Smart Contracts: Legal Aspects and Litigation Practice in Russia and Abroad

 

September 15, 2025

BRACE Law Firm ©

 

Smart contracts are one of the primary tools of the crypto-economy. As smart contracts become increasingly common, parties must be certain that their legal rights and interests will be protected. In this regard, the relationship between blockchain and traditional legal systems is of significant interest.

In this article, we examine judicial disputes concerning smart contracts, technologies and core elements, advantages and disadvantages, and provide interesting cases from both Russian and foreign judicial practice.

What is a Smart Contract?

Smart contracts have no physical form and parties do not sign them like traditional contracts. Instead, they are program codes that execute automatically upon the fulfillment of specified conditions. I.e., for an obligation to be performed, it must be provided for in the program code.

No single legal position exists today to define the term "smart contract". Legal literature offers numerous points of view on the legal nature of smart contracts. For example, one perspective suggests that smart contracts possess a dual legal nature: on the one hand, they are a technological solution involving a computer protocol that may not constitute an agreement; on the other hand, they are an electronic agreement between parties that carries legal force. [1]

Other researchers conduct a legal analysis of smart contracts, focusing on the use of computer code to formulate, verify, and perform an agreement between parties. In this context, the key legal issues are notification, consent, and consumer protection. [2]

In general, authors recognize that smart contracts are a type of computer code that can represent all, part, or one of the active forms of legal contracts under the law. Even when a smart contract constitutes a set of a legally binding agreement, it remains subject to the same contract law as any other contract drafted in natural language. [3]

A smart contract functions based on distributed ledger technology — blockchain — which is a decentralized, distributed, and immutable digital database (ledger) in which information is stored as a chain of blocks linked by cryptographic methods.

One of the key advantages of blockchain is that the data contained in a block cannot be deleted or changed; one can only create a new block with updated information. Furthermore, all entities with access to this chain must grant consent (or refusal) to add new blocks, which minimizes the risk of fraudulent transactions.

A smart contract is characterized by the following features: [4]

• Parties may use smart contracts exclusively within the Internet space, without the possibility of transferring the terms of the transaction to a physical medium;
• Due to the application of blockchain technology, the obligation will be performed automatically upon the occurrence of established circumstances without additional intervention from the parties;
• The performance of obligations by one party directly depends on the performance of actions by the other party to the transaction.

What Types of Smart Contracts Exist?

Currently, there is no accepted classification of smart contracts, but from the perspective of agreement performance, the following types of smart contracts may be identified:

• Control of property relations during operations with digital assets, including "cryptocurrencies";
• Financial services (exchange trading, participation in auctions, etc.);
• Performance of obligations under credit products at the moment events occur.[5]

Smart contracts are used to automate processes and transactions in various fields: finance, supply chains, real estate, education, healthcare, gaming, and even for the automation of banking services and voting management. They operate on the "if X, then Y" principle, where a programmed action is automatically performed when a specified condition is met, such as transferring funds, recording data in the blockchain, or controlling contract performance.

The following are examples of the use of smart contracts in the field of finance and "cryptocurrency":

• Creating platforms for lending and "token" trading without the participation of banks and intermediaries;
• Managing the process of fundraising and the "issuance" of new "tokens" based on smart contracts;
• Converting real assets (real estate, securities) into digital "tokens" on the blockchain.

In insurance, smart contracts can automate the process of processing insurance claims and payments in standard cases. In logistics, smart contracts allow for tracking and controlling the movement of goods from production to delivery. In real estate, smart contracts will simplify and reduce the cost of real estate purchase and sale transactions through process automation.

When concluding a smart contract for the provision of "services", it is possible to provide for the payment of remuneration to the performer upon fulfillment of the transaction terms, and in the case of a lease — the automatic deduction of rent from the lessee on the specified day.

Risks and Disadvantages of Smart Contracts

The main disadvantages of smart contracts include the irreversibility of code errors and the impossibility of correcting them, the lack of legal status and regulation, problems with flexibility and the labor-intensive nature of making changes, technical vulnerabilities and security risks, and the limited scalability and performance of blockchain networks.

Technical disadvantages include:

• Errors and vulnerabilities in the code that can lead to a loss of funds, which cannot be corrected after the contract is deployed;
• The impossibility of modification, which means that the contract cannot be adapted to new conditions if this was not originally included in the code;
• The complexity of the code makes identifying and eliminating malfunctions a difficult task that requires careful testing and auditing.

Legal disadvantages include:

• The lack of legislative recognition in most jurisdictions, which creates legal uncertainty and complicates dispute resolution;
• Uncertainty regarding the procedure for challenging non-performance or errors in a smart contract;
• The impossibility of accounting for the human factor and ambiguous conditions that cannot be formalized.
• The risks and disadvantages also include:
• Public skepticism due to concerns about security and efficiency;
• The need for specific knowledge to create and use smart contracts, as well as the high cost of development;
• The risk of job displacement as a result of process automation, which could lead to staff reductions in some areas, for example, in the banking industry.

In Case No. SIP-467/2024, Sberbank of Russia appealed to the court with a demand to invalidate a decision by Rospatent, adopted following the consideration of an objection to a decision refusing to issue a patent for an invention.

The Bank filed an application for the registration of a patent for the invention Method and System for Concluding Sale and Purchase Transactions of Digital Assets, one of the features of which is the formation of a smart contract and the entry of a digital asset identifier and a digital asset cost value into it. As the Bank indicated, the technical problem or task set in this technical solution "is the creation of a new, effective, simple, and reliable method for the automated conclusion of digital asset sale and purchase transactions using bank accounts. The technical result is the provision of the possibility of conducting a reliable and secure digital asset sale and purchase transaction for both parties using a bank account in an automated mode". Rospatent refused to issue the patent because the proposed invention relates to business methods, which are not granted legal protection as inventions.

The Court indicated that Rospatent reasonably proceeded from the fact that "the specified result will be achieved due to the established rules for conducting the transaction: checking the availability of digital assets/funds and the simultaneous transfer of digital assets and funds, implemented using simple automation of sale and purchase transactions with the implementation of a common technique for such transactions in the state of the art — the use of a smart contract stored in a distributed blockchain ledger, i.e. due to a software algorithm implementing a set of operations performed by economic entities (the buyer and the seller) in accordance with the established rules for the sale and purchase process. Such a result does not have a technical character". [6]

How Did Smart Contracts Appear?

In 1994, computer scientist and cryptographer Nick Szabo, who specialized in digital currency and protocols, first put forward the idea of a smart contract. He defined a smart contract as "digital protocols that allow for the transfer of information using mathematical algorithms to perform transactions and establish secure connections over computer networks". He spoke of them as a combination of computer codes that assist some applications and operations, such as credit and payment systems, as well as the conclusion of contracts protected by cryptography, as Szabo was interested in developing legal and related contracts that allow for the use of electronic commerce protocols. [7]

At the time Szabo put forward these proposals, given the prevalence of traditional financial services, they seemed unrealistic because the technologies necessary for their implementation had not yet been created, as certain conditions had to be met for the full implementation of the process. Another reason the concept of smart contracts seemed unrealizable at that time was the fact that before blockchain began to be used to create smart contracts, there was a risk of violation of this concept by a central control point, as well as a number of other related limitations, in connection with which the efficiency and flexibility of smart contracts were called into question. [8]

With the appearance of Bitcoin in 2008, it became possible to store data in the blockchain, which ensured the transparency and security of information. However, the possibilities for smart contracts in Bitcoin were limited. In 2015, with the launch of the Ethereum platform, a new stage in the development of smart contracts began. The Ethereum platform, unlike the original Bitcoin blockchain platform, has an architecture with unique layers that open and expand new opportunities for business. Its programmability ensures simpler, faster, more transparent, and more secure use and accessibility of smart contracts, replacing traditional contracts. [9]

Legal Regulation of Smart Contracts Abroad

The lack of a legislatively established definition significantly complicates the use of smart contracts in real life.

The regulatory framework for smart contracts is in the stage of development. At the international level, there are no acts directly dedicated to smart contracts.

Legal regulation in individual US States can be attributed to the technical-oriented model, which is determined by the technical essence of the smart contract as a computer program.[10]

For example, in the State of Arizona, in accordance with the Arizona Revised Statutes, a smart contract means an event-driven program with state that runs on a distributed, decentralized, shared, and replicated ledger and that can take control of and instruct the transfer of assets on that ledger. A record or contract secured using blockchain technology is considered to be in electronic form and to be an electronic record. Smart contracts can exist in commercial activity. A contract related to a transaction may not be denied legal force, validity, or enforceability solely on the ground that it contains a smart contract condition. [11]

In the State of Tennessee, a smart contract means an event-driven computer program that is executed on an electronic, distributed, decentralized, shared, and replicated ledger, which is used to automate transactions, including but not limited to transactions that:

• Take responsibility for and give instructions for the transfer of assets in the specified ledger;
• Create and distribute electronic assets;
• Synchronize information;
• Establish the authenticity of identity and manage user access to software applications. [12]

The legislation of the State of Vermont can be attributed to the transaction-oriented model of legal regulation. The concept of a smart contract is not established in the state, but a digital record registered electronically in a blockchain must be self-authenticating if it is accompanied by a written statement by a qualified person made under oath, which indicates the qualifications of the person performing the certification, and:

• The date and time the record was entered into the blockchain;
• The date and time the record was retrieved from the blockchain;
• That the record was maintained in the blockchain as a regularly conducted activity; and
• That the record was made as a result of regularly performed activity within the framework of ordinary practice.[13]

The burden of proving the invalidity of the relevant record falls on the person against whom the record is directed. This person bears the burden of providing evidence sufficient to justify the conclusion that the alleged fact, record, time, or identity is not authentic, as indicated in the date added to the blockchain. [14]

Of interest is the case Van Loon v. Department of the Treasury, No. 23-50669 (5th Cir. 2024), based on a claim by users of Tornado Cash, a "cryptocurrency" mixing service that uses immutable smart contracts to anonymize transactions. Tornado Cash fell under sanctions from the Office of Foreign Assets Control (OFAC) in accordance with the International Emergency Economic Powers Act (IEEPA) for alleged facilitation of money laundering for malicious actors, including North Korea. The plaintiffs argued that OFAC exceeded its legal authority by assigning Tornado Cash the status of a Specially Designated National (SDN) and blocking its smart contracts.

The US District Court for the Western District of Texas issued a decision in summary judgment in favor of the Department of the Treasury, ruling that Tornado Cash is an entity subject to sanctions, that its smart contracts constitute property, and that Tornado Cash DAO has an interest in these smart contracts. The plaintiffs appealed this decision. The US Court of Appeals for the Fifth Circuit considered the case and focused on the question of whether immutable smart contracts can be considered "property" in accordance with the Electronic Money Consumer Protection Act (IEEPA). The Court concluded that these smart contracts are not property, because no one, including their creators, can own, control, or change them. The Court emphasized that property, by definition, must be ownership, and immutable smart contracts do not meet this criterion. Consequently, the Court ruled that OFAC exceeded its legal authority by sanctioning the immutable smart contracts of Tornado Cash.[15]

In Chinese legislation, there is no official definition of smart contracts. Chinese contract law allows for the use of digital technologies to support traditional contracts. This is reflected in the provisions of various laws: the Electronic Signature Law, the E-Commerce Law, and the Civil Code. For example, Article 469 of the Civil Code of China provides that written form includes the communication of data in any form, such as electronic data exchange and e-mail, allowing the content contained in it to be presented in a tangible form and made available for review and use at any time. [16]

In China, smart contracts are used both on the basis of the state digital currency (the digital yuan) and on private blockchain platforms, and are implemented in various fields, including financial services and car purchases. The State supports their use to stimulate innovation, and the private sector strives to use them to automate transactions and reduce costs.

The Agricultural Bank of China has launched a pilot program that allows users to pay in advance for cars using smart contracts. The system works without intermediaries and allows for the specification of conditions and their coordination throughout the entire transaction. This significantly reduces the risk of money theft and effectively regulates the activities of car dealers. The buyer pays the advance through a smart contract, and the coins are blocked on it until the car is handed over to the owner. After the delivery of the vehicle, the "stablecoin" will automatically be sent to the dealer's account and the transaction terms will be fulfilled. [17]

Also, the Chinese judicial system actively uses blockchain and smart contracts. The Supreme Court of the PRC promulgated the Provisions on Certain Issues Concerning the Consideration of Cases by Internet Courts, according to which blockchain and other similar technologies can be used to confirm the authenticity of evidence in judicial disputes in China. [18]

The Court in Hangzhou, which specializes in considering disputes related to electronic commerce, online contracts, and copyright infringements on the Internet, has launched its own blockchain platform for evidence, since evidence is mainly digital and can be stored in the system. [19]

In the Republic of Belarus, the concept of a smart contract is provided in Decree No. 8 by the President of the Republic of Belarus dated December 21, 2017, On the Development of the Digital Economy. [20] In accordance with this act, a smart contract is a program code intended for functioning in a block transaction register (blockchain) or another distributed information system for the purposes of automated performance and (or) execution of transactions or the performance of other legally significant actions. The right to conclude smart contracts is granted to residents of the High Technology Park.

It should be noted that in paragraph 5.3 of this Decree, there is a provision according to which a person who has concluded or performed a transaction using a smart contract is considered to be properly aware of its terms, from which it follows that a smart contract is a method of concluding or performing a transaction. A smart contract automates contractual obligations (introduces automated performance of obligations into law and acts as a transaction performed using an electronic agent without the direct participation of a party). Furthermore, the Decree introduces a presumption according to which a person who has concluded a transaction using a smart contract knew these terms of the transaction and is not entitled to challenge them. This circumstance is intended to promote the stability of circulation and limit abuses by its participants, as well as for the development of the use of smart contracts in entrepreneurial relations in general. [21]

In India, smart contracts are recognized as legal and valid in accordance with Indian contract law. They are used in various fields, including financial technologies, "tokenization" of assets, and automated systems. However, the legal framework for smart contracts is still developing, and there is no specific regulatory structure or exhaustive judicial recommendations, which creates potential difficulties with enforcement and dispute resolution. Smart contracts are regulated by the Indian Contract Act 1872. According to this Law, a valid contract must meet basic criteria: firstly, an offer; secondly, an absolute and unconditional acceptance; and finally, a lawful consideration. The Law also requires consensus, implying that the parties must agree on the same terms in the same sense. [22]

In the United Kingdom, recommendations to the UK Government were published by specialists in 2021, from which it followed that the current legal framework of England and Wales can facilitate the use of smart contracts without the need for legislative reform. Smart contracts should be supported within the framework of current legislation, and related issues should be considered in English courts as new facts and situations appear. [23]

English lawyers in their research came to the following conclusions:

• The current legal framework is sufficiently reliable and adaptable to facilitate and support the use of smart contracts;
• The flexibility of common law means that the jurisdiction of England and Wales provides an ideal platform for business and innovation without the need for legislative reform;
• Efforts should be made to identify and, if necessary, eliminate any fundamental legal obstacles to the use of smart contracts.

Thus, English lawyers believe that problems with the interpretation of smart contracts are unlikely to arise if its terms are written exclusively in natural language, and the code simply automates the performance of these terms. However, if the terms of a smart legal contract are partially or fully defined in code, this potentially creates difficulties for the interpretation of the contract. The parties may first conclude a contract in natural language that determines the terms of the transaction. Then the contract in natural language is translated into code, but errors may occur during the translation process. Similarly, disputes about coded conditions may arise if the result of the code becomes obvious only after its use. In such cases, the parties may try to correct or cancel the consequences, but this may depend on the complexity of the transaction. [24]

Judicial Practice Regarding Smart Contracts in Russia

The Bank of Russia pays special attention to smart contracts. One of the key innovative projects of the Bank of Russia, the "Digital Ruble", will allow for the automation of control and the settlement of contracts using smart contracts, which should increase transaction security and reduce the risks of non-payments for business. [25]

In the concept of the digital ruble, the Bank of Russia defines a smart contract as a transaction performed automatically upon the occurrence of conditions predetermined by the parties. Smart contracts will be an additional functionality of the digital ruble platform.

The Bank of Russia believes that the use of smart contracts will optimize business processes related to interaction between counterparties, and also minimize time and costs during a transaction. It is expected that clients will be able to independently use smart contracts previously created by financial organizations and verified by the Bank of Russia. The smart contract will contain information about the parties to the transaction, the amount, and the terms of its performance. Registration of the smart contract on the digital ruble platform will be performed after it has been signed by all parties to the transaction.

One of the additional options for using smart contracts could also be the labeling of digital rubles, allowing for the establishment of conditions for their expenditure (for example, determining specific categories of goods/services that can be purchased using them) and tracking the entire chain of passage of the labeled digital rubles. At the same time, the implementation of smart contracts on the digital ruble platform does not restrict financial organizations from implementing smart contracts in their own systems.

The Russian Government, in the Transport Strategy of the Russian Federation until 2030 with a forecast for the period until 2035, proposes the dissemination of platform technologies and smart contracts, which will simplify the interaction between participants in the transport process, eliminate intermediaries who do not generate added value, and reduce logistical costs. To increase the level of trust in such technologies and involve the maximum number of transport market participants, distributed platforms — logistics integrators independent of one large player or state structure — will be supported. For Russian logistics platforms, data exchange channels will be formed with Asian and European platforms.[26]

Russian Railways (RZD) proposed the use of an electronic service for monitoring freight transport smart contracts on the Distributed Data Ledger platform using blockchain technology on the basis of a concluded framework agreement on the self-performance of the transport contract and related contracts and an agreement on the provision of information services and the provision of electronic services in the field of freight transport.

This service provides the following information:

• About the main operations of the freight transport process by rail;
• About the occurrence of events related to the performance of contractual obligations;
• About the facts of occurrence and the amount of financial obligations of transport participants arising in the process of performing transport. [27]

In 2019, as a result of making changes to a number of articles of the Civil Code of the Russian Federation (the "Civil Code"), the use of smart contracts in Russia was enabled. In accordance with paragraph 1 of Article 160 of the Civil Code, the written form of a transaction is also considered to have been complied with in the case of a person performing a transaction using electronic or other technical means that allow the content of the transaction to be reproduced on a tangible medium in an unchanged form, while the requirement for a signature is considered fulfilled if any method is used that allows for the reliable determination of the person who expressed their will. A special method for the reliable determination of the person who expressed their will may be provided for by law, other legal acts, and an agreement between the parties.

Article 309 of the Civil Code provides that the terms of a transaction may provide for the performance by its parties of obligations arising from it upon the occurrence of certain circumstances without a separate expressed additional expression of will of its parties aimed at performance by using information technologies determined by the terms of the transaction.

It should be noted that the above wording contains the main principle of smart contract performance, since obligations arise after the occurrence of the consequences specified in the contract.

According to Article 434 of the Civil Code, a contract in writing may be concluded by drafting a single document (including an electronic one) signed by the parties, or by an exchange of letters, telegrams, electronic documents, or other data.

Thus, from an analysis of these norms, the conclusion can be reached that civil legislation equates a smart contract with a contract in electronic form concluded in writing and does not provide for any special features for concluding transactions in which smart contracts are used.[28]

In Russian judicial practice, there are cases concerning the compulsion to conclude a smart contract. To purchase a car, the plaintiff chose a seller who professionally deals with the online sale of cars using smart contract technology. The text of the smart contract is cryptographically signed by the parties to the transaction and is launched for performance on a trusted platform. The smart contract monitors the terms of the contract and, upon fulfillment of the conditions, performs its obligations. For the automatic operation of the smart contract, all terms and obligations of the contract must be software-accessible on a trusted platform. By connecting the specified algorithm, the plaintiff received an offer from the seller to purchase a car, addressed to an indefinite circle of persons, which contained all the necessary (essential) terms of the agreement: the subject of the contract (car) indicating the brand and VIN-number of the specific car, the price of the contract — the cost of the specified (specific) car. The plaintiff believed that the defendant's offer contained all the features of a public offer contract, according to which the seller offers the buyer to purchase the specified product at the specified price, and the buyer concludes the contract by acceptance (payment) on the proposed terms. The plaintiff made payment of the specified cost, but the defendant returned the funds transferred by the plaintiff as an erroneous payment, thereby refusing to perform the concluded contract. These circumstances served as the reason for appealing to the court and considering Case No. A55-7445/2022. The judicial instances indicated that "the copies of screenshots of the screen on the computer presented by the plaintiff in confirmation of his argument about concluding a contract with the defendant for the acquisition of a vehicle using smart contract technology do not contain a link to a specific website, they lack an indication of the date and time of the creation of the screenshot on the computer, the signature and information about the person who took the screenshot on the computer, information about the technical means with which the screenshot was taken, and the copy of the document presented by the plaintiff is not an invoice for payment for the disputed car issued by the defendant specifically to the plaintiff, since it lacks a specific indication of the seller and the buyer, the name of the product being sold, its identifying features, quantity and its cost, as well as a link to the relevant civil law contract, i.e. there are no essential terms regarding the name and quantity of the goods, the address to one specific person, and the obligation to pay". Furthermore, the judicial instances reached the conclusion that "since the contract between the parties was not concluded, the defendant did not express a will to conclude a contract specifically with the plaintiff for the sale of the disputed car, including through the use of smart contract technology".[29]

We note that in Russian judicial practice, the term "smart contract" is most often found as a component of such an object of intellectual property rights as program code (software), for the development of which a corresponding contract has been concluded.[30]

Court Cases Concerning the Conclusion of a Smart Contract

Since a smart contract is a program, it can only be implemented by relevant technical specialists. A key problem for the wide application of smart contracts is that the parties will need the support of a reliable expert who could assist in fixing the agreement in code, or confirm that the code written by a third party is accurate.

It is possible to translate certain parts of a contract into smart contracts. For example, provisions of a sale and purchase contract regarding the payment of funds and the transfer of ownership can be coded and, consequently, automatically performed by a smart contract. In the contract, for example, it can be indicated that the parties agree that the provision should be represented by the following line of code. Other actions, such as the performance of warranty obligations, can be performed in the traditional way.

Lawyers independently will not be able to translate complex legal agreements into the form of a smart contract. Close interaction between lawyers and programmers is necessary in creating a smart contract. Before drafting a smart contract, the parties need to develop the legal architecture for process automation and determine exactly what the smart contract will regulate.

In the field of smart contracts, many unresolved situations remain. For example, the introduction of amendments is not allowed due to their immutable nature. The terms of the contract cannot be changed after they have been recorded in the blockchain. This is due to the decentralized nature of the blockchain, which allows all users to check and confirm transactions, but also makes any further changes impossible. Therefore, it is necessary to include a mechanism for future changes in the smart contract code. To solve this task, it is necessary to include in the lines of code the possibility of changing certain factors.[31] Problems of the law applicable to the relations of the parties, the invalidity of the transaction, liability, etc., should also be noted.

An interesting example is Quoine Pte Ltd v. B2C2 Ltd, considered in the Singapore International Commercial Court and the Singapore Court of Appeal. [32]

For trading, a trader used a computer algorithm that automatically performed transactions at prices that the algorithm recognized as acceptable, taking into account information about other transactions performed on the exchange. The exchange also used a computer algorithm that automatically sets "cryptocurrency" quotes based on information about rates prevailing on other exchanges. Due to a technical error by the exchange's system administrator, the exchange algorithm began to work incorrectly, as a result of which the trader, through his algorithm, purchased "cryptocurrency" at a price 250 times lower than the market price. Upon discovering this incident, the crypto-exchange operators manually canceled the anomalous transactions and returned the trader's account to its original state, which the trader did not agree with and filed a claim against the crypto-exchange based on the user agreement, which stated that transactions performed on the exchange were final and irrevocable. The exchange in response referred to the fact that the transaction was performed as a result of an error, and therefore was invalid. [33]

The Singapore International Commercial Court resolved the case in favor of the plaintiff (trader), reaching the following conclusions:

• The contract regarding each of the disputed transactions operated directly between the buyer and the seller. However, a contractual connection also existed between the exchange and the clients, originating from the user agreement;
• The unilateral cancellation of the disputed transactions by the exchange was a violation of the user agreement, specifically its provision on the irreversibility of transactions;
• Bitcoins credited to the trader's personal account following the disputed transactions were held by the exchange in trust for the trader, and therefore their deduction from the account was a violation of the terms of the trust. [34]

When concluding a smart contract, attention should be paid to the type of smart contract you are dealing with. There are two categories of smart contracts: those where the contract is drafted in natural language and the obligations are translated into code and performed by it, and those where the obligations are determined by the code (as well as everything in between). The latter option will probably be more complex from a legal point of view. The parties should consider whether a record of the contract or its parts in natural language would be useful to them. Does the platform through which the smart contract will be recorded and performed meet the needs of the parties? As noted, the key question to consider here is whether the platform is decentralized or whether a central administrator exists. Most blockchains are decentralized, meaning that once information is recorded in them, no one has the right to update or delete that information. If there is a central administrator, they can change the information recorded in the ledger, but it is important to understand who this administrator is, where they are located, and what they can do. Can they correct errors in the ledger (for example, an error in the code that records the terms of the contract), and if so, under what circumstances and how is this achieved in practice? Do the parties want this, or do they strive to record their obligations in a truly immutable ledger? [35]

What happens if the code fails or works differently than the parties intended (for example, due to human error in coding or other unforeseen consequences)? These possibilities and the possibility of risk mitigation should be considered from the very beginning, for example, by including an emergency shutdown function in the code, which can be activated if it is necessary to terminate operations before the code is fully performed. The parties may also consider the appropriateness of agreeing on an exclusion of liability related to problems arising in connection with the code.

Smart contracts, more often than traditional contracts, are of a cross-border nature; for example, because they can facilitate cross-border financial activity and chain management, and also because the defendants in a claim may be not only the counterparty to the contract but also the platform provider, an involved programmer, etc. The inclusion of a clear jurisdiction provision is very important and should not be ignored. It would be prudent for the parties to record this agreement in natural language, either in a separate agreement or as part of the code. A similar approach should be applied to the choice of applicable law; that is, it should be clearly indicated, preferably in natural language, to eliminate the risk of ambiguity.[36]

Thus, smart contract technology is quite convenient, simple, and fast. This tool allows for the implementation of transactions of different types and purposes. Nevertheless, despite the advantages of introducing smart contracts, it is also extremely important to remember that many uncertainties exist in legal and state policy around smart contracts, since technology often outpaces legislation and the regulatory framework. These uncertainties can lead to disputes. We note that law enforcement practice in many countries is only forming and, taking into account the specifics of smart contracts, relies on already existing cases in the field of traditional contracts.

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