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Smart Contract Legal Review

Why is a legal review necessary for a DeFi project?

Technical audits ensure code security, but legal reviews ensure the code doesn't inadvertently violate financial regulations (like AML/KYC laws) or contract law, protecting the developers from future liability.

What if the Smart Contract executes differently than the Whitepaper?

This creates a legal discrepancy that can lead to fraud accusations or investor lawsuits. Our review ensures alignment between the marketing promises (Whitepaper) and the actual code logic.

Does "Code is Law" hold up in Georgian courts?

No, statutory law prevails over code. If a smart contract produces an illegal outcome (e.g., unjust enrichment due to an exploit), the court can order restitution regardless of what the code permitted.

How do you handle automated liquidations legally?

We draft Terms & Conditions that explicitly inform users of the risks of automated liquidations, ensuring informed consent is obtained to mitigate the risk of legal challenges later.

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A smart contract is software code that automatically executes an agreement, but this does not mean it automatically has legal force. Smart Contract Legal Review is a process that ensures the code's logic complies with the parties' real intent and applicable law. This service differs from a technical audit: an audit checks for security (bugs), while a legal review checks for the code's legal validity. Often, so-called "Ricardian Contracts" are created, where code and a natural language contract are linked together.

What Does the Smart Contract Legal Review Cover?

This service synchronizes code and law:

  • Code and Contract Alignment: Verifying if the code actually performs what is written in the Whitepaper or offline contract. For example, if the contract allows for force majeure, does the code have a "pause" function?
  • Regulatory Restriction Check: Does the code contain functions that violate the law (e.g., circumventing sanctions, automating money laundering)?
  • Terms & Conditions (T&C) Drafting: Creating a legal document for the smart contract user that describes risks and limits the developer's liability.
  • Intellectual Property: Resolving code licensing issues (Open Source vs Proprietary).
  • Legality of Automatic Enforcement: Assessing the legality of automatic asset seizure (Liquidation) by the code without a court order.

Common Real-World Scenarios

Legal review is necessary when:

  • A company commissions a developer to write a smart contract and wants to ensure the code accurately reflects the business objective.
  • A DAO is created, and synchronization is needed between its Bylaws and the voting smart contract.
  • Tokenizing real estate, where the smart contract must reflect ownership rights in the Public Registry.
  • Launching an NFT collection to clarify what rights the buyer receives (commercial use or ownership only).
  • A project wants to undergo an audit for a VASP license and needs a legal opinion on software compliance.

Georgian Legislation and Regulations

In Georgia, smart contracts are subject to the norms of the Civil Code of Georgia regarding the expression of will in transactions. The Law on Electronic Documents and Electronic Trust Services provides the basis for electronic data (code) to be considered evidence. The lawyer's task is to ensure the smart contract meets the conditions for transaction validity: mutual consent, defined object, and lawful purpose. If a smart contract automatically violates mandatory norms (e.g., consumer rights), it may be declared void.

Service Process

Legal.ge experts work in the following stages:

  1. Business Logic Study: What should the contract do?
  2. Code Review (with Developer): Comparing functions and variables with legal terms.
  3. Creating a "Legal Wrapper": A document connecting the code to the real world.
  4. Issuing an Opinion: A written conclusion on legal risks.

Why Legal.ge?

A smart contract is not just code; it is a digital agreement. Legal.ge gives you access to lawyers who can understand "Solidity" and translate it into Civil Law language. This ensures your digital agreements are not only technically sound but also legally enforceable.

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Specialists for this service

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