The novel Serbian Digital Property Act, enacted in the end of 2020, mentions smart contracts only in few places. Article 2 paragraph 39 defines smart contracts as computer programs or protocols, based on the technology of a distributed database or similar technologies, which, in whole or in part, is able to automatically execute, control or document legally relevant events and actions in accordance with an already concluded contract, whereby such contract may be concluded electronically through that program or protocol. Furthermore, Article 37 declares the permission of the use of smart contracts in secondary digital property trading, that has been excessively explained in Articles 30-36, and sets out an obligation to obtain the consent of digital property users in case a digital property-related services involved the use of smart contracts.
Simply explained, a smart contract can be defined as a computer code that aids in automating and enforcing legally binding agreements. In the traditional sense, contractual parties have been relying on intermediaries, for example banks, to guarantee the performance of a contract. Smart contracts, as the new kids on the blockchain block, eliminate the occurrence of such intermediaries because they are essentially self-enforcing and self-executing. This feature is directly linked to its main benefits; by cutting out intermediaries from the picture and dictating transactions solely by computer codes, transaction fees become tremendously reduced, along with the transaction speed becoming broadly increased. In a world where we constantly adapt to emerging technological solutions, the question whether contract law can fully adapt to such novelties remains.
The many positive perks of blockchain technology include a decentralized structure, reduced costs, improved security, privacy, and traceability. Trust can be fully maintained due to third parties not being able to exercise any control over the contract, and the entire history of the contractual transaction is recorded. Namely, it doesn’t leave a lot of room for doubt. However, the immutable feature of blockchain technology amounts to smart contracts being totally unmodifiable, and that is something that may be new to us in terms of contract law. Encompassing at the same time its upper hands and drawbacks, it essentially means that a transaction cannot be reversed in any way or that specific parts and elements cannot be declared void. Hence, the sole nature of smart contracts leaves no room for contractual interpretation.
By adopting the Digital Property Act, Serbia joined a number of countries around the globe that recognized the need provide legal certainty in the booming area of digital property and blockchain technology, along with the objective to give the domestic business environment a boost over the wall. On the European level, the draft of the proposed Data Act was adopted in February 2022 by the European Commission. The proposed regulation is all about increasing the degree of legal certainty, preventing contractual imbalances and consumer benefits. Yet, there is an interesting thing in relation to the smart contracts talk. Namely, the proposed regulation would require a smart contract as such to include a ‘kill switch’ such as contractual parties being able to change the terms of the contract or cancel it entirely; a switch that seems to directly go against the nature of smart contracts, and its commercial value.
