You're welcome!

Thank you!

Hi, Greg. Great question! First, the two companies in your fact pattern could have agreed on contract terms that address delays due to customs, which may have solved the problem entirely. Of course, in nearly every commercial contract there is the possibility of contingencies and arguments that the contract doesn't anticipate. For these issues, while I think it's possible that one day an entire contract can somehow (with AI, etc.) be performed and administered on the chain, that doesn't appear to be in our near future. For the time being, smart contracts will have components (e.g., dispute resolution) that happen off the chain. I expect new dispute resolution options/tools to evolve that will be more streamlined and better fit the blockchain world, although they will still need to take place off the chain. So, for example, in your fact pattern, assuming the parties disagree about who bears responsibility for customs-related delays, the delivering company could take an action to direct the dispute to a dispute resolution system -- same way we do today. That takes away from the efficiency of building a smart legal contract, although it does not entirely undermine it.

Hi, Cemre. You pose some interesting questions. Regarding unlawful subject matter, that won't change. The applicable laws will continue to apply and control enforceability. I think this will play out similarly to how it does today. Parties make unlawful contracts all the time -- some knowingly (e.g., drug deals), some unknowingly (usury is often unintentional). The latter would rarely see a court of law. I suspect they'd also be hesitant about coding their contract into an immutable blockchain, although we'll see; the former will still have a mechanism for challenging the contract's validity, including its lawfulness from a subject matter standpoint or any other specific terms (e.g., the interest rate). SageWise (sagewise.io) is creating a smart contract component (piece of technology) that parties can put into a smart contract and, as I understand it, it functions like a pause button that either party can press if the smart contract needs to move to dispute resolution, which, at least today, people are envisioning will continue (in the short to mid-term) to take place in relatively traditional ways (e.g., mediation, arbitration, litigation), albeit we are seeing more available options in ADR, many of which are better suited, IMO, for where the world is moving -- quicker, virtual, etc. (e.g., formalized systems of "neutral arbiters" and things of that nature). The other issues you bring up could be treated similarly -- stopping the smart contract and moving to negotiate an amendment or working through a dispute around it. One other thought on dispute resolution is that I can foresee in the not-too-distant future, systems where the dispute resolution also moves through the blockchain and, while being anonymous is a big part of the decentralization movement that's driving some of the early adoption of blockchain (e.g., cryptocurrencies), I expect a strong, real world identity piece will soon come into focus and that, with identity immutable and transparent policing bad actors in the contract space (i.e., companies/people who consistently dispute contracts, don't perform, use terms that aren't lawful), may be much easier than it is today. Regarding legal capacity, I'll confess I don't know offhand what happens if a party loses capacity during the term of the contract. I'd assume they're still held to the terms, right, that their successors/assigns must perform?

Hi Brett! Many thanks for your response! With regards to unlawful matters, I mean if the subject of the contract is something legal now, let's assume that I give loan with a 80 percent interest rate. We only made the enforcement of transaction part, meaning the payment and return, through smart contracts. Our main contract is governed by English law. Let's assume that it is unlawful to have more than 40 percent interest rate under English law. When we initiate the code and when it is added the change, if I am not mistaken, the transaction will be continuing, right? Although it will be unlawful but as it is immutable and even the contractors -from today's application- are not capable of intervening it, it will continue its application between the accounts. How would traditional courts intervene and respond to that? Thank you for the info. But do you not think that such a pause would go against the certainty which is the primary aim of smart contract? I am inclined to an human arbitrator as humans are still good at interpreting the contractual clauses that provide flexibility to contractors with terms like ''reasonable, best effort'' etc. ' That's seems logical to have an arbitrator in an online dispute resolution but how can that be coded or given effect in a smart contract code? Maybe that is because of I do not have computer science background but It seems to me rather confusing. Thank you for the rest. But I am still very confused with even this simple example which as follows: you rent a hotel room. You pay with bitcoin through a smart contract code. And you get the code that will open the door of the room. So far everything is simple. You rented it for 2 days and code checks if you have enough credit on your account. As soon as it checks it and validates, you get the code. You use the code, enter into the room. But room is empty. So, here do we just use the code to open the door -is it the only function of smart contracts in this example- or through the application of the Internet of Things, could that be overcome? Let assume that all stuff was there but they did not work properly. So, it is still of lack. And enforcing smart contract in the Legal world, not the virtual one, needs to deals with many unanswered questions. Currently I am dealing with my PhD project which is on this topic. If you have a contact email, I would like to share it with you to have your thoughts about it as well. Kind regards, Cemre

Cemre, you're spot on with your questions and the confusion you profess is the same lack of clarity I profess. I don't think anyone yet knows how these smart legal contracts will develop. We have a general idea of where this is all going, although it's tough now for me to look at anything more than the most simple contractual arrangement (e.g., Szabo's vending machine example) and see how that unfolds entirely "on the chain." One thing I am certain of is that lots of contract fulfillment, for the indefinite future, will continue to occur in a more traditional sense like it does today. In your example of the hotel room, I may be able to press pause and route the problem to the counterparty. If they didn't resolve the issue to my satisfaction within 1 hour, the problem routes somewhere else. In that case, the automation of the problem and time to cure being hard-coded into the blockchain has some value. To your point, taking the contract "off the chain" and into the traditional world undermines some of the overall value proposition of smart legal contracts, but not all of it. A blockchain will still create a transparent, immutable record of the pre- and post-dispute/issue performance (i.e., everything that occurs on the chain). And, over time, I expect more and more of the contract to move "on the chain." Today, most commercial contracts are replete with language of standards rather than rules, e.g., "reasonable time to cure" vs. "7 days with time of the essence." We'll shift more toward the latter to make the contracts more concrete (therefore more codable and able to function automatically). Another example - calculation of damages in the U.S. are rarely quantified in advance. There's a concept of "liquidated damages," which are upfront, set amounts. That's the exception and they're not preferred by courts, although I expect things to shift toward specific set damages (e.g., what U.S. law currently refers to as a penalty for non-performance). Things will keep moving toward a more certain outcome, more concrete contractual language. Looking out even further, while I can't specifically envision this, I can generally imagine a place for artificial intelligence to handle certain things "on the chain" that we couldn't possibly get done in that manner today. In your example, could I take a picture of the room, which shows things missing or shows a bed that isn't made and upload it and the computer could then determine the room is not in order (i.e., in essence resolving the possible dispute/validating my issue re: the counterparty's non-performance)? Perhaps. I realize that example raises more questions and only addresses one tiny little issue, but it's meant to illustrate that there is a whole lot more that could even today be done contractually in a more codified way. Tomorrow, there will be even more. In 10 years, who knows exactly, although the world of AI, blockchain, etc. are developing so quickly that I believe today's contracting world will be virtually unrecognizable in 10 years. You can reach me at brettATcenkus.com

there is a lot of hype, although I think there is so substance here, too, and that we'll see a move toward more codified "smart legal contracts" in the years to come. Thank you for your input!