THE AUTHOR:
Dalila Djamane, Legal Advisor
This series explores the evolving landscape of arbitration and alternative dispute resolution (ADR) in the Middle East, with a focus on innovation, legal reform, and regional best practices. Each article offers insight into emerging trends—from digital transformation and legal tech to cross-border enforcement and institutional developments. Stay tuned as we unpack key themes shaping the future of dispute resolution in the region.
Smart contracts are increasingly used across industries, particularly in digital finance, real estate, and dispute resolution. As blockchain adoption grows, so does the legal community’s interest in understanding whether and how smart contracts are enforceable under existing laws.
This article provides a clear overview of what smart contracts are, how they work, and the current state of legal recognition in key jurisdictions.
What Are Smart Contracts?
Despite the name, smart contracts are neither basically “smart” nor traditional legal contracts. A smart contract is a self-executing program stored on a blockchain. It performs specific actions automatically once predefined conditions are met.
For example, in a simple real estate transaction, a smart contract could be designed to transfer digital ownership of a property token once payment is confirmed — all without human intervention.
Do Smart Contracts Replace Legal Contracts?
No. While a smart contract can carry out part of an agreement, it is not a legal contract by default. Its legal status depends on:
- The intention of the parties
- Whether it satisfies the requirements of a binding contract (e.g., offer, acceptance, consideration, and intent)
- The jurisdiction in which it is used
Smart contracts are better seen as a tool to automate performance of certain clauses rather than a substitute for legal drafting.
Practical Use Cases
Smart contracts are increasingly used in:
- Real Estate: Automating rent payments or holding escrow
- Finance: Triggering repayments or interest calculations
- Insurance: Automating claims processing based on verified events
- Supply Chain: Releasing payments upon delivery confirmation
- Dispute Resolution: Enforcing digital settlement agreements or penalties
They are most effective when conditions are clear and actions are purely digital.
Legal Recognition Across Jurisdictions
United States
Several states have enacted laws recognizing smart contracts.
- Arizona and Wyoming explicitly state that smart contracts can be legally enforceable.
- Contract law at the federal level still applies: if the smart contract meets legal elements, it is likely to be recognized.
United Kingdom
In 2021, the UK Law Commission affirmed that English law can accommodate smart contracts, even without legislative change. Courts have already considered blockchain evidence and code as part of contract disputes.
United Arab Emirates
The UAE has shown strong regulatory leadership. The DIFC and ADGM both support blockchain use, and the Dubai Blockchain Strategy promotes smart contracts in public and private sectors. While specific smart contract legislation is evolving, existing contract law frameworks can support enforceability.
Singapore
A key fintech jurisdiction, Singapore allows digital contracts if traditional requirements are met. The Electronic Transactions Act 2010 supports smart contracts as part of the digital commerce infrastructure.
European Union
The Regulation (EU) 2023/1114 on Markets in Crypto-Assets (“MiCA”) primarily targets crypto-assets, but smart contracts are indirectly covered. Some member states, such as Germany and France, have taken further steps in offering guidance or legal frameworks that support blockchain applications.
Key Legal Considerations
- Is the smart contract meant to be legally binding or just a technical tool? This affects enforceability.
- What if the code doesn’t perform as intended? Many jurisdictions would defer to the underlying legal agreement or seek to understand the parties’ original intent.
- Most smart contracts are immutable once deployed. It’s essential to incorporate options for upgrades or corrections (via admin keys or update mechanisms).
- Disputes involving smart contracts may require hybrid dispute resolution mechanisms — combining traditional legal recourse with blockchain-based tools for evidence and enforcement.
Implications for Legal Professionals
Smart contracts are not replacing lawyers, but rather changing how we work. Legal professionals need to:
- Understand how smart contracts operate technically
- Work with developers to ensure legal alignment
- Draft parallel agreements to cover what code can’t
- Advise on applicable laws and dispute resolution options
In arbitration and ADR, lawyers may also encounter smart contract evidence or enforcement processes in blockchain disputes. It’s no longer enough to know the law — we must also understand the code that might carry it out.
Conclusion
Smart contracts offer efficiency and automation, but legal enforceability still depends on intent, clarity, and local laws. Jurisdictions such as the U.S., U.K., UAE, and Singapore are moving forward with supportive legal frameworks, while others are closely watching.
For lawyers, arbitrators, and commercial parties, the message is clear: smart contracts are a valuable tool, not a full replacement for legal agreements. When used with care, they can streamline performance — but only if their legal status is clear from the start.
ABOUT THE AUTHOR
Dalila Djamane is an international Legal Advisor with a focus on cross-border contracts, governance, and regulatory compliance. She brings a unique perspective shaped by experience across diverse jurisdictions, including Egypt, Algeria, Saudi Arabia, the UAE, the United States, and France. Bridging both civil and common law traditions, Dalila has advised on high-value real estate transactions, international trademark portfolios, and strategic investments in the MENA region. A strong advocate for legal innovation, she regularly writes on the intersection of law, technology, and international dispute resolution.
*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.
