Smart Contracts Work – But Do They Hold Up In Court?

Key takeaways

• Smart contracts are sometimes expected to seriously challenge the rule of the established legal order, offering a simple, completely unambiguous and trustworthy tool for agreeing and executing party agreements without having to rely on lawyers and courts.
• A recent judgment by the German Federal Court of Justice on a lease agreement for batteries used in electric cars only incidentally referred to smart contracts. Nevertheless, the ruling serves as a useful reminder that when smart contracts interact with the "real world," the traditional legal rules of property law still prevail and set certain limits to the effectiveness of the concept.
• The arguments used by the court would apply to a similar case looked at under Swiss law.