ABSTRACT
Contract law is rapidly evolving in synergy with new technologies. Concurrently, age-old debates remain unsolved: the desire to infuse an overt doctrine of good faith continues to clash with the English common law ethos of individualism and freedom of contract. Among contract law’s most recent and consequential developments, smart contracts may be viewed as sitting at the heart of this tension. These self-enforcing mechanisms (e.g. vending machines), which convert natural language to computer code, are agreements stored on a blockchain1 (or, distributed ledger technology) that run when certain predetermined conditions are met.2 With their execution being automatable,3 this revolutionary technological advancement promises to facilitate seamless and synchronised transactions, while simultaneously maintaining a novel system of mutual exchange that thrives independently of judicial and other forms of adjudicated decisions’ interference. This article critiques the optimism of smart contracts in the context of the doctrines of freedom of contract and good faith, assessing their wider implications for the ‘social’ and ‘relational’ contexts of contracts. More broadly, this critique also serves as an example to highlight the need for a balance between freedom of contract and good faith by demonstrating the dubious outcomes which result from supporting and endorsing only one side of the spectrum.
INTRODUCTION4
English courts have long been confronted with the intricate exercise of walking a fine line between preserving freedom of contract, which mandates upholding contracts in their original form as far as possible, and respecting good faith and fair dealing by interfering to protect weaker parties.5 Though they have expressly endorsed the former, it is generally understood that English courts have baulked at the prospect of explicitly demonstrating support for an overriding principle of good faith in dealings between commercial parties. Instead, they have devised ‘piecemeal solutions’6 that permeate orthodox doctrines. The rationale underpinning this position is that overtly recognising good faith would strike at the heart of English law promoting an adversarial stance between contracting parties, as exemplified in Walford v Miles.7 In the first part of this article, it is briefly examined whether English courts appropriately situate themselves in this delicate balancing exercise, through a short analysis of whether ‘piecemeal solutions’ are satisfactory. Next, the ‘relational’ and ‘social’ nature of contract law is discussed, including how the normative arguments favouring the adoption of an overarching doctrine of good faith are compatible with the practical reality that the impact of contracts spans beyond their ‘four corners’. Overall, while greater respect for the doctrine of good faith is demanded, this article observes that such respect for good faith can coexist with the common law ethos of freedom of contract.
Smart contracts are self-executing digital transactions, built on distributed cryptocurrency technology8 and the blockchain that facilitates it, that automatically and securely execute obligations when certain conditions are met.9 Notably, in the case of a dispute, the parties will still turn to the courts or alternative dispute resolution, with the transaction being irreversibly encoded. Any decision holding a smart contract unenforceable cannot undo the results of its fully executed agreement. The simplest example is a vending machine: once you select your choice and insert money, it dispenses the item you have chosen, thus completing a contract.10 Smart contracts are being hailed for their ability to reduce manual errors and efficiency. In the second and more fundamental part of this article, however, the optimism and enthusiasm about smart contracts is critiqued. Through this critique, it will be illustrated that courts need to play a role in protecting the weaker party by extending overarching respect for good faith. By removing the judiciary and any other form of adjudication (e.g. arbitration) as the governing body over contract law, smart contracts seek to achieve absolute ‘freedom of contract’, potentially excluding the concept of good faith. However, the practicality of such potential to circumvent judicial intervention seems considerably doubtful. More specifically, this account significantly underestimates the necessary role of the State in regulating and maintaining justice through the protection of weaker parties. This article uses the case study of smart contracts to highlight the anomalies that may likely arise out of overly narrow adherence to freedom of contract and the resultantly compromised ability to protect good faith and fair dealing. Returning to the discussion in Part 1, this illustration of the (unsuitable) impact of supporting just one side fortifies the need for a balance between freedom of contract and good faith.
Finally, premised on the observations in Part 1, this article illustrates that smart contracts coherently accommodate only the technical aspect of contracts and that their exclusion of contracts’ social and relational aspects negates their effectiveness, ultimately giving rise to anomalies. By design, the inflexibility introduced by smart contracts may likelyshort circuit several social constructs that are of prime significance in contractual dealings.
I. FREEDOM OF CONTRACT VS PROTECTION OF PARTIES
A. Is the balance adequate?
Under the influence of Roman Law, the English legal system around the 18th Century made considerable use of good faith as a legal obligation,11 to the extent that Lord Mansfield even held that good faith was ‘[t]he governing principle… applicable to all contracts and dealing’ (emphasis added).12 However, with a rise in legal positivism, laissez-faire, and the caveat emptor philosophy,13 English law’s inclination towards good faith radically capsized, leaning now wholly in favour of endorsing rugged individualism. Today, English law continues to be underpinned by an adversarial ethic,14 with an expectation from parties to protect and cater to their own interests and to bargain to secure the best deal possible for themselves.15 Consequently, the courts have been motivated to respect the doctrine of freedom of contract, implying minimal judicial interference, and have only committed themselves to recognising ‘piecemeal solutions’ in favour of good faith.16 Space precludes full consideration of all possible ‘piecemeal solutions’ developed in English law. However, through a brief analysis of some of these solutions, this section argues that English law fails to adopt a satisfactory balance of both accounts – safeguarding freedom of contract and good faith – at once.
Admittedly, there have been instances of court interference that seem to have indirectly upheld the principle of good faith, thus implicitly achieving the same outcome. For example, in Schuler v Wickman,17 the contract included a term, labelled as a ‘condition’ (i.e. breach of this term would repudiate the contract), according to which Wickman would have to send his representatives to the UK’s six biggest motor manufacturers every week, amounting to roughly 1400 visits in total. The court, however, held that a literal construction of the term would be unreasonable, as the likelihood of mistake was exceptionally high, and the parties were likely not to have intended to impose such an onerous obligation. Although the court did not expressly refer to good faith, the judicial outcome arguably cohered with an interpretation of the contract in good faith.
Yet, for most ‘piecemeal solutions’, an overt reference to good faith would likely generate more effective outcomes. Sometimes it is argued that by implying terms either by custom or in fact, through a myriad of malleable tests,18 courts often reach the same outcome as they would through a doctrine of good faith. However, firstly, such tests for the implication of terms often do not generate clear results.19 Secondly, in concealing the real issue, courts often cannot accumulate and deploy sufficient authority for a general framework of good faith.20 Similarly, the doctrine of unconscionability, a development propagated by the English courts of Chancery, is often presented as an adequate ‘piecemeal solution’ and some commentators argue that explicit use of good faith as a criterion would instead actually weaken the protection afforded to parties.21 However, this may be countered too. Firstly, like the existing rules, good faith proposes an ‘objective standard of commercial fairness’,22 as opposed to unconscionability which is essentially a matter of law. Moreover, since English law considers oppression as an element of unconscionability, it is difficult to imagine cases where the oppressor acted with complete innocence. Secondly, the unconscionability standard prohibits parties from acting in excessive self-interest, with resultantly minimum regard for the other party. A good faith standard would instead ‘[require] parties to have regard for each other’s legitimate interests’.23 Although the difference lies largely in degree, good faith’s higher standards may better safeguard the parties’ reasonable expectations.24
On balance, therefore, it can be argued that although good faith is sometimes indirectly accounted for (through the ‘piecemeal solutions’), an overarching doctrine would be preferable in most situations. The following sub-section cements this need for an overarching doctrine of good faith by suggesting that such a principle would accommodate for the social and relational nature of contract law, in conjunction with English law’s promotion of an adversarial stance between contracting parties. This would ultimately reflect the practical reality of the commercial world more reasonably and viably.
B. Good faith and fair dealing: greater compatibility with the relational and social nature of contracts
So far, English law has only demonstrated explicit support to imply a duty of good faith in relational contracts,25 which in this context may be understood as contractual relationships that develop over time.26 This development is appreciated, since it finally accepts that the classic adversarial perspective of antagonism, suggesting that contractors always act solely in a self-interested manner, does not reflect the reality of contractual transactions. Instead, relational dealings are dynamic transactions whereby parties cannot feasibly provide for every contingency. Rather, parties habitually put trust in luck or good faith in the opposite party,27 as proven by empirical studies.28 This confirms that respecting good faith squares with reality by acknowledging the relational nature of some contracts. Similarly, even with consumer contracts, where terms are either incomprehensible to the consumer, or where they do not realistically contain parties’ reasonable expectations, consumers usually trust producers to act with a degree of reasonableness ‘in not enforcing some obscure terms’.29
Extending this further, it is crucial to accept and respect that contracts are more than paper dealings. They are social constructs and represent relationships, which requires a subjective outlook and overall respect for fair dealing and good faith. Contracts have both relational and social significance and therefore, in both time and space, the effects of contractual negotiations reverberate beyond the objective ‘four corners’ of formal agreements.30 This suggests that parties turn to legal instruments and negotiations to achieve a myriad of socially productive aims, many of which may not be immediately apparent from the face of agreements.31
This article proposes that such recognition of the social and relational nature of contracts falls in line with the contractarian argument, which suggests that good faith operates to fix the limitations of the contracting process for an optimal allocation of resources.32 Transaction costs, limited foresight, and some degree of trust and confidence in the other party lead to the inevitable result that contracts can never be totally complete. However, by showing respect for good faith, the law helps bring about efficient outcomes by recognising the terms that the parties would have wanted.33 Simultaneously, it ensures the avoidance of a bad faith performance of either party attempting to use its discretion to recapture opportunities forgone when entering into the contract.34 This also comes with the recognition that when parties are confident about what they want, they specify in their contractual agreement, and thus determinations shall always prevail, in line with freedom of contract. Crucially, therefore, it must be noted that good faith does not necessitate a complete abandonment of self-interest – a balance can be arrived at while still abiding by the ethos of freedom of contract. Respecting good faith is an indicator of the maturity of a legal system, as, by qualifying the adversarial pursuit of self-interest, acknowledging good faith allows courts to ‘give effect to the spirit of the deal’, in recognition of the broader social and relational context in which it exists.35
Finally, relying on the conceptual distinction between law and morality, some may argue against overtly recognising good faith by saying that the law cannot police each commercial transaction based on morality. However, it has been argued that ‘contract law is not morally neutral’, as even traditional contract law’s ‘minimal constraints’ reflect some degree of morality.36 After all, the law is essentially a ‘social and a practical enterprise’.37
The difficulty this section has discussed, in balancing the freedom of contract and principles of good faith and protection, seems to have acquired new life with smart contracts, given that their enforcement mechanism excludes adjudicated decisions and the doctrine of good faith, which the next section explores.
II. SMART CONTRACTS
This section opens with an examination of whether smart contracts, and their inherent quality of singularly enforcing ‘freedom of contract’ by circumventing judicial enforcement, can serve as a successful and practically feasible model. Next, this section examines their inflexibility and resultantly limited ability to abide by principles of party protection and good faith and fair dealing. Simultaneously, the implications of this rigidity of smart contracts are then placed into their wider context, critically analysing how this stringency neglects the relational and societal aspects of contracts.
A. Do smart contracts promote true freedom of contract?
Hobbes discussed the impossibility of binding agreements without the law, intuitively arguing that agreements are facilitated by a system that ensures that counterparties can trust one another to perform.38 However, this basic idea, having guided civilisations for centuries, seems to now be called into question. Blockchain reflects an anti-establishment tone of evading financial institutions and instead enabling ‘two willing parties to transact directly with each other without the need for a trusted third party’.39 Smart contracts similarly carry this anti-establishment tone by replacing the evasion of financial institutions with the goal of bypassing the legal system, and more specifically, ‘judicial intervention’.40 For proponents of absolute freedom of contract, such a lack of judicial intervention seems optimal.
In line with this, ardent advocates of smart contracts express hostility towards traditional contracts. This is mainly rooted in their ambiguity and the subjectivity of interpretation by both the court and the parties, leading to uncertainty. Smart contracts, on the other hand, are purportedly characterised by certainty due to the use of code and predictability of what the code is likely to perform in any given situation.41 Overall, smart contract advocates arguably show a deep commitment to the principle of ‘freedom of contract’ alone.42 While they acknowledge a need for governance, they believe that such governance should be commanded by the blockchain amongst smart contract’s private users, rather than by the judiciary.43
Accordingly, proponents of smart contracts argue that smart contracts should ‘replace large swaths of the traditional contract system’.44 Circumventing courts as the governing body over contract law, and replacing it with decentralised blockchain governance, they argue, shall show a way to true ‘freedom of contract’, and thereby preserve efficiency, legal certainty, and effectiveness.45 However, this anti-establishment argument does not appear fully defensible, carrying instead practical limitations that create the need for a centralised judicial function to preserve justice and equality in contracts.
Smart contracts also do not seem as ‘simple’ and straightforward’ as they are often (misleadingly) presented. In the context of ‘clickwrap’ internet contracts – online agreements wherein users signify their acceptance by clicking a button or checking a box stating ‘I agree’ – the argument favouring such contract’s validity finds force in the fact that a user has had the actual opportunity and ability to read the terms and conditions of the service provided – written in comprehensive and readable language – ahead of choosing between whether to click ‘I agree’ or ‘I disagree’. Written in binary code (‘0’ and ‘1’ language), smart contracts, however, do not have this inherent ability that allows readers to verify what they are contracting/agreeing to.46 This resultantly rebuts the bold assertion that smart contracts solidly enforce ‘freedom of contract’ if parties cannot even vet what they are agreeing to. Building on such characteristic issues, the next section further analyses the inability of smart contracts to accommodate the social and relational nature of contract law.
B. Can smart contracts thrive in the absence of human judgment?
One of the key attributes of smart contracts is their ability to automatically and relentlessly execute transactions without the need for human intervention. Unlike traditional contracts, generally, performance on a smart contract cannot be stopped, neither voluntarily by the parties nor by a central entity, court or supervisor. However, this automation, and smart contracts’ lack of flexibility in being able to be amended or terminated unless the parties incorporate such capabilities during the contract’s creation, represents a major obstacle to the mainstream use of smart contracts.47
When contextualised in the social and relational nature of contracts discussed above, the objective interpretation, coupled with the automatic and independent execution of smart contracts, does not seem to align with the practical manner in which many businesses operate in the real world.
Smart contracts are functional on a conditional (IFTTT—if this, then that)48 basis: they automatically function once certain conditions are met. However, this does not always guarantee accurate results. This, compounded with their irrevocability once entered into, leads to difficulties unfolding. Let us consider a hypothetical scenario. X, a British company, exports ‘chips’ to Y, an American company that thinks they are receiving something akin to a packet of Walkers. The parties use a smart contract to trigger payment from Y to X once the good is received by Y. With the smart contract administrator being based in India, whose understanding of ‘chips’ aligns with the American system, the trigger is designed in that manner. However, in a certain month, no automatic payment is made even after Y received the goods. The failure could be due to the trigger not being met since what is received is in fact, as per the smart contract, ‘fries’ or possibly due to an Act of God, frustration or other events which would, in one view, render the administrator or the chain not liable for the failure of the trigger. Y may argue that it is not at fault for non-payment since it had the smart contract in place to ensure payment was made and cannot be responsible if that mechanism fails. Clearly, this is problematic. Firstly, clarifying the reason for the failure of payment is considerably difficult. Secondly, parties may consequently shrug off their responsibility very easily. Finally, smart contracts are heavily reliant on the understandings parties themselves exhibit of the contract, evidently causing a mass of confusion and uncertainty of performance.
Furthermore, even if the math works perfectly and code is seamlessly executed, blockchains are systems designed, implemented, and used by humans. Human behaviour and judgment occupy prime relevance even when expressed through objective code. Blockchains are susceptible to ‘selfish behaviour, attacks, and manipulation’ by contractingparties.49 In such situations, along with scenarios where ‘gap filling’ is required (as suggested in the contractarian argument above), the idea of good faith becomes particularly relevant.
Additionally, with traditional text contracts, parties have the liberty and flexibility of sometimes excusing a breach when considering the overall business relationship between the parties and their past ties of successful cooperation. So, if, for example, a valued customer delays its monthly payment instalment by one month, for the very first time, the vendor may make a real-time decision to excuse this delay in the interest of their long-term commercial relationship. Or, if a regular customer defaults payment by 3 days because of a personal grievance, only a traditional contract might allow the recipient to waive off penalties on grounds of humanity. Whether they do is a separate issue; we are concerned primarily with whether they can even allow for such accommodation. Smart contracts, however, cannot provide parties with any such flexibility of camouflaging, motivated by recent circumstances and relational factors, on an ad hoc basis.50 Let us return to the example of Schuler v Wickman.51 Hypothetically, if this were a smart contract instead, even if the defendant’s representatives visited 1399 of the 1400 car dealers, the contract would nonetheless be considered in breach entitling the plaintiff to terminate. This outcome appears contrary to the notions of justice and fairness, thus clearly illustrating the undesirable effect of smart contracts when contextualised in the reality of business transactions and contractual issues.
Similarly, smart contracts do not allow for parties to accept partial performance; it is often always executed on a ‘take-it-or-leave-it-all’ basis. However, in reality and on an ad hoc basis, the other party may often be interested in accepting at least partial performance either in the interest of protecting the parties’ long-term business relationship or because, from a practical standpoint, the party may wish to get at least something as opposed to nothing at all. Here, the objective expression necessary for a smart contract’s code might not ‘reflect the realities of how contracting parties interact’.52 Secondly, the premise that judicial intervention should be minimal presupposes that commercial arrangements are freely negotiated, and that when one signs a document,53 it is assumed to have been understood. While this may be true, particularly in cases of disparity in knowledge and bargaining power between parties, the assent may practically be considered to the overall contractual arrangement rather than each specific term. In the context of smart contracts, weaker parties are put at a greater disadvantage, since the technical aspects are most likely incomprehensible in the absence of expert advice. In such scenarios, protecting good faith by rejecting acceptance of unreasonable conditions which are not, or unlikely, to be read, seems most realistically feasible.
While it may be possible for the code to include an impartial third party’s judgment (e.g. an arbitrator) to authorise the execution of a software instruction (e.g. ‘Was the shipment delay justified? If so, do not transfer the funds or else, transfer the funds’), such application still remains rigid. The impartial third party can only enter a ‘yes/no’ answer; no leeway is still permitted.54 Moreover, amending contracts is not an easy option either. In traditional text-based contracts, parties may mutually decide to change their terms due to a changed understanding between them or due to other factors including changes in the law and/or surrounding circumstances. By contrast, smart contracts do not easily offer such an option to make amendments. Even if they do, it yields comparatively higher transaction costs, while also increasing the margin of error (i.e. the amendments may not accurately reflect the modifications the parties wish to make).55
In conventional contract drafting, adjectival language is commonly used to describe the requisite standards of the performance of obligations by the parties; examples include ‘undertake best endeavours in’, ‘acceptable to the other party’, ‘to the satisfaction of’, or ‘to a reasonable standard’.56 The yardsticks here to measure the fulfilment of performance require a significant exercise of judgment. Being written in binary code, smart contracts currently are severely limited in their ability to articulate such ‘open-texture concepts’ that are meaningful for the human mind and subjective interpretation.57
Finally, similar challenges can be identified even to issues pertaining to the termination of contracts. Efficient breaches, where parties knowingly breach a contract and willingly paying the resultant damages if they feel that those damages are likely lower than the cost to perform, are a common business practice.58 Smart contracts do not allow for parties to engage in any such practice. Moreover, smart contracts also render self-help remedies pointless. Often by ceasing performance, or threatening to take that step, a party may bring the counterparty back to the table to negotiate an amicable resolution.59
Overall, from the foregoing discussion in this section on smart contracts, a two-pronged conclusion emerges. Firstly, smart contracts do not appear to be smart enough yet. Secondly, after a demonstration of the problems that arise from smart contracts precluding judicial intervention and the possibility of offering judicial protection through good faith, we come to realise the need for an overarching doctrine of good faith and fair dealing in English law. Simultaneously, this section illustrates express situations where good faith is of particular necessity in smart contracts.
CONCLUSION
This article has demonstrated how the debate surrounding the effectiveness of smart contracts is emblematic of a larger need for a balance between freedom of contract and judicial intervention to protect weaker and vulnerable parties through respect for the overarching doctrines of good faith and fair dealing. Smart contracts, and their attempt to circumvent state intervention, illustrate how singularly protecting freedom of contract is practically unfeasible and likely to lead to an imbalance between parties and resultantly unfavourable outcomes which are contrary to perceived notions of fairness and justice. This cements the proposition that English law requires a guiding doctrine of good faith, as a companion to its manifest propagation of freedom of contract. Yet, smart contracts have only been able to replicate and transform the technical aspect of traditional text contracts. Their automation and lack of flexibility lead to a significant deviation from contract law’s inherently social and relational aspects, thus compromising their overall desirability.
[1] There are three primary elements to the Bitcoin architecture: the ledger, the network, and consensus. These three elements combinedly create a mechanism that ensures trustworthiness without requiring trust in any particular institution or agent. This means users can have confidence that a transaction on the network is legitimate, accurate, and not duplicated. Smart contracts use blockchains to generalise the approach to any digitally expressible transaction. See Philipp Paech, ‘The Governance Of Blockchain Financial Networks’ (2017) 80(6) The Modern Law Review 1073.
[2] Christopher D. Clack, Vikram A. Bakshi, Lee Braine, ‘Smart Contract Templates: foundations, design landscape and research directions’ (_ar__Xiv:_1608.00771, 2 August 2016) <http://www.resnovae.org.uk/fccsuclacuk/images/article/sct2016.pdf> accessed 25 January 2022.
[3] ibid 1.
[4] I would like to extend my gratitude to Dr Paul MacMahon for his inspiring commercial contract classes and comments on this piece and Dr Nick Sage for also reviewing this piece. A warm thank you also to the Notes and Alumni editors Felipe Caldas Verás, Tai Shen Wong, Gloria Schiavo and Ernesto Edwards for their comprehensive and valuable comments and suggestions; Sarah Ahmad for handling the publication of this piece; and Edward Lee (Editor-in-Chief) for his continuous support. Finally, I am grateful for this opportunity provided to me by the LSE Law Review. Any errors remain my own.
[5] Tiffany M. Sillanpää, ‘Freedom To (Smart) Contract: The Myth of Code and Blockchain Governance Law’ (2020) 7(2) IALS Student Law Review 38, 38.
[6] Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1987] EWCA Civ 6.
[7] Walford v Miles [1992] 2 AC 128.
[8] Bitcoin is a ‘virtual’ digital currency, not issued by any bank or sovereign state. See Satoshi Nakamoto, ‘Bitcoin: A Peer-to-Peer Electronic Cash System’ (Bitcoin, 31 October 2008) <https://www.ussc.gov/sites/default/files/pdf/training/annual-national-training-seminar/2018/Emerging_Tech_Bitcoin_Crypto.pdf> accessed 11 March 2022.
[9] Kevin Werbach and Nicolas Cornell, ‘Contracts Ex Machina’ (2017) 67(2) Duke Law Journal 313.
[10] Nick Szabo, ‘Formalizing And Securing Relationships On Public Networks’ (1997) 2(9) First Monday <https://firstmonday.org/article/view/548/469> accessed 11 March 2022.
[11] H. K. Lücke, ‘Good Faith And Contractual Performance’ in Paul D. Finn, Essays on Contract (Law Book Co 1987) 2.
[12] Carter v Boehm [1766] 97 ER 1162, 1164.
[13] Bell v Lever Bros Ltd [1932] AC 161 (HL) 227.
[14] Walford v Miles (n 7).
[15] Ewan McKendrick, Contract Law (13th edn, Red Globe Press 2019) 243.
[16] Interfoto Picture Library Ltd (n 6).
[17] L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 (HL).
[18] Such tests include the ‘business efficacy test’ proposed in The Moorcock (1889) 14 PD 64 ; the ‘officious bystander test’ proposed in Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206 (CA); and ‘the necessity test’ proposed in Marks and Spencer Plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd[2015] UKSC 72.
[19] John Wightman, ‘Good Faith and Pluralism in the Law of Contract’ in Roger Brownsword, Norma J. Hird and Geraint Howells (eds), Good Faith in Contract: Concept and Context (Dartmouth Publishing 1999) 41, 63.
[20] Stephen Waddams, The Law of Contracts (3rd edn, Canada Law Book 1993) 323.
[21] ibid 55.
[22] Woo Pei Yee, ‘Protecting Parties’ Reasonable Expectations: A General Principle Of Good Faith’ (2001) 1 Oxford University Commonwealth Law Journal 195, 203.
[23] ibid 199.
[24] ibid 203.
[25] Many contracts that do not fit the traditional model of a simple exchange and involve a longer term relationship between the parties which they make a substantial commitment are called relational contracts. They ‘may require a high degree of communication, cooperation and predictable performance based on mutual trust and confidence and involve expectations of loyalty which are not legislated for in the express terms of the contract but are implicit in the parties’ understanding and necessary to give business efficacy to the arrangements. Examples of such relational contracts might include some joint venture agreements, franchise agreements and long term distributorship agreements’. See Yam Seng Pte Ltd v International Trade Corporation Ltd [2013] EWHC 111.
[26] Essex County Council v UBB Waste (Essex) Limited [2020] EWHC 1581 (TCC).
[27] De Monchy v Phoenix Insurance Co of Hartford (1929) 34 Ll L Rep 201 (HL) 209.
[28] John N. Adams and Roger Brownsword, Key Issues in Contract (Butterworths 1995) 297.
[29] Woo (n 22) 198.
[30] Karen E. C. Levy, ‘Book-Smart, Not Street-Smart: Blockchain-Based Smart Contracts and the Social Workings of Law’ (2017) 3 Engaging Science, Technology, and Society 1.
[31] ibid.
[32] Deborah A. DeMott, ‘Beyond Metaphor. An Analysis of Fiduciary Obligation’ (1988) 37 Duke Law Journal 879.
[33] Mariana Pargendler, ‘Modes Of Gap Filling: Good Faith And Fiduciary Duties Reconsidered’ (2008) 82 Tulane Law Review 1315.
[34] Steven I. Burton, ‘Breach of Contract and the Common Law Duty To Perform in Good Faith’ (1980) 94 Harvard Law Review 369, 378-94.
[35] Woo (n 22) 196.
[36] ibid.
[37] Paul D. Finn ‘Commerce, the Common Law and Morality’ (1989) 17 Melbourne University Law Review 87, 88.
[38] Thomas Hobbes, Leviathan (first published 1651, Oxford University Press 1996) 91. See generally Anthony T. Kronman, ‘Contract Law and the State of Nature’ (1985) 1 Journal of Law, Economics & Organization 5, which examines the possibilities for assurance without state-imposed enforcement.
[39] Nakamoto (n 8).
[40] Sillanpää (n 5) 41.
[41] James Grimmelmann, ‘All smart contracts Are Ambiguous’ (2019) 2(1) Journal of Law and Innovation 1, 3.
[42] Mark Verstraete, ‘The Stakes Of Smart Contracts’ (2018) 50 Loyola University Chicago Law Journal 743, 748.
[43] Max Raskin, ‘The Law And Legality Of Smart Contracts’ (2017) 1 Georgetown Law Technology Review 305, 335.
[44] Verstraete (n 42) 746.
[45] Sillanpää (n 5) 38.
[46] Teo Yi-Ling, ‘Coming To Terms With Smart Contracts Part 2 – Encoding Certainty And Enforceability In Contracts “Ex Machina”’ (2021) 26 Singapore Academy of Law Practitioner 8.
[47] Stuart D. Levi and Alex B. Lipton, ‘An Introduction To Smart Contracts And Their Potential And Inherent Limitations’ (Harvard Law School Forum on Corporate Governance, 26 May 2018) <https://corpgov.law.harvard.edu/2018/05/26/an-introduction-to-smart-contracts-and-their-potential-and-inherent-limitations/> accessed 11 March 2021.
[48] Patricio Alvarado Luzuriaga, ‘Smart Contracts and Transaction Costs Economics’ (Master thesis, Tilburg University 2019) 40 <http://arno.uvt.nl/show.cgi?fid=148200> accessed 11 March 2021.
[49] Kevin Werbach, ‘Trust, But Verify: Why the Blockchain Needs the Law’ (2019) 32 Berkeley Technology Law Journal 487, 494.
[50] Levi and Lipton (n 46).
[51] ibid.
[52] ibid.
[53] L’Estrange v F Graucob Ltd [1934] 2 KB 394.
[54] Alvarado Luzuriaga (n 47).
[55] ibid.
[56] Teo (n 46) [15].
[57] Alvarado Luzuriaga (n 48) 40.
[58] McKendrick (n 15).
[59] Woo (n 22) 216.
Ipsa Yadav
LLB (LSE) ’23 and Criminal Law Notes Editor of the LSE Law Review Summer Board 2021 and the LSE Law Review 2021-22