Role Of Trust In Agency: Smart Contracts Vs. Traditional Contracts
- IJLLR Journal
- Jul 11, 2023
- 2 min read
Updated: Jul 11, 2023
Kanav Singhal, O.P. Jindal Global University
Introduction
“Trust is a critical element that facilitates social and economic interaction. Agency contracts, in particular, depend fundamentally on trust between principal and agent.”1 Agency in contracts is a well-established legal concept utilized by the Court when it becomes necessary to explain and resolve the problems created by specific facts or situations. The agent's act binds the principal in the same manner that he would be bound if he did that act himself. Agency under the Indian Contract Act, 1872 is covered in Sections 182 – 238.2 It is defined as an agreement between the agent and the principal where the latter engages with the former to do any act for another or represent the principal in some way or the other.
Trusts and Agency are both legal notions about relationships between two parties. They are somewhat different from each other, and therefore, identifying which relationship exists in a particular situation is critical to enhancing our understanding of legal rights and responsibilities. Perhaps because of this common misconception, people tend to confuse the two.
This paper shall begin by introducing the concept of Smart Contracts, followed by Traditional contracts, emphasizing the relationship between these two. Further, the idea of an agency shall be analyzed by looking at certain case laws. This then shall be followed by a study of the Indian position concerning contracts of Agency and smart contracts. The paper attempts to provide an insight into certain conditions that need to be fulfilled in order to hold the principle of Agency into both smart and traditional contracts and how the aspect of trust plays a role in both scenarios. Upon fulfilment of these conditions, there might be certain variations in the traditional contract policies. Towards the end, the paper will answer the question in the limelight of whether smart contracts will replace traditional contracts or just supplement them.
