+41 41 521 80 00 | info@lexcellence.swiss

Open jobs!

Smart Legal Contracts — The Future of Business Contracts

Smart Legal Contracts — The Future of Business Contracts

Thursday, 16 December, 2021

What are smart legal contracts?

Immediately after the launch of Bitcoin, the idea of the blockchain and its applications was seen as an enabler of radical changes in how contracts were designed and implemented. The concept of smart contracts is the logical next step for the development of contracts and the Internet.

Smart legal contracts would make it possible to build legal agreements that can be easily verified by a wide range of computers, rather than relying on human interpretation.

In an ideal world, technology would write these new contracts in code, which could be read by machines and other programs and enforced by law, just as with traditional contracts. Smart legal contracts will be able to operate autonomously with no direct human involvement.

How is a smart legal contract formed?

There are multiple conditions for the creation of a legally binding contract under English and Welsh law. Agreement, contemplation, certainty and completeness, the desire to create legal connections, and formality requirements are the ones to look out for.


Each of these conditions, which may be used to smart legal contracts, is discussed below.


An agreement is required for a contract, which consists of an offer and an acceptance. When the person accepts an offer and agrees with a request, it indicates duty imposed by defined terms. An endorsement is a firm and unequivocal statement of agreement with the conditions of an offer. The existence of an offer and acceptance is genuinely assessed based on the parties' arguments and actions.


A contract cannot be legally binding unless it is backed up.

A promise or (in the event of a unilateral contract) performance by one party in exchange for a promise by the other party is referred to as consideration. Because of the consideration requirement, commitments are not legally enforceable. 


To make a contract, Swiss law normally needs an offer and acceptance. Under Swiss law, concepts like "consideration" (common law) do not exist. Offers and acceptances are regarded as expressions of will (Willenserklärung) that must be legally binding.


Any declaration's significance is open to interpretation. The recipient's framework focuses on a subjective test firstly, but objective interpretation is usually applied using the notion of a reasonable third person in the patient's position. The significance of following behavior is debatable. Under Swiss law, there is no such thing as a parol evidence rule.


If the terms of an agreement are too unclear to be enforced and if the parties have disagreed on essential issues, it is incomplete.

Only if it is "legally or practically impossible to impart any reasonable content to the parties' agreement" will an agreement be deemed unclear.

The certainty and completeness of a competent legal contract containing a natural language agreement may be measured by looking at the contents of the natural language agreement.


The parties' intentions are statistically significant, using their words and actions rather than their subjective frames of mind. A choice to form legal relations is inferred by law when an express agreement is reached in a business environment.


The formality requirements in contracts may not have to be written in a specific format. Arrangements can be enforceable by law, whether formed in writing, orally, or by behaviors.


Switzerland and smart legal contracts


In Switzerland, distributed ledger technology is increasingly being used in a variety of industries. The finance sector is at the frontline of blockchain and smart legal contract implementation, with a variety of businesses providing services related to cryptocurrency exchanges and other virtual currencies. 

For example, capital management, investing and trade services, possession and storage solutions), and the tokenization of securities like stocks and debentures.


In Switzerland, the blockchain industry presently looks to be dominated by more mature initiatives, supported or started by well-known financial institutions and technological firms. Regulation, especially smart legal contracts, is more commonly accepted and embraced by the new wave of blockchain start-ups in the financial industry.