Importance of the contracting parties having the appropriate legal capacity to enter into a binding
However, certain individuals lack the capacity or legal ability to enter into contracts. Smart contracts functioning as credible commitments would result in economic and time efficiency in business transactions.
Capacity of parties to contract examples
They are responsible for these accounts as if they were legally binding contracts. A contract may be legally binding only if it entails consideration. In some cases, however, the courts force those who have voluntarily intoxicated themselves to uphold the obligations they've made while under the influence. To determine whether parties have the requisite capacity to be bound to smart contracts it is necessary to be able to identify these parties. He holds a Master of Business Administration degree. For this reason, only if there is consideration can a set of promises be regarded as enforceable. The automatic- and self-executing nature of smart contracts would ensure performance of the promises, regardless of whether consideration has been given, and thus regardless if these promises are regarded as enforceable by contract law. To that end, see also 7. Mental incapacitation of a person means that law deems such person incapable to enter into a contract because of some psychological or mental disability. However, certain individuals lack the capacity or legal ability to enter into contracts. Capacity to be bound to a smart contract, would mean the competence and ability of a person to be bound to a smart contract.
However, a minor also has capacity to contract in many circumstances, almost all of which in NSW are governed by an extensive legislative code. This often becomes an issue when dealing with elderly people with dementia or people with intermittent mental illnesses whose conditions cause capacity to fluctuate.
It is possible for such people to validly contract during a lucid interval. In general, minors are presumed to be bound when they enter into contracts if the contract is for their benefit or if the contract was entered into pursuant to a court order granting the minor capacity.
This section will address how certain characteristics of smart contracts may support the view that a smart contract is indeed a promise at-law. Contracts Signed By Minors As a general rule, anyone under the age of 18 is said to lack capacity to enter into contracts.
Consideration in contracts may take various forms: money payment, provision of services, taking or refraining from taking a particular action. Even if this smart contract is not legally binding and enforceable, its self-executing nature will ensure its performance.
Capacity to contract notes
Smart contracts may present the opportunity to reduce or even eliminate issues related to lack of credibility as to the performance of contracts. The requirement of consideration ensures that an exchange of some value has occurred between the parties. The promisee in this case, would not have to enforce the performance of the contract lacking consideration. In a conventional business setting with traditional contracts, there appear, many times, problems of credibility between the contracting parties. In other words, once a party is deemed to lack the legal capacity to enter into a smart contract, that party may have the option to repudiate the contract and be restored to the position it would have been prior to the execution of the contract. This means that no exchange of value occurs; consideration is absent. Codification in smart contracts could be made in any form anticipated for contracts themselves.
based on 26 review