Instead of going to court to ask the state to enforce the contract, the
parties can agree to a cheaper enforcement mechanism. This is the method by
which smart contracts reduce transaction costs. In the realm of wills and
estates, like in Ricketts, smart contracts can be of particularly high value
because they will bind the hands of the executor to the will of the testator,
with little room for deviation.
Some of the most difficult problems of early contract law involved
defenses of misunderstanding and mistake.
68
With respect to interpretation,
the use of computer code has the potential to minimize future conflicts over
terms.
69
In Raffles v. Wichelhaus, a controversy arose over a cotton shipment
contract when two ships named Peerless could both fulfill the terms; one party
claimed he intended one ship, the other party, the other.
70
Such problems are
virtually non-existent now, at least in the shipping world, but for similar
problems that may exist, the precision of cryptographic identifiers is able to
dispatch with such issues.
71
Although ambiguity certainly exists in
programming languages, these ambiguities are less than in the real world
because of the fact that there are simply fewer terms that a computer can
recognize than a human can recognize.
72
68
See, e.g., E. Allan Farnsworth, "Meaning" in the Law of Contracts, 76 YALE L.J. 939
(1967); E. Allan Farnsworth, Precontractual Liability and Preliminary Agreements: Fair
Dealing and Failed Negotiations, 87 COLUM. L. REV. 217 (1987).
69
This potential is not certain, as examples of fraud abound in the world of computer code.
We discuss the DAO incident is discussed below, infra p. 336. Much like contracts of
adhesion, many lay individuals will not comb through the code of their contract. But like open
source software, granting everyone access to potentially review the code is a strong bulwark
against fraud. Code can minimize, but not completely erase these problems because humans
and their misunderstandings of code could provide a basis for contract rescission.
70
Raffles v. Wichelhaus, 2 H. & C. 906 (1864).
71
David Wu et al, Privacy, Discovery, and Authentication for the Internet of Things (Feb. 28,
2017) (unpublished manuscript), https://crypto.stanford.edu/~dwu4/papers/PrivateIoTFull.pdf
[https://perma.cc/PXQ6-ZGMY].
72
While computer code is subject to the same human error that written language is, it is much
less subject to uncertainty. Two humans may read the same words and ascribe different
meaning. Two compatible computers reading the same piece of code will not, although that
code may not be the “correct” code that was meant to be written by the programmer; average
adults have a vocabulary of between 20,000 and 35,000 words. See Vocabulary size: Lexical
Facts, ECONOMIST (May 29, 2013),
http://www.economist.com/blogs/johnson/2013/05/vocabulary-size [https://perma.cc/UQV4-
3W32]. Because computer programs are written by humans, anything a human can write into
code, a human can at least recognize as a word or signifier.