Smart Contracts on Trial: The Legal Enforceability of Automated Agreements in Stamford Courts
Discovering that an automated agreement did not execute the way you expected can create serious problems, especially when business or personal assets are involved. A coding error, a disputed transaction, or a disagreement over the parties' intent may raise questions about whether the agreement is enforceable and what remedies may be available.
At the Law Offices of Peter V Lathouris LLC, we help clients address contract and business disputes in Connecticut. We serve clients throughout Fairfield County and New Haven County, including Darien, Greenwich, Norwalk, Danbury, and Westport. Reach out to us today to discuss your situation.
Defining the Basics of Automated Agreements
Smart contracts are generally computer programs or protocols designed to execute transactions automatically when specified conditions are satisfied. While automation can make transactions more efficient, using code does not eliminate the legal questions that ordinarily surround agreements.
Connecticut law expressly recognizes automated transactions. Under the Connecticut Uniform Electronic Transactions Act, a contract may be formed through the interaction of electronic agents, even when an individual did not review the electronic agents' actions or the resulting terms. A contract may also arise through the interaction of an electronic agent and an individual under certain circumstances. The terms of the resulting contract remain subject to the substantive law applicable to the agreement.
If there is an error in the code or a disagreement about the transaction, the surrounding agreement and circumstances can therefore become important. We can examine the underlying transaction and applicable Connecticut contract law when an automated agreement becomes the subject of a dispute.
Enforceability Challenges in Connecticut Courts
Using an automated system does not eliminate traditional contract-law requirements. Connecticut courts generally look for mutual assent and agreement on sufficiently definite terms to determine whether an enforceable contract was formed.
Several issues may arise when an automated agreement is disputed:
Mutual assent: The parties' words, actions, agreement, and surrounding circumstances may help establish whether they agreed to the transaction and its terms.
Errors in code or electronic records: A coding or transmission error may create a dispute over whether the automated result accurately reflects the parties' agreement.
Writing and signature requirements: Connecticut law generally provides that electronic records and signatures cannot be denied legal effect solely because they are electronic, although other applicable laws may still affect a particular transaction.
These issues require more than simply examining what the computer ultimately executed. The underlying agreement, the parties' conduct, the electronic records, and the substantive law governing the transaction may all matter.
What to Do When the Code Fails
If a smart contract executes incorrectly, you should not assume that the automated result necessarily determines your legal rights. Connecticut's electronic-transactions law specifically addresses certain changes and errors involving electronic records, while other contract principles may also apply depending on the circumstances.
Preserving evidence can be particularly important in a dispute involving an automated transaction. Depending on the technology involved, relevant information may include transaction records, communications between the parties, agreements describing how the transaction was intended to operate, and available technical records showing what occurred.
Avoid altering or deleting relevant records while the dispute is unresolved. You should also consider the consequences before entering into a new agreement intended to correct the disputed transaction, because subsequent communications or agreements could affect the parties' rights.
If the dispute involves significant financial or business interests, a lawyer can evaluate how the technology interacts with Connecticut contract and business law and determine what legal issues may need to be addressed.
The Impact of Local Statutes on Digital Deals
Connecticut's Uniform Electronic Transactions Act provides an important legal framework for electronic agreements. The statute states that a record or signature may not be denied legal effect or enforceability solely because it is electronic. Similarly, a contract cannot be denied legal effect solely because it was formed using an electronic record.
When a law requires a record to be in writing, an electronic record can satisfy that requirement under UETA. When a signature is required, an electronic signature can likewise satisfy the requirement. However, UETA contains exceptions and does not determine every question concerning whether a particular contract is enforceable. Other substantive laws continue to apply.
Connecticut law also expressly addresses automated transactions. A contract can be formed through an electronic agent or through the interaction between an electronic agent and an individual. The statute therefore provides a framework for recognizing automated contracting rather than requiring that every transaction be personally reviewed as it occurs.
An electronic form also does not prevent a record or signature from being admitted as evidence. Connecticut law states that evidence of a record or signature cannot be excluded solely because it is electronic.
The more difficult question in a dispute may therefore be not whether an electronic agreement can exist, but what the parties actually agreed to, whether the automated transaction accurately carried out that agreement, and what substantive law applies.
Finding Support for Your Smart Contract Disputes
Smart-contract disputes can involve both familiar contract principles and less familiar questions about electronic records and automated transactions. If an automated agreement did not operate as expected, you may need to determine what the parties agreed to, what the electronic system actually did, and how Connecticut law applies to the resulting dispute.
At the Law Offices of Peter V Lathouris LLC, we represent clients in contract and business matters throughout Fairfield County and New Haven County, including Darien, Greenwich, Norwalk, Danbury, and Westport, Connecticut. If you are concerned about the enforceability of an automated agreement or are facing a related dispute, reach out to our Connecticut business and contract law attorney today to discuss your situation.