The world of corporate deals has always had its drama. Negotiations, long documents, endless edits, lawyers from both sides who spend weeks agreeing on every comma in the Share Purchase Agreement. But imagine a completely different picture: instead of a ton of tribulations on the way to perfection, there are a few lines of code on the blockchain that automatically executes agreements. This is no longer fantasy, but a reality that is rapidly gaining momentum. Lawyers at international consulting companies, including Eternity Law International, are already encountering cases where classic contracts are supplemented with code. It’s much easier, faster and doesn’t require stressing employees.
How SPA can work through a smart contract in practice
Imagine a classic share purchase and sale agreement. Usually, these are dozens of pages of terms: price, payment terms, guarantees, earn-out, additional obligations. Previously, each item was checked manually, agreed upon by lawyers and financiers, and the slightest inaccuracy could delay the deal for days or weeks. Now imagine that some of these terms can be translated into code — into a smart contract that works like an automatic conductor: it launches each action at the exact moment, without human delays and errors. For example, the buyer agreed to pay $1,000,000 for 10,000 shares. As soon as the availability of funds in the account is confirmed, the smart contract automatically transfers them to the seller and, at the same time, transfers the digital shares to the buyer.
In the case of an earn-out mechanism, the system can check the company’s financial performance itself via an API to the accounting program: if the profit reaches a certain level, the contract transfers additional bonuses. Or, say, the shares remain in a “digital escrow” until all conditions are met — and no one can get them before. And if one of the parties violates the conditions? The code can suspend any further actions: neither the money nor the shares will be transferred until the issue is resolved. At the same time, the classic SPA text remains the basis: guarantees, assurances and legal nuances are still spelled out so that in the event of a dispute, there is support for the court or arbitration.
This creates a true “hybrid” approach. You can even imagine it as a digital coordinator of the deal, monitoring every step and ensuring that the agreements are fulfilled in real time. Such models are already being tested in some M&A deals, and they show that the process is becoming not only more efficient, but also much more transparent for all parties.
Legal Challenges in Defining and Regulating Smart Contracts
And now — a fly in the ointment. A lawyer can not always read Solidity code and understand exactly what they “agreed” to. And a programmer — does not always know what guarantees and assurances are.
This gap between the world of law and the world of technology creates new challenges. Another issue is regulation. In most jurisdictions there are no clear rules for smart contracts. And while some countries recognize them as electronic agreements, others do not understand how to qualify them at all. Add to this the problem of flexibility: the code does not take into account force majeure, changing economic conditions or “reasonable efforts”. It does what is written, and nothing more. He is not interested in nuances.
Role of Smart Contracts in Corporate Governance and M&A
And now about corporate governance. Here smart contracts can replace dozens of procedures. Payment of dividends, fulfillment of escrow obligations, automatic closing of the deal as soon as regulatory approval comes.
They reduce the risk of human error, speed up calculations, remove unnecessary checks. Interestingly, several pilot projects on Ethereum have already tested M&A deals with escrow. Yes, without real money, but the logic worked flawlessly. And this is just the beginning.
Balancing Flexibility and Automation: Can Smart Contracts Adapt to Reality?
Here’s another question that can’t be avoided: can smart contracts be flexible? Business doesn’t live in black and white. Economic crises, new regulatory requirements, force majeure — all of these are game-changers. And code is rigid. Now developers and lawyers are testing hybrid models: some of the terms are coded, some remain in the text. And this is perhaps the most realistic way: automate routine, but leave room for human judgment where common sense is needed.
What if a smart contract “freezes”?
This is not fiction. If the blockchain network is overloaded or there are problems with validators, transactions can be frozen indefinitely. In a classic contract, you can simply sign the next day, but here everything depends on the operation of the decentralized network.
What are smart contracts in the new era of contract law?
This is not just a technology, but a new format for executing agreements: fast, automatic, but with a legal basis.
Can a smart contract be built with an emotional aspect, such as “trust”?
No. A smart contract does not “understand” intentions; it only checks conditions. This makes it ideal for precise transactions (such as transferring funds after a certain event occurs), but unsuitable for situations where human flexibility and negotiation are vital.
Will it be possible to challenge a smart contract in court?
This is one of the hottest questions. If the code fulfills the conditions incorrectly, who is to blame: the developer, the customer or the network?
The legal framework is still being formed, but many countries are already developing laws that will allow smart contracts to be recognized as admissible evidence in court.
What is the difference between smart contract and smart legal contract?
In a nutshell, a smart contract is code that enforces terms. A smart legal contract is a combination of code and text that provides enforceability.
What does the transition from traditional contracts to smart contracts really mean?
It’s not just about “automation.” It’s about moving part of the legal work from the paper plane to the realm of software code. Whereas before, every clause of a contract had to be interpreted, checked, signed, and controlled, now an algorithm does it instantly. But the price for speed is limited flexibility. After all, code executes terms literally, without “human” context, and this raises the question: is the law ready for absolute accuracy without exceptions?
What are the legal issues with smart contracts?
Lack of understanding of the code by lawyers, lack of global standards, issues with force majeure and jurisdictional conflicts.
What is the most unconventional application of smart contracts currently being discussed?
In addition to financial agreements, “smart” marriages are already being tested, where the living conditions of spouses (for example, the division of expenses) are registered in the blockchain. There are projects in medicine: automatic transfer of funds after confirmation of tests. This sounds like futurism, but there is already an MVP.
Can smart contracts make law “safer”?
Only partially. They reduce the risk of fraud, but they create a new one — a technological one. Now the threat is not from a lawyer who “forgot” a clause, but from code that failed to take into account an exception. Without a balance between technology and human control, new risks will only multiply.
What is a smart contract in M&A?
This is a tool for automating the fulfillment of the terms of the deal: escrow, earn-out, checking regulatory requirements.
What risks do businesses most often underestimate when implementing smart contracts?
Most often, it is a question of jurisdiction. For example, a blockchain can be global, but a dispute is still resolved in a specific legal field. What if one party is in Singapore, the other in France, and the code is executed somewhere “in the cloud”? Also, no one has canceled cyber threats: a smart contract cannot be “rewritten” without interfering with the blockchain, so a mistake or hack is a disaster.
Is a “black market” for smart contracts possible?
Theoretically, yes. Although smart contracts are often associated with transparency, decentralized platforms are not always controlled by government agencies.
This creates a field for the use of the technology in gray schemes: from illegal gambling to money laundering. The problem is that the code itself is neutral — it does what it is written to do. If the algorithm is designed for a prohibited activity, the system does not recognize the moral or legal aspect.