Towards the regulation of “Smart Legal Contracts” in Kenya: a critical analysis of the need for a legal framework

Abstract

Contract law has become more complex with the rise of “Smart Legal Contracts”, which are self-enforcing agreements programmed using computer “code” and implemented on decentralized ledger systems. “Smart Legal Contracts”, which automate performance based on pre-established conditions, raise fundamental questions regarding their legality, validity, and enforceability unlike traditional contracts which are written in natural language and enforced through courts and other legal institutions. Kenya has made strides in regulating electronic transactions but does not yet have a complete regulatory framework that considers the unique features of “Smart Legal Contracts”. The suitability of Kenya's current contract law for governing “Smart Legal Contracts” is evaluated critically in this thesis. It investigates whether current laws, including the Data Protection Act, the Evidence Act, the Kenya Information and Communications Act, and the Law of Contract Act, can adequately regulate the formation, performance, and enforcement of contracts made using decentralized technologies. In addition to highlighting the legal ambiguities and enforcement difficulties that arise in the lack of clear legislative direction, the examines how conventional contract principles apply to “coded agreements”. The study also compares the regulatory approach in the UK using a doctrinal research methodology and a multi-theoretical framework that includes legal realism, public interest theory, and techno-regulatory theory. Kenya can learn a lot from the UK's progressive approach, especially from the “Law Commission” of England and Wales's guidelines. According to the study, the unique characteristics of “Smart Legal Contracts” are not adequately addressed by Kenya's current legal system. It finds regulatory gaps, notably in sectors such as consumer protection, the resolution of disputes and party intention. In order to improve legal certainty, safeguard the public interest, and promote innovation in Kenya's digital economy, the thesis ends by suggesting specific reforms. These include judicial capacity-building, the creation of particular guidelines for “Smart Legal Contracts”, and legislative changes to data protection and contract laws.