BLOCKCHAIN IN SMART CONTRACTS: ENSURING TRUST IN A TRUSTLESS ENVIRONMENT

Abstract

In recent years, the Building and Construction Authority (“BCA”) has focused on improving the construction industry through the publication of the Construction Industry Transformation Map. One vision is for the industry to have progressive and collaborative firms. The advantages for construction firms having such attitudes were outlined by then Minister of State for National Development Zaqy Mohamad in his speech, where he mentioned that greater collaboration will allow “firms to leverage on [sic] expertise from each other, pool resources, and even jointly venture overseas”. By encouraging cooperation and reducing mistrust between parties to a construction contract, there can be lesser disputes over time, cost and quality, which will reduce the frequency of time-consuming and costly litigation between firms.

As such, this author proposes to consider the applicability of blockchain technology to enhance current construction contracts. Such contracts that are powered by blockchain are known as “smart contracts”. As this innovation is a new concept in the sector, this author proposes to identify the legal implications of such smart contracts.

A literature review is conducted to understand the current reasons why there is mistrust and disputes amongst parties. A comparative analysis is performed to compare the use of smart contracts and traditional contracts so as to ascertain if there are beneficial use-cases for Singapore’s construction industry. The literature gap, which is the analysis of smart contracts and their place in Singapore’s legal framework, is also identified and studied.

Interviews are also conducted with lawyers, developers, contractors, subcontractors, and statutory board officials to understand their priorities when forming contractual relationships, and the applicability of smart contracts in the industry. Based on the findings from the literature review and interviews, this author opines that the existing legal framework in Singapore presents legal ambiguities for smart contracts. This dissertation therefore has three main deliverables; how standard forms of construction contracts can be amended to include smart contracts and blockchain, how current legislation can be amended to give legal grounds to smart contracts, and how smart contracts can fit into Singapore’s push for digitalisation.