In today’s digital world, the concept of contract seems to have evolved significantly with the introduction of Smart Contracts. However, despite their name, they do not meet all the characteristics of a contract as defined in article 1261 of the Spanish Civil Code

A Smart Contract is more than a simple agreement between parties on its execution. So, it will be a sequence of code in charge of executing actions automatically when certain predefined conditions are met. For it to work properly, it must meet two fundamental requirements:

1. Code Conditionality: The content of the code must establish conditional actions, such as “if A occurs, then B; otherwise, C”.
2. Objective verifiability: The conditions established must be objectively verifiable, since it currently lacks the ability to interpret the content subjectively.

Benefits and Functionalities

Smart Contracts offer a number of significant advantages:

1. Automation and Autonomy: They reduce the intervention of the parties in the verification and execution of the contract; propi code will be in charge of these tasks.
2. Integration with Emerging Technologies: They allow interaction with technologies such as the Internet of Things (IoT) and Blockchain, through the so-called oracles. These act as a “bridge” between the network and the outside world, making it easier to obtain relevant data for contract execution.
3. Security and Efficiency: They improve security and reduce intermediation and management costs, while speeding up response times.
4. Immutability and Unavailability: Once integrated into the blockchain, the Smart Contract cannot be modified, guaranteeing the integrity of transactions.

However, the use of Smart Contracts also creates challenges:

1. They respond to a Boolean logic: this means that the conditions must be expressed in terms of true or false, which may limit their flexibility compared to the traditional contract. Indeterminate legal terms or the ambiguity of the contract itself are not welcome in a smart contract.
2. Multidisciplinary development: They require a multidisciplinary approach that combines legal and programming expertise to ensure that the contract adequately reflects the intentions of the parties.

In Spain, there is currently no specific regulations for Smart Contracts. Therefore, the provisions of the Civil Code, the Commercial Code and Law 34/2002 on Information Society Services and Electronic Commerce regarding obligations and contracts apply.

One of the growing trends in the field of Smart Contracts is the tokenization of assets, especially in the real estate and insurance sectors. Real estate tokenization allows the ownership of real estate to be divided into digital tokens, which facilitates the efficient and transparent buying and selling of fractions of properties on the market. This innovative technology not only streamlines the transaction process, but also gives investors the opportunity to diversify their portfolios in a more affordable way.

For the insurance industry, Smart Contracts offer the ability to automate and streamline the management of policies, claims and payments, improving operational efficiency and reducing administrative costs for insurers and policyholders alike.

In short, Smart Contracts offer an innovative new approach to the execution of digital agreements, but their implementation requires a thorough understanding of both the legal and technological aspects.

Smart contracts can be a great tool for your business but, due to their unalterable nature, you must be sure that they meet the legal and formal requirements for their validity. Failure to do so can lead to serious prejudice.

Therefore, it is necessary that they are reviewed by a lawyer. If you are interested, you can contact us.

Autor

Salvador Cabello Guillén 
Abogado - Attorney

Datos de contacto
 + 34 652 724 645
 salvador.cabello@lariostreslegal.com

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