Green light for smart legal contracts?

The Law Commission has published its advice to the UK Government on smart legal contracts, in which some or all obligations are defined or performed by code. Building on previous work by the UK Jurisdictions Taskforce, the Commission's clear view is that these contracts, their formation and enforceability can be accommodated within the existing body of English contract law.

The prospect of significant legislative and regulatory change in this space therefore seems unlikely in the short term. This is welcome news for organisations in sectors like financial services wanting to explore and expand the use of legally binding contracts with elements of automated and code-based performance, with the anticipated speed, consistency and cost gains that they promise. 

There are still, however, important areas where the parties to smart legal contracts will need to proceed with care, to address potential uncertainties such as choice of law and jurisdiction (including compliance with relevant sector-specific regulations), the inter-relationship between natural language and coded terms, allocation of risk for underlying data, bugs or coding errors and, for consumer-facing agreements, what further explanation of the contract and its obligations may be necessary.

As with all emerging technology, common market practices will develop over time to clarify and streamline the contracting process, but for now they remain a work in progress.


This information is for general information purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given. Please contact us for specific advice on your circumstances. © Shoosmiths LLP 2024.



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