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CS Professional · Artificial Intelligence, Data Analytics and Cyber Security - Laws and Practice · Internet and Other Technologies

A company uses a smart contract on a blockchain to release payment to a supplier automatically when a delivery sensor confirms receipt of goods. Which statement best describes the legal and technical position of this arrangement?

A smart contract is self-executing code, and it is enforceable only if the ordinary Indian Contract Act requirements are met, namely offer, acceptance, lawful consideration and free consent. Electronic form is recognised, but code alone does not guarantee validity.

  1. AA smart contract is self-executing code, and whether it is an enforceable contract depends on the general requirements of the Indian Contract Act, 1872 such as offer, acceptance, consideration and free consentCorrect
  2. BA smart contract is automatically a valid contract under the Information Technology Act, 2000 regardless of the parties' consent
  3. CA smart contract cannot be a contract because it is written in code rather than words
  4. DA smart contract needs a physical stamp of the blockchain operator to be binding

Explanation

Smart contracts are code that executes agreed terms automatically. Their enforceability turns on the ordinary contract law requirements, and the IT Act recognises electronic form and records but does not make every code-based arrangement valid regardless of consent. Being in code does not by itself bar a contract.

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