Hashing Out Agreements

About the Report

Blockchain-based technologies are starting to permeate every aspect of the Canadian legal landscape. Blockchain is often solely associated with cryptocurrencies, such as Bitcoin; however, it has numerous applications beyond virtual currencies. Blockchain technology has the potential to provide numerous opportunities to those providing legal services, notably through smart contracts. However, some legal uncertainty remains with respect to smart contracts. The legality of smart contracts and their place of operation under Canadian law has yet to be researched. Potential risks for clients, as well as for lawyers—especially with respect to their ethical and professionalism duties—also need to be researched and highlighted.

This paper begins by providing an overview of smart contracts, including a brief history of the development of smart contracts, followed by a discussion of the underpinnings of blockchain-based applications. After forming an understanding of smart contracts, this paper will address the important technical and legal limitations that smart contracts face. Since blockchain-based smart contracts rely on blockchain technology and digitalization, this paper will explain how smart contracts can only be as “smart” as its developer, and the computers running them.

This paper will then transition into a discussion of how the advent of cryptocurrencies and smart contracts relaunched decades-old debates about how society should regulate technology. Although we argue that legal frameworks must evolve with society, we will highlight that we do not need to rewrite or create new approaches to each technological innovation.

Subsequently, this paper will provide an overview of smart contracts under Canadian common law. As it currently stands, academics have not fully addressed the issue of whether smart contracts conform to our traditional contract law framework. This paper will address the legal status and remaining questions regarding the legal status of smart contracts and the enforceability of smart contract performance.

While there may be many barriers to the adoption of any new technologies, legal uncertainty—and therefore legal risks for clients and lawyers—should not be one of them. The key findings below present an overview of the academic research on the key legal questions facing smart contracts in Canada. The key findings are followed by an overview of some of the preliminary use cases of smart contracts in the legal field.

The research and the production of this paper was generously supported by a grant from the Law for the Future Fund of the Canadian Bar Association. Research was conducted between September 2019 and August 2019, and the paper was produced in the Fall of 2019.

About the Authors

Dr. Florian Martin-Bariteau, LL.D., is an Assistant Professor of Law and Technology at the Faculty of Law, Common Law Section at the University of Ottawa, and the Director of the University of Ottawa’s Centre for Law, Technology and Society.

Marco Pontello, B. Com., JD 2020 Candidate, is a third year student at the University of Ottawa Faculty of Law, Common Law Section. He has been a Research Assistant at the University of Ottawa’s Centre for Law, Technology and Society since January 2018.