THE RISE OF BLOCKCHAIN: AN ANALYSIS OF THE ENFORCEABILITY OF BLOCKCHAIN SMART CONTRACTS

Abstract

In recent years, there has been an eruption of interest in ‘smart contracts’ and their underlying blockchain technology, with several business operators, both private and public, as well as law firms, began to explore and incorporate smart contract and blockchain design and development to the modern-day businesses. The hype over smart contracts is deemed by many as the future means of executing a contract, which would minimize legal costs and time, and, thus, reducing lawyers' role in intermediating commercial and contractual negotiations and disputes handling. While the issues in the business and operation perspective remains whether blockchain, the main smart contract platform, is able to accommodate and guarantee the functionality of smart contracts, the bigger issue of smart contracts for legal practitioners in any jurisdiction is whether they are legally enforceable.

This thesis aims to provide the analysis study of the enforceability of ‘smart contracts’ under the current Thai legal jurisdiction with comparative study of foreign legal jurisdictions. In order to determine whether the ‘smart contract’ is enforceable, the focal issues will be (a) formation of contract and (b) required formality. For Thailand, the thesis will explore the existing Thai legislative framework and the extent to which it can accommodate blockchain smart contracts in the area of contract formation and legal formality and written evidence requirement. Specifically, this thesis will focus on the Electronic Transaction Act B.E. 2544 (2001) and its amendment B.E.2551 (2008) as specific laws for electronic communication and the Thai Civil Commercial Code as general law of the formation of contract.

For comparative studies on foreign legal jurisdictions, the laws of the Commonwealth of Australia and the Republic of South Africa will be examined. The author chose to examine the aforementioned jurisdictions as the laws of both jurisdictions are substantially advanced and aim to encourage the business community to engage via smart contracts and electronic transactions. Thus, the thesis will aim to analyze and evaluate the existing legislations, case precedents and the developments of those two legal systems, and their impact on facilitating blockchain smart contracts.

The concluding section sets out the core question as to whether a lack of certain rules or mechanism to accommodate the implementation of this technology may leave uncertainty regarding the validity and enforceability of smart contracts under Thai law. Based on the study, it is recommended that Thai ETA will have to be amended by comparing with laws and regulations of foreign jurisdictions to facilitate the full implementation of smart contract in Thailand. The principles that should be incorporated in this specific law are: (1) the default rule to determine the time of dispatch and receipt of electronic communication; (2) the use of an automated message system; and (3) the relevant competent authorities should be compulsory to make available systems in accordance with the law for fulfilling the required formality for the contract to be registered with the competent authority electronically.