With this changing era, everything has become digital. Our world is changing so fast that everyday technology is going to a whole new level. Smart Contracts are also a gift from technology. Generally, contracts are done on paper, which proves to be more time-consuming and involves the interference of lots of third parties to confirm the agreement. But this does not happen in the case of Smart Contracts. Smart contracts can be more trusted and secured. Now it would be interesting to know how Smart Contracts will spread their wings in the coming future.


Smart contracts are self-executing contracts that run on predetermined terms between the parties. The parties agree on the terms of the agreement that are written on the line of codes. This agreement exists on a decentralized network called a blockchain. Blockchain is a digital ledger that contains blocks, in which each block represents transactions. This ledger is completely based on a decentralized network. This means there is no interference from a central authority on the blockchain. Smart contracts automatically execute all the terms of an agreement.

In other terms, it can be said that Smart Contracts are digital contracts that exist on a decentralized distributed network and executes automatically as soon as the predetermined terms and conditions are met by the parties to such a contract. Smart contracts are best suitable for the automatic execution of two types of ‘transactions’ present in a contract. First, is the transaction through which payment of funds upon triggering event is ensured, and the other is when financial penalties are imposed in case of non-achievement of an objective. (An Introduction to Smart Contracts and Their Potential and Inherent Limitations, 2022)[1]


Smart contracts first came into action in the late 1990s by Nick Szabo. He was an American computer scientist, who also invented a cryptocurrency named “Bit Gold “, years before Bitcoin. He was the person who visualized smart contracts. He was the person who believed the contracts which are set down on codes could be more self-enforcing which can increase the efficiency and unambiguity of contractual relationships. (Smart Contracts, 2021)[2]

Szabo compared smart contracts to vending machines. He believed that when a person a coin in a vending machine, the requested goods will come out. In this expected process there was little to no trust between the parties. The vending machine has no other option than to deliver the goods as its infrastructure is designed using such technology that ensures that the contract would be fulfilled. Similarly, self-executing can be more trustless and unambiguous as the contract will perform in the exact way in which it is designed.

He also said that smart contracts can prove to be smarter and more efficient than paper contracts the terms of the agreement determined by the parties will be automatically executed. He defined Smart Contracts as a set of promises, that can be either contractual or non-contractual, specified in digital forms, such as codes and protocols, within which the parties perform the contracts


  • Savings: Smart Contracts help in saving the cost as such contracts do not require any interference from the third party such as intermediaries or brokers to confirm the agreement. This also eliminates the risk of manipulation and increases cost savings
  • Safety: Smart Contracts are end-to-end encrypted using cryptography, which keeps all the documents safe from attacks and ensures safety.
  • Backup: As Smart Contracts exist on a decentralized network, called a blockchain, the documents stored on the blockchain are copied many times. So the original document can be restored in case of any loss of data.
  • Accuracy: Smart Contracts eliminates the risks of manual errors as such contracts are.
  • Saves Time: All the tasks in Smart Contracts are executed automatically using computer protocols which helps in saving hours. (Smart Contracts, 2021)[3]


  • Difficulty to change: Smarts Contracts contains codes and protocols. Once a code is entered, the contract process is almost impossible to change as smart contracts are inconvertible. Solving any error can be time-consuming and expensive.
  • Delayed  Transaction: Any stoppage in the blockchain network can result in delayed transactions and can increase the transactional costs which can be more than the cost incurred in paper contracts.


Till today, there is no legislation that governs smart contracts as a separate entity, but they are legal in India. A contract must fulfil the requirements of a valid contract. Smart contracts satisfy all the conditions laid down in Section 10 of the Indian Contract Act 1872, such as free consent, lawful consideration, competency of the parties, lawful object, and an agreement that is not expressly declared to be void. In the Indian Evidence Act 1872, Section 85B states that any electronic agreement can be validated if electronic signatures are obtained ad per provisions of the India Information Act 2000. Also, Section 65B of the Indian Evidence Act 1872, states that a digitally signed contract is admissible in a court of law. Section 5 and Section 10 of the Information Technology Act 2000 legally accepts digital signatures to be enforceable and valid. Arbitration with the help of smart contracts can resolve security issues with traditional arbitration by coding the arbitration clause into smart contracts and giving it a certain degree of automation or by coding a third-party platform into smart contracts ensuring greater flexibility in dispute resolution. (Smart Contracts in India, 2021)[4]


It can be concluded from the above discussion that Smart Contracts are a better choice as many benefits come along with them. They are decentralized and self-executing in nature, with other advantages which are different from their nature of functioning. In the coming time may be the Indian courts will be advanced enough to recognize and appreciate the credibility of Smart Contracts.

Author(s) Name: Poorva Sharma (Maharaja Ganga Singh University, Bikaner)


[1]Stuart D. Levi and Alex B. Lipton, Skadden, Arps, Slate, Meagher &Flom LLP, An Introduction to Smart Contracts and Their Potential and Inherent Limitations(Harvard Law School Forum, 26 May 2018,

[2]Smart Contracts (Internet Policy Review), 20 April 2021,,relationships%20(Szabo%2C%201996)

[3]Smart Contracts (CFI), 29 January 2021,

[4] AshimaObhan and Shuchi Dutta, Smart Contracts in India (mondaq), 19 November 2021,<>