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One way smart contracts could still prove useful is by changing the position parties are in prior to any lawsuit. Suppose we agree that in two weeks, you are t

One way smart contracts could still prove useful is by changing the position parties are in prior to any lawsuit. Suppose we agree that in two weeks, you are to pay me $1000. Then suppose that some dispute develops between us as to whether the payment is still owed in full, so you refuse to pay. If we merely had a standard contract, I would need to sue you, and the burden of proof would be on me to show that I am entitled to payment of the full sum. If we had a smart contract, the payment would execute automatically, and you would have to sue me, and the burden of proof would be on you to show that you are entitled to recover the sum. So even in a world where a smart contract has the exact same effect on legal duties as a standard contract[1], it could still let parties reallocate counterparty risk. There are of course other mechanisms for reallocating those risks, like escrow services. How smart contracts compare to those seems like a great area for economic and legal research. [1] A doubtful proposition, since parties to a smart contract have manifested some intention to be bound to at least some extent by the mechanics of the smart contract platform. A court will have to consider that as a factor in discerning the true intentions of the parties.

twblalock 9y ago
I'd rather not live in a world where people can take money out of other people's bank accounts without going through due process first. In your example, due process happens at the end of the dispute rather than at the beginning.
- captn3m0 9y ago
  This would also mess badly with the economics of law. For a majority of the contracts, the cost will go up as they will need to be scrutinized more because the cost of a mistake is much higher (it is immediate and final).
- shkkmo 9y ago
  In that case, don't read too much about how ACH actually works. You are supposed to obtain authorization first, but this is not generally verified at the time of the transaction (some accounts do white list specific accounts for outgoing ACH transfers). People can pull money out of your account with just your account and routing numbers. The only way to initial an ACH chargeback is to attest under penalty of perjury that you did not authorize the transfer. (Not receiving the product / fulfilling the terms of the contract is not a valid chargeback reason for ACH). So if you had indeed authorized the transfer (as maroperaza stipulates) then your only recourse is to sue them in court.
Dylan16807 9y ago
You could also just post-date a check (and notify the bank). When it comes specifically to changing the positions of parties, I can't think of a scenario where smart contracts help. Especially because they can't check anything, like "was the work done?". I can think of many uses of escrow, but those don't need smart contracts...
- marcoperaza 9y ago
  The purpose of the example isn't to be a realistic or useful application of a smart contract, but merely to show that smart and traditional contracts can in principle have different effects on the real world, even if the law treats them as having identical effects on parties' legal duties.

twblalock 9y ago

I'd rather not live in a world where people can take money out of other people's bank accounts without going through due process first. In your example, due process happens at the end of the dispute rather than at the beginning.

captn3m0 9y ago
This would also mess badly with the economics of law. For a majority of the contracts, the cost will go up as they will need to be scrutinized more because the cost of a mistake is much higher (it is immediate and final).
shkkmo 9y ago
In that case, don't read too much about how ACH actually works. You are supposed to obtain authorization first, but this is not generally verified at the time of the transaction (some accounts do white list specific accounts for outgoing ACH transfers). People can pull money out of your account with just your account and routing numbers. The only way to initial an ACH chargeback is to attest under penalty of perjury that you did not authorize the transfer. (Not receiving the product / fulfilling the terms of the contract is not a valid chargeback reason for ACH). So if you had indeed authorized the transfer (as maroperaza stipulates) then your only recourse is to sue them in court.

Dylan16807 9y ago

You could also just post-date a check (and notify the bank). When it comes specifically to changing the positions of parties, I can't think of a scenario where smart contracts help. Especially because they can't check anything, like "was the work done?". I can think of many uses of escrow, but those don't need smart contracts...

marcoperaza 9y ago
The purpose of the example isn't to be a realistic or useful application of a smart contract, but merely to show that smart and traditional contracts can in principle have different effects on the real world, even if the law treats them as having identical effects on parties' legal duties.