Smart contracts stand as one of the most revolutionary advances in technology today. As self-executing agreements, they directly impact how people create and enforce deals, forming an intriguing intersection of technology and law, especially contract law. While computer programming forms the core of these contracts, their design and use are equally influenced by legal principles, emphasizing a unique partnership between technical skills and legal knowledge.
Like other contracts, it is crucial to leverage the expertise and skills of a lawyer or legal team in this type of agreement to minimize risks. In this context, Karimi & Associates Law Firm, with a team of attorneys with expertise and experience in various legal matters, including financial and banking law, as well as cyber law, will assist and support your interests in the preparation of smart contracts by providing specialized legal advice and drafting the contract terms, significantly reducing the associated risks.
Nature and the Importance of the Smart Contracts
Smart contracts are digital agreements that combine the core ideas of traditional contracts with the power of block chain technology. They specify the terms of a deal between parties, but instead of relying on paper or third parties, these terms are coded and automatically executed on a block chain network. This provides a high level of security, transparency, and immutability, creating a trustworthy environment for financial transactions. Beyond their technical design, smart contracts enable individuals to participate in activities like investing, borrowing, saving, and insurance from anywhere in the world, without needing banks or other middlemen. By connecting to decentralized protocols such as Uniswap or Compound, these contracts allow autonomous, efficient, and dependable transactions, ensuring speed, fairness, and confidence in every exchange. Essentially, smart contracts combine legal principles with innovative technology, offering a faster, safer, and more affordable way to navigate modern financial markets.
Smart Contracts in Iran
As block chain technology continues to reshape the world of finance and law, smart contracts are emerging as a powerful tool for automating agreements and transactions. In Iran, however, this innovation exists in a legal gray area, with many questions still unanswered about how these digital contracts fit within the existing legal system. How can they be recognized, enforced, or disputed? And who bears responsibility when something goes wrong? Examining the current state of smart contracts in Iran reveals both the exciting possibilities of this technology and the challenges that must be addressed to ensure it can operate safely and effectively within the country’s legal framework.
The following lines mention some parts of the gray area:
Legal Validity
Since there is no clear definition of smart contract in Iranian law, this creates uncertainty regarding their validity and enforceability in courts.
Furthermore, there are not any specific legislation for the Smart contract regulatory and currently, these contracts are evaluated under the general frameworks of the Civil Code (provisions related to contracts) and the Electronic Commerce Law (2003).
According to the Article 10 of the Iranian Civil Code, private contracts are considered valid as long as they do not expressly violate the law. On this basis, smart contracts can also be treated as private agreements that fall within the scope of this article. Furthermore, the Electronic Commerce Law already accepts digital documents and electronic signatures as legally valid, which provides a legal foundation for recognizing smart contracts as well.
Liability
Assigning responsibility when a smart contract malfunctions or contains faulty code raises serious legal uncertainty. There is no clear answer as to whether accountability should be imposed on the programmer who authored the code, the platform or network validating and executing it, the contracting parties who triggered the transaction, or even the external data provider (oracle) whose input influenced the outcome. In addition, because smart-contract performance is typically automated and self-executing, traditional standards of fault, causation, and foreseeability do not easily map onto this environment, which further complicates liability assessment.
Dispute Resolution
One of the next challenges relates to dispute resolution, because it is still unclear how conflicts arising from such contracts should be handled. Should these claims be brought before general courts, or would it require a specialized tribunal in the future? At this point given the absence of a clear legal mechanism, arbitration appears to be the most practical option.
Practical Uses of Smart Contracts in Iran
In recent years, smart contracts have gained significant attention in Iran, with various pilot projects exploring their potential. These agreements offer opportunities to simplify procedures, enhance transparency, and reduce costs across multiple sectors.
Key Areas of Application include: Financial and Banking System, Innovative Financing, Supply Chain and Trade, Insurance and Real Estate.
The specific applications of smart contracts within these areas will be explored in depth in the next articles.
Advantages of the Smart Contracts in Iran
Smart contracts are gradually emerging as a transformative tool in Iran, offering the potential to streamline business operations and enhance trust in transactions. By leveraging automation and block chain technology, they promise not only efficiency but also greater transparency and reliability. The following points highlight some of the key advantages that smart contracts bring to the Iranian context.
Cost Reduction by eliminating intermediaries and manual processes,
Attracting Foreign Investment by building trust and security for investors,
and
Transparency and Anti-Corruption by Recording transactions on the block chain.
Challenges of the Smart Contracts in Iran
Smart contracts in Iran face several challenges that hinder their broader adoption. From legal and technological obstacles to social and institutional barriers, these factors collectively slow down the integration of smart contracts into mainstream practice.
Key Challenges include but not limited to: Lack of Legal Infrastructure, Technological Limitations, Sanctions and International Restrictions, Resistance from Traditional Institutions and Low Public Awareness.
Efforts to Promote
Generally, effective actions have been taken in recent years to create a better understanding of these contracts and enhance their use and acceptance amongst people and business activists; these actions include: Research Studies, Private Sector Collaboration, Drafting Legislation, Education and Human Resource Development, etc.
As the adoption of smart contracts continues to grow in Iran, several developments are expected to support their wider use. Comprehensive legislation may be introduced to address issues such as contract validity, dispute resolution, and liability. At the same time, investment in block chain infrastructure, including the creation of domestic platforms, could accelerate implementation. Additionally, easing international restrictions and fostering collaboration with global block chain networks would further enhance the development and practical application of smart contracts in the country.
Smart contracts are changing the way business and law interact in Iran, but navigating them safely requires expert guidance. Karimi & Associates Law Firm is ready to support you in drafting, reviewing, and implementing smart contracts, helping you minimize risks, ensure compliance, and make the most of this innovative technology. Take action today to turn opportunities into secure and efficient agreements.