Intelligent Contracts: Meaning, Application, and the Possibility of Enforcement

With the rise of Artificial Intelligence, automation is the future. Law isn’t immune to this technological revolution. But, when automation becomes a reality in the legal field, it brings up new issues. Smart contracts are an example of automation.

Most laws were designed for human and manual transactions, but not automated or artificial intelligence-based ones, so applying old rules in the modern world is like terra incognita.


“Smart contracts” is a phrase used to describe software that executes every part of an agreement. The code is stored on the blockchain platform. [1] The code assists, manages negotiations, enforces the terms of the deal, and executes the contract stipulates the times.

Intelligent contracts’ operation is made possible via Blockchain technology. Blockchain technology permits it to remain decentralized, which gives an entirely different nature than traditional contracts. The basic principle is that any agreement is considered intelligent when it keeps records of rules, verifies rules, executes itself, and is executed decentralized. [2]

The fundamentals of an intelligent contract comprise the following:

Decentralized – The rules and information about contracts are kept in blockchain technology. The nodes that store information. So, the information is separated into various information blocks or data nodes.

Self-Executing Smart contracts are self-executing by nature, meaning that no intervention from a human would be needed to complete the contract. This makes intelligent contracts a superior option to traditional arrangements since it eliminates the human error that can cause the execution of contracts.

They are irreversible. The nature of can never reverse intelligent contracts. They are, in essence, an element of coded logic. Once the contract’s execution is in place, it cannot be changed. This can be said as one of the drawbacks of the absence of human intervention.

Unchangeable Smart contracts are built into blockchain technology. Once a data block has been created, it cannot be altered. If the parties wish to do so, to make an entirely new smart contract, however, any modification to the existing innovative agreement isn’t feasible.

Simply, it is possible to be considered the computer or vending machine. When the inputs are right and outputs, a specific outcome is assured. Smart contracts, similar to vending machines, come with the ability to program logic into them. Much like a vending machine does away with the requirement for an employee at the vendor, intelligent contracts could substitute intermediaries in various sectors.


Cost-effective Smart contracts seek to eliminate intermediates between parties to the agreement. This means that it reduces the expense of brokers and other intermediaries. Therefore, smart contracts might offer a cheaper alternative in the sectors that typically depend on brokering.


Document Safety and Confidentiality documents and the details in the agreement are protected when using a smart contract compared to the traditional arrangement. Intelligent contracts are secured, and cryptography protects the records safe from intrusion [33. Because the information is stored in a blockchain, it is not alterable. Also, it keeps the knowledge of the contract secure.

Speed- Since smart contracts are self-executing in nature, and there is no human involvement. Therefore the execution of an agreement will be instantaneous upon the satisfaction of all pre-requisite requirements.

Accuracy- Human interference can create errors in the contract execution. However, the software that is coded is based on a pre-set algorithm. As such, there is no room for error.


IndefinitelySmart contracts cannot be changed. This means that any error in the programming could result in irreparable losses. If a contract is traditional, parties can renew the conditions of the contract by agreement, but for intelligent contracts, it isn’t possible to achieve the same.

The possibility of loopholes – According to the notion of good faith, parties should be fair and not reap unjust benefits from contracts. However, using smart contracts can make it challenging to ensure that the terms are fulfilled by what was agreed on. 

]It is challenging to comprehendSmart contracts typically require the assistance of software experts to comprehend the contract’s terms and modify the code. This leads to the involvement of a third party, thus raising the cost.


Smart contracts can be used in a broad range of applications. The list of applications isn’t exhaustive. Here are some real-world examples of smart contracts

The cross-border liquidity of financial assets intelligent contracts could also change the world of trade finance. It is undisputed that the Letter of Credit can aid in international trade and trade payment start-ups.

Intelligent contracts will enhance the financial asset’s liquidity, improving the efficiency of financial transactions for buyers, suppliers, and other institutions. If correctly integrated, it can solve legal problems and offer the best solution to disputes between the parties.

Improve financial services. If smart contracts are used to provide financial services such as mortgages and loans, then the whole process will be effortless and less burdensome for the parties.

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