As a rule, a smart contract is a program that issues instructions within a specified environment under specified conditions, whether for the transfer of money or for the execution of other commands that the environment enables to be executed. However, a first problem is already apparent here: as far as can be seen, there is no uniform and generally accepted definition. This naturally also complicates the discussion about smart contracts, especially in the legal context.

The link to blockchain technology in the case of smart contracts is that the program is mapped and executed (unchangeably) on the blockchain, with the corresponding possibility of exchanging services between the parties involved. The most prominent use case is the Etherum network, which enables the execution of smart contracts through its platform and using its own cryptocurrency, Ether. The prospects seem intoxicating: within seconds, contracts are executed with absolute certainty for the parties involved, the identity of the parties and the execution of their promises as certain as the amen in the church. The (justified) expectation is that transaction costs will be drastically reduced in the execution of contracts.

From a legal perspective, however, the question arises as to what extent such a program should have the qualifying characteristics of a contract. What is widely described as a smart contract often turns out on closer inspection to be a single aspect of a contract, a combination of terms, an execution modality, or simply the execution of a contract. In its given environment, a program is of course also capable of performing contract-typical services such as making a payment or other dispositional acts (changes in property registers, opening an electronic lock, etc.).

However, all this does not make the smart contract a contract. As is well known, a contract is characterized by the agreement of two parties on the relevant content. This agreement is the essence of every contract. However, the content of the expression of will would then be hidden in a code that is unreadable for ordinary people. One may now object that this is all the same, that legalese is also incomprehensible. Even if there is some truth in this, the step to the code as a language is much bigger for the party.

A central question is how and whether the parties can agree on the level of the code. For the time being, one solution could be to guarantee individual (programmed) areas in the “clear” language, but this would shift the agreement back to the level of the clear language and thus not conclude a “smart contract” in the sense of an agreement solely at the program level. This would mean that the content of the declaration of intent would not result from the code itself, but from the clear language, which would contradict the concept of a “pure” smart contract. However, should the code once be accepted by the parties as the authoritative language, this medium would then represent the will of the parties as an agreed, albeit atypical language, in application of the will theory under Art. 18 CO. An agreement on the program level would therefore be possible in principle.