Smart Contracts: Self-Executing, Self- Exempting? Rethinking Contractual Doctrines In The Digital Age
Maanya Bhambal, OP Jindal Global University
I. Introduction
A smart contract does not promise to perform, it performs. Once it is deployed on a blockchain, a piece of self-executing code transfers an asset, releases an escrow or liquidates a position the instant a pre-defined condition is satisfied without the possibility of renegotiation.
The term itself is a misnomer: a smart contract is neither smart in the Artificial sense nor is it necessarily a contract in the legal sense. It is a program whose output may or may or may not correspond to an enforceable obligation depending upon the system asked to evaluate it.
Indian commentary has largely treated the recognition of smart contracts as a question of formal validity. Can a code constitute an “agreement” under Section 10 of the Information Technology Act, 2000 (“IT Act”) extends recognition to contracts “formed through electronic means” The dominant view is that formal question is largely resolved: nothing in Indian law bars electronic contracts and Section 10A was enacted precisely to remove such barriers. This consensus, however, concentrates on the easier half of the problem.
This paper argues that the harder and more consequential problem is not formation, but consequence. A smart contract’s defining feature is that it is irreversible, automatic and has near – instantaneous execution. This is something the ICA’s doctrines of consent, certainty and discharge were not built to accommodate. The paper develops and build on two linked arguments. The first part of the argument defines a formation crisis where the code-based mechanics of smart contracts produce an outward semblance of an offer and acceptance while undermining the substantive enquiry into free consent that Section 13-22 of the ICA mandate and raise a separate certainty problem under Section 29 when execution depends on unverified oracle data.
The second part identifies a irreversibility crisis: self-execution forecloses the temporal window in which the frustration doctrine under Section 56 operates, so that the smart contract is, in effect, self-exempting, it discharges itself before any party can invoke the supervening impossibility framework that would excuse a counterparty from a paralleling paper contract.
