In many cases I would assume the opposite will occur: plaintiffs will claim that there was no contract formation because because the technical mumbo-jumbo of computer code is incomprehensible to a layman.

I suspect that courts will react quite favorably to this argument seeing as how they have a natural interest in maintaining their jurisdiction.

If code has bugs (and sufficiently complex code will always, always, always have bugs) you simply have to suffer the consequences (sorry for your loss) or the entire community can choose to execute a hard fork and rewrite history (see DAO). If a vanilla legal contract has some typos or even some semantic differences that lead to ridiculous outcomes, lawyers and judges will hash it out. People, not computers, make the final decisions in our legal system, so human errors are mostly tolerated. If I sneak a clause into a contract saying that the other party must pay me their entire salary every year, it would be voided in an instant. Not so if placed in a "smart" contract.

Perhaps you could say that Ethereum is better than our legal system because it's decentralized. But I don't think it's enough to say something is better simply because it's decentralized. Why should I be afraid of a centralized legal system? We elect politicians, who choose judges (who have to be confirmed by legislative bodies whose members we also elect). Sure, it's not perfect, but it's hardly the tyrannical system that would make me turn to the bug-ridden wild west of Ethereum smart contracts.

I think the only reasonable argument in favor of Ethereum contracts is that they are easier to create (less friction, don't need to hire a lawyer, etc), but that's hardly a good thing. Real life contracts are expensive for a reason, not because Rothschild & Co. have some other nefarious plans. You need lawyers to write good contracts and think through their consequences, as well as reasonable, human judges to decide issues when they arise. Ethereum, to me, seems a purely ideological creation, not one rooted in actual needs that people have. Sure, it's decentralized and immutable (unless a contract hurts the wrong people, lol) but did anyone really want that (except for those with ideological reasons, i.e. libertarians)?

Not trying to start a flamewar, I just want to hear a strong opposing viewpoint on this.

However i cant think of a non-contrived example where that is true. Real agreements involve real things in the real world, outside of the reach of automated compliance checking, and you're back at square one.

Perhaps you could say that the formalized computer language helps disagreements, but lawyers already have formalized language for this, and i suspect legaleze is better for making human-agreements than some turing complete language ever would be.

Even the clearest contract is worthless if one party is too weak to hold everyone to the contract's terms. "What, you want me to pay for the work you did for me? Come back with a lawyer and we'll talk."

That said, Ethereum looks really cool, and I'd be interested to see what kind of good they can do.

The advantages of Ethereum are in eliminating 3rd party trust and the costs that come with it. Right now if you want one of these simple financial services, there is both a direct financial cost associated with it and the implicit risk-expense of trusting someone else with your money. This is a drain on the global financial system that just doesn't need to exist anymore.

The idea that Ethereum or things like it will supplant the legal system is of course, absurd on its face. That will not happen. But what we may start to see, in my opinion, is the co-mingling of the two, and contracts being written with deterministic, executable components alongside more traditional legal verbiage.

Fundamentally there are some things that are amenable to mechanization and some things that are not. But right now both are encoded in human language. And the use of either one for the other's optimal purpose is perverse and unnecessarily expensive.

Why would I ever build a business around an Ethereum smart contract when I could just write a normal contract, and then I know the courts will enforce it even if one of my business associates tries to pull a fast one?

If it's about the precise coding of constraints and all that, you can easily write a legal contract that specifies that the piece of code should be followed. Ask wall street derivatives traders if they have any issues with making paper legal contracts arbitrarily mathematically complex. It works fine for them.

But it is a little unsatisfactory to have this ad-hoc method of hard forking. Maybe there should be in future some sort of public process to determine whether an action is consistent with the intentional meaning of the contract (as opposed to the machine meaning). We could all agree to appoint some qualified person to hear disputes and determine whether the code has got it wrong and we should fix the code with a hard fork. Let's call that person a 'judge'.

Now that judge will need to have procedures and rules. He or she isn't deciding on a whim, after all. These rules will set out things like what evidence the judge can look at to determine the intentional meaning of the contract. Just for giggles, let's call one of those rules the 'parol evidence rule'. Also, we don't want anyone to be able to bug the judge and waste their time, so we need some rules as to who can ask the judge to look at a dispute. I'm feeling creative, so let's call those rules 'standing rules'.

What would be really fabulous is if this system could be paid by the taxpayer out of general revenue. That way we can reduce the likelihood of the biggest, richest investors bribing the judges.

But this is obviously all fantasy. No one would ever build such a system.

Contracts in something as flexible as Ethereum strikes me as the ultimate in fragility. There's a great use case for anything that looks like a smallish FSM - formal methods will yield something very usable and provably correct. Being able to do that on a system with a state space the size of Ethereum + The DAO - yea, we're a ways away from that one.

Ethereum is already full of fun stories where "smart" contracts did extremely dumb things because they took a programmer's word extremely literally rather than a programmer's intent.

In a world where programmers are assumed to be ordinary, fallible humans that's a ton of pressure to put on a programmer to never make a single mistake. While there's a lot of active research into trying to bring technical solutions to that human problem such as strict "formal proofs" and such of the programs being made into smart contracts, I'm increasingly of the opinion that would benefit them the most would be political and sociological solutions such as classics like "courts of appeals", "trials by jury of peers" to determine intent over literal substance, and so forth.

Those aren't "fun, technical" solutions, and would require placing trust again in institutions and people, so I absolutely have zero optimism that any smart contracts system would embrace them. I just think that they need such political structures to exist otherwise you left with merely a lowest common denominator tyranny of software bugs (no matter how formally the best contracts mathematically prove their claims/efforts).

A court would not see it that way. Contract law would apply to these contracts if the parties to the contract sued each other.

The legal system applies to all contracts, whether on Ethereum or not. Ethereum does not get to exist in its own reality outside of the law.

Therefore, the immutability of an Ethereum contract won't matter very much, because a judge can still invalidate part of it, or all of it, if it contains unconscionable provisions, lack of disclosure, agreement to commit criminal acts, fraud or misrepresentation, simple mistakes, or any one of the many other reasons contracts can be rendered legally unenforceable.

So, I don't see how immutability offers any advantage over standard legal contracts. It won't prevent the courts from determining that a contract is wrong or invalid.

The problem is that lots of smart contract enthusiasts embrace them for the same reason they embrace crypto currency: they see it as a way to avoid government institutions that they do not want to have to work with or trust. In fact they want the entire contract to be trustless: agree to the terms, implement them in code, and and since the rest is automated you don't have to trust that the other party won't follow through.

I don't see how that can actually work in an automated fashion. Whether it's traditional government or some other legal system or analog, you need a resolution layer above contract layer, but at that point you've lost a lot if what enthusiasts want in smart contracts.

Ethereum solves that: as part of the contract you put the money into escrow, such that if the work is completed the money is automatically delivered to the other guy.

Personally I think the problem is on the other side: an automated contract is all well and good, but how can a computer ever make a judgement as to whether the work that was done was compliant with the terms?

If Ethereum becomes popular enough, one day the participants in an Ethereum contract are going to sue each other, and the judge is not going to be impressed by arguments that the contract is intended to be immutable. You can't opt out of contract law just by saying that you opt out of contract law.

Ethereum contracts do not get to exist outside of the legal system. Courts have jurisdiction over all contracts, period.

But smart contracts would change the way contracts are written, as they're often intentionally ambiguous for a variety of reasons. There's also the problem of "oracles", but we already have a profession for translating real-world events into legal ones (notaries).