The UAE is at the forefront of innovation by systematically implementing new technologies across all sectors of commerce and governance. One of the most significant advancements near us is smart contracting, self-executing contracts coded on blockchain platforms.

A smart contract digitally performs actions after specific conditions have been satisfied with decreased cost, speed, transparency, and reduced reliance on third parties. 

However, as technology continues to advance exponentially, anticipatory legal measures are required more than ever. That’s why our team of smart contract lawyers at Khairallah Law Firm is motivated to guide businesses through the intricacies of adopting a complex legal-technical model.

We want to help as you progress through this and make sure you do so with clarity and confidence.

Smart Contracts Explained: What You Need to Know

Smart contracts are not like traditional legal contracts and shouldn’t be lumped together. Smart contracts are lines of code saved on a blockchain. Smart contracts self-execute specific outcomes once pre-established conditions are met, requiring no human interaction.

For example, in real estate, a smart contract can access the blockchain to confirm that a title has been transferred and subsequently automatically release payment. This enhances efficiency, decreases paperwork, and limits opportunity for human error.

At the same time, a contract is “smart” does not mean that it is enforceable under UAE Contract Law.

Making sure you are compliant with the law is one of the reasons to seek guidance from an experienced, qualified smart contract lawyer with experience in the technical aspect and regulations in the UAE.

Legal Implications of Smart Contracts Under UAE Law

The UAE is making significant progress in digital transformation by formally implementing legal frameworks that promote blockchain and fintech.

The UAE Civil Code states that a contract is valid and enforceable if a contract is formed electronically, so long as the contract has all of the minimum necessary elements of contract formation – the elements of offer, acceptance, capacity, consideration, and lawful purpose. 

Even more, the Federal Law No. 46 of 2021 on Electronic Transactions and Trust Services recognizes electronic contracts as valid contracts if they satisfy minimum requirements for security and authentication. 

In spite of these developments, challenges still remain. Not all smart contracts meet the legal requirement of being a binding agreement.

Moreover, in a court proceeding, the UAE courts will investigate the parties’ intent, the clarity of contractual obligations, and whether the smart contract is a valid contract in the UAE and whether it is a valid contract and complies with UAE public policy and contract law.

Legal Readiness for Businesses: Insights from a Smart Contract Lawyer

Here at Khairallah Law Firm, we work with companies, developers, and founders as part of our Legal Tech Team to understand how successful smart contracts are functional vehicles not just technologically but also legally, and we will help you every step of the way:

Identify Applicable Legal Principles

We first help you ascertain if it is legally binding under UAE law, then, if you might want old school legal language in the contract to render it enforceable pursuant to the UAE provisions under the principles of contract law.

Draft and Create Enforceable Digital/Smart Contracts

We will then help you with the developer to draft hybrid agreements that include smart code and written terms, which means the smart contract equals the legal contract.

Protect your Legal Rights

We will then identify all required protections, including dispute resolution methodology, jurisdiction, and governing law.

Beyond that, we clearly define liability, risk allocation, and force majeure even in decentralized ecosystems.

Define Legal Compliance

Finally, we help you identify the compliance obligations associated with operating smart contracts, including anti-money laundering (AML) regulations, data protection compliance obligations, and so on, to ensure that your smart contract is operating in compliance with UAE law.

Conclusion

Smart contracts can optimize processes, reduce costs, and foster trust through automation of business processes; however, without a legal foundation, a smart contract, no matter how efficient, can still expose your business to an unreasonable amount of risk. 

So, is your business legally ready for the smart contract revolution? 

At Khairallah Law Firm, we make it legal and ready. Our Legal Tech Team is bridging the gap between innovative technology and legal compliance and providing you with the complete assurance that your digital contracts are smart and safe, enforceable, and in compliance with the laws of the UAE. We are part of the Best Lawyers in Dubai, and we provide sound legal and technical advice at every engagement with our clients. 

📞 Contact our Legal Tech Team today and take the first step in future-proofing your business in the UAE digital economy!

Having said that, contact Khairallah Advocates & Legal Consultants and benefit from our free 30-min legal consultation.

*Disclaimer: our blogs, law updates, and FAQ’s are freely distributed for educational purposes and to showcase recent updates and regulations in the UAE’s framework.

If you have any questions and need assistance, contact us at our number or book an appointment online.