What Is an Algorithmic Contract? -Part 1

Aynsley Moore

Oct 07, 2021

The algorithm “prescribes” our world. However, it is the contract, with the support of the law, that gives the algorithm the power to change the world through commercial exchange of resources and services.

The biggest challenge that algorithmic contracts bring to traditional contract law is those contracts involving “black box” algorithm agency. The decision of this kind of contract cannot be functionally understood beforehand, or even sometimes not understood at all. Under the current contract law, there is only one small case that can show its enforceability. The Uniform Electronic Transactions Act (UETA), which was enacted and widely adopted twenty years ago, ensured that electronically concluded contracts using basic automation technology be performed. However, looking at the terms of UETA, it can be seen that it presumes all contracts concluded by an algorithm to be in the correct format because they are all in electronic form. Some unintended consequences of this method include fraud, market manipulation, and a general lack of accountability for algorithms and companies.

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