Are Smart Contracts Legally Binding?

Smart contract use has become increasingly widespread, and they've risen in popularity for as long as Ethereum has been a crypto market trend. So, what are smart contracts? Putting it simply, they are a program that has a coded self-executing contract, containing the precise terms of an agreement between a buyer and seller. These contracts are deployed on the Ethereum blockchain, they cannot be deleted, remaining permanently upon the chain. Reasons why blockchain smart contracts have gained popularity include:

• Speed & accuracy - once the coded condition has been met, the Ethereum contract is automatically executed immediately.
• Trust - smart contracts will forever remain on the blockchain, and no third party is required to manage them. Increasing transparency and avoiding potential fraud.
• Safety & security - everything that has been written on the blockchain is there to stay. All transactions on the blockchain, with smart contracts included, are encrypted and are almost impossible to hack & decode.

Smart Contracts and the Law

Many question the law behind smart contracts - specifically whether or not they're legally binding & enforceable. Although it differs from jurisdiction to jurisdiction, the general rule is that, yes, smart contracts are legally enforceable & can be legally binding if they comply with the contract law under the relevant jurisdiction. The specific term these types of contracts fall under is "smart legal contracts", which are largely automated contracts and can be accepted as legal & lawful under a jurisdiction, without any legal issues.

Can You Amend or Terminate Smart Contracts?

Once smart contracts have been created, there's no way to alter them, making them unbreakable contracts among their participants - this is generally how smart contracts work in blockchain. Although they have been programmed to be immutable by default, there are some scenarios in which smart contracts require amendments. Let's imagine a situation where both parties believe that it would be beneficial to alter a smart contract; they would go about it like this:

1. Deploy a new version of the smart contract on Ethereum's chain.
2. Migrate the state of the old contract technology to the new one, which could be costly in gas fees.
3. Update the contracts that have interacted with the old contract to use the new one's address.
4. Handle both contracts simultaneously as users slowly migrate to the new one.