The Resilience of Contract Law in Light of Technological Change

Abstract

While the Internet hardly creates academic excitement anymore, a number of internet-related technologies seems to challenge the principles of contract law and may, finally, test their ability to withstand technological change. Smart contracts, artificial intelligence and so-called ubiquitous computing belong to a suite of transaction technologies that – if we are to believe the popular press and some legal journals – slowly seep into mainstream commerce and challenge the basic principles of contract law. Purportedly, blockchain-based smart contracts, often defined as the encoding of legal terms in self-executing computer programs, enable the automation of performance and of enforcement. It is necessary to examine the recurring claim that if both performance and enforcement are entrusted to impartial machines operating within a distributed system, breach becomes impossible and both transacting parties benefit from lower transaction costs and greater legal certainty. It is also necessary to inquire whether the translation (or reduction?) of contractual obligations into algorithms, is legally possible and desirable. Can contracts be devoid of ambiguity?

The challenges of automation are further aggravated by advancements in artificial intelligence. Apart from the possibility of inadvertent orders, unforeseen transactions or computer errors brought about by the deployment of autonomous systems in commercial interactions, we are forced to inquire whether such technological phenomena as algorithmic trading, machine learning or electronic agents affect the existence of intention and, on a broader level, raise problems concerning the validity and enforceability of any resulting contract – if only due to the unprecedented transactional imbalances introduced by them. The legal problems arising on the side of the person deploying the technology must, however, be distinguished from those arising on the side of the person interacting with the technology.

Additional difficulties concern ubiquitous computing, loosely defined as the user-facing technologies involving the Internet-of-Things (“IoT”). Smart objects and novel transacting interfaces blur the division between online and offline environments and force a revision of our understanding of “online contracting.” When the Internet spills over our computer screens and when we encounter requests for consent and contractual terms in contexts that have traditionally been non-commercial, it becomes difficult to rely on such basic principles as the objective theory of contract or on the presumption that in commercial contexts the parties intend to be legally bound. The point is not to question the continued applicability of such principles or presumptions but to illustrate the difficulty in their application.  

This lecture explores the legal implications of the said technologies and, while abstaining from unnecessary futurism, presents a realistic picture of their legal relevance.

Presenter biography

Dr Eliza Mik holds a PhD in contract law from the University of Sydney. She has taught contract law and the law of e-commerce at the Singapore Management University and at Melbourne University. In parallel with a line of research focused on distributed ledger technologies and smart contracts, she is involved in multiple projects relating to the legal implications of automation, the deployment of ‘intelligent agents’ in transactional environments as well as the imbalances created by the use of consumer-facing technologies, such as predictive analytics and AI. Eliza is presently a Research Associate at the Tilburg Institute for Law, Society and Technology (TILT), a Research Affiliate at the Center for AI and Data Governance in Singapore and a Guest Professor of IP at the School of Nanjing University of Science and Technology, amongst others.  More recently, she has commenced a long-term collaboration with the Aalto University in Finland on the topic of smart contracting and contract automation. Before joining academia, she has worked in-house in a number of software companies, Internet start-ups and telecommunication providers in Australia, Poland, Malaysia and the United Arab Emirates. Eliza advised on e-commerce, payment systems, software licensing and technology procurement.