Abdul Muhammed Law Practice
Abdul Muhammed Law Practice’s Lead Lawyer Abdulateef Muhammed examines the legality of smart contracts.
Introduction
Let’s delve into a topic that’s as dynamic as the crypto landscape itself— smart contracts.
Smart contracts in simple terms
Smart Contracts are like digital handshakes touted as self-executing agreements with code. In a world where trust is a rare commodity, smart contracts aim to streamline transactions without the need for a middleman.
Legal validity in Nigeria
The burning question: are smart contracts legally valid here? The answer is not absolutely.
Nigerian law recognizes the sanctity of contracts. Smart contracts, are not by definition a form of contract. All legally enforceable contracts must exhibit offer, acceptance, consideration, a meeting of minds and an intention to create legal relations.
Smart contracts are subject to the same principles.
As long as there’s an offer, acceptance, consideration, and a lawful object, smart contracts hold water in Nigerian courts.
I hold the view that the way to use smart contract is to draw up a legally enforceable contract in the old way and making sure this contract incorporates the smart contract code.
Beyond blockchain and crypto transactions
Smart Contracts are not exclusive to crypto transactions. Picture this: Lateefah wants to sell her car to Bunu. They agree on the terms, enter this agreement into a legally binding contract that incorporate the code for the smart contract and voila!
The code ensures that once Bunu pays, ownership transfers automatically.
Comparing jurisdictions
Other common law jurisdictions, like the UK and Australia, share the same legal outlook.
In the UK, smart contracts, properly situated are seen as a natural evolution of traditional contracts and English courts uphold their validity provided there is a valid contract.
In Australia, the legal stance echoes ours and smart contracts could be valid and courts could recognize them as binding agreements.
Efficiency and transparency
Smart contracts are to be used to supplement traditional contracts but they can bring efficiency to the forefront as far as the execution of contract terms are concerned. This could cut through red tape, reduce transaction costs and ensure speedy execution and transparency is hardwired into the code, minimizing disputes.
Conclusion
Smart Contracts would stand as beacons of innovation in Nigeria and in other common law jurisdictions not because smart contracts represent a magic wand. The beter way to look at the elegal status of a smart contract is to say that a legally enforceable contract that incorporates execution as a smart contract would have, legal validity.
On the other hand just simply writing smart contract code does not of itself exempt contracts from the ingredients of a valid contract.
Disclaimer: This article provides general information and does not constitute legal advice. Consult with a Nigerian cryptocurrency lawyer, a crypto competent lawyer in Nigeria or other legal professionals for advice tailored to your specific situation.
READ: Nigerian crypto law series 25: Manipulation, spoofs, bots and wash trading
