Legal Aspects of Blockchain Technology — Liability

Preamble

Introduction

Protection in case of misjudgements

Breach of duty

Limitation of liability

Liability in case of incorrect implementation of smart contracts

  1. The developers of the smart contract create the code (analogy: manufacturer of a vehicle)
  2. The operators of the smart contract put it into operation and are perceived by third parties as responsible (analogy: holder of a vehicle)
  3. The users of the smart contract access it, regardless of the purposes and reasons for why they do so (analogy: driver of a vehicle)
  4. Damaged parties are those who suffer a loss, e.g. due to an error in the smart contract (analogy: e.g. passengers of another vehicle, passers-by)

Liability reasons

Contract

Product liability

Producer liability

  • Design flaw: The smart contract does not meet the legitimate security expectations of an average user, even after its design.
  • Manufacturing defects: Although the manufacturing process was correct, there is an unplanned deviation in individual pieces — in the case of software this is rather rare, for example in the case of damaged data carriers.
  • Errors in instructions: The manufacturer omits necessary warnings and instructions for use.
  • Product monitoring obligation: After the product has been placed on the market, the manufacturer must monitor the product and, if necessary, initiate a recall in order to prevent risks emanating from the product — this also seems rather unlikely in the case of a smart contract, but may still occur if security gaps subsequently arise.

Who is liable if the smart contract was audited?

About KOSMoS

Remarks

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