What Every Indian Business Should Know
With the rise of blockchain technology and outsourcing software development to India, smart contracts have emerged as a game-changer. These self-executing digital agreements are designed to operate without human intervention. But what happens when things go wrong?
At Tech Legal, we regularly assist international businesses who outsource Web2 and Web3 development to Indian vendors. This article outlines the key legal considerations, risks, and dispute resolution strategies when smart contracts are involved.
What Is a Smart Contract?
A smart contract is a code-based agreement that automatically executes transactions when certain conditions are met. Typically built on blockchain platforms like Ethereum, smart contracts are used in a range of industries including real estate, finance, gaming, and supply chain.
Are Smart Contracts Enforceable in India?
Under Indian law, electronic contracts are recognized under the Information Technology Act, 2000 and Indian Contract Act, 1872. For a smart contract to be enforceable, it must fulfil basic contract requirements such as:
- Offer and acceptance
- Lawful object and consideration
- Free consent
- Parties competent to contract
However, challenges arise due to the code-based nature of smart contracts. Courts are yet to test enforceability of a purely algorithmic contract without a traditional written agreement. We recommend always backing smart contracts with a traditional Master Service Agreement (MSA) and clearly outlining dispute resolution mechanisms.
Common Legal Disputes in Smart Contracts
When foreign clients outsource blockchain development to India, the following issues commonly arise:
- Non-delivery of promised functionality
- Breach of confidentiality or IP misuse
- Lack of dispute clauses in the code
- Ambiguous or incomplete functional requirement documents (FRDs)
- Smart contracts deployed on public blockchains without adequate security audits
How Tech Legal Helps
At Tech Legal, we offer full-spectrum support for cross-border tech contracts involving smart contracts. Our services include:
- Drafting and reviewing enforceable smart contract-backed MSAs
- Dispute resolution when Indian vendors default
- Advising on intellectual property protection in code
- Structuring source code delivery clauses and escrow mechanisms
- Representing clients in arbitration or mediation with Indian vendors
Dispute Resolution: Code vs. Court
Smart contracts do not inherently resolve legal disputes. You must include a jurisdiction clause, specify governing law (e.g. Singapore, UK, India), and agree on a forum (arbitration or courts).
We have represented clients in cases where Indian developers failed to deliver, even after partial deployment of smart contracts. Without clear legal contracts and timelines, recovering damages becomes difficult.
Final Word
Smart contracts are revolutionary, but they’re not foolproof. If you’re outsourcing blockchain or software development to India, make sure your legal framework is as smart as your code. Partner with a firm like Tech Legal, experienced in cross-border tech contracts and dispute resolution with Indian vendors. Avoid costly legal pitfalls and safeguard your project from day one.
Need help drafting your smart contract agreement or resolving a vendor dispute in India?
Contact Tech Legal today for a consultation.