English law can accommodate smart legal contracts, but automated execution does not establish ownership of technology or determine who bears a commercial loss. For businesses commissioning blockchain development, investing in a platform or entering a collaboration, those questions need to be addressed before resources are committed.
Herrington Carmichael advises businesses on the commercial and regulatory arrangements supporting blockchain projects. This guide considers how development agreements, intellectual property rights and written terms can help protect investment, manage disputes and support growth.
Who Owns the Technology and IP in Blockchain Projects?
Ownership depends on the circumstances in which the technology was created, the legal status of each contributor and whether the relevant rights have subsequently been assigned or licensed. Copyright created by an employee in the course of employment will generally belong to the employer, whereas paying an independent contractor to develop software does not, by itself, transfer copyright. A legal assignment of copyright must generally be recorded in writing and signed by or on behalf of the assignor. A blockchain development agreement should distinguish existing technology from newly created code and specify whether the business receives ownership or a licence.
The commercial test is whether the business can use, modify and commercialise the deliverables as intended. Reviewing intellectual property provisions before work begins may avoid restrictions becoming apparent during an investment round or supplier change.
- Document assignments and licences from developers and other contributors.
- Identify open-source components and assess the conditions attached to their licences.
- Address improvements, documentation and rights to appoint replacement developers.
Investors should verify the chain of ownership, rather than relying solely on a statement that the project owns its technology.
Are Smart Contracts Legally Enforceable in England and Wales?
Smart legal contracts are capable of being legally binding and enforceable under the law of England and Wales. However, not every computer program or automated transaction described as a “smart contract” constitutes a legally binding contract. Enforceability depends on whether the ordinary legal requirements for contract formation are satisfied. The Law Commission concluded that existing law can support smart legal contracts, while identifying issues requiring careful consideration.
In smart contract development, the distinction matters:
Code may perform contractual obligations and, depending on the structure of the arrangement, may itself form part of the legally binding terms. However, code will not necessarily address matters such as liability, interpretation, remedies, governing law or dispute resolution. A programme may execute exactly as written while producing an outcome that one party did not intend.
Written terms should identify the parties, establish governing law and specify which terms prevail if code and prose conflict. They should also allocate responsibility for errors and unreliable external data feeds, and address correction, suspension and dispute resolution. Any pause or upgrade mechanism must be technically available, with clearly allocated authority to use it.
How Should Blockchain Projects Manage Regulatory Risk?
Regulatory exposure depends on the activities performed, the assets involved and the markets served. Calling a product a utility token or a platform decentralised does not determine its legal classification. Businesses should assess applicable requirements before agreeing launch dates or investor commitments.
Contracts should allocate responsibility for obtaining required permissions, approving marketing and responding to regulatory change. They cannot remove statutory duties. Herrington Carmichael’s digital asset lawyers assess regulatory boundaries alongside the proposed commercial arrangements.
Where personal data is processed, applicable data protection obligations also need consideration. Businesses should establish who controls processing, what information is placed on-chain and how individual rights will be addressed, rather than expecting contract wording to resolve architectural limitations.
Drafting Blockchain Contracts That Support Commercial Growth
Blockchain contracts should translate the commercial plan into measurable obligations while allowing controlled changes. A successful demonstration does not necessarily establish that the product meets production requirements. Delivery, testing and acceptance provisions should reflect the intended use.
Alongside the wider commercial contract considerations, businesses should address:
- Delivery and payment: link milestones to agreed functionality, testing evidence and acceptance procedures.
- Risk allocation: negotiate responsibility for defects, vulnerabilities and third-party failures, with appropriate liability provisions.
- Change control: agree how changes to scope, networks, timescales and charges are authorised.
- Collaboration: establish decision-making rights, contributions and ownership of jointly developed assets.
- Exit: specify continuing licences, documentation, source-code access and transition assistance.
Bespoke terms should reflect the project’s dependencies and commercial exposure, rather than transferring a generic template into a blockchain context.
Blockchain Contract FAQs
Does a Smart Contract Replace a Written Agreement?
Not necessarily. Code may automate performance without addressing liability, ownership or remedies. Herrington Carmichael can review the surrounding agreement so that the intended commercial relationship, dispute provisions and responsibilities are documented alongside the automated process.
Does Funding Blockchain Development Transfer Ownership of the Code?
Funding alone does not transfer copyright in independently developed code. Ownership and licensing need to be established contractually. Herrington Carmichael can review assignments, background technology rights and licence restrictions before a business commits development expenditure or investment.
Does Every Blockchain Project Require FCA Authorisation?
No. The regulatory position depends on the activities undertaken, the nature and legal characteristics of the assets, the location of the business and customers, and how the product is marketed. A project that does not require full FCA authorisation may nevertheless be subject to the anti-money-laundering registration regime, the financial-promotion rules or other financial-services legislation. The UK’s wider cryptoasset authorisation regime is expected to take effect on 25 October 2027, so businesses launching or expanding projects should also assess whether those permissions will apply.
How We Can Help with Blockchain Project Contracts
Our Commercial and Regulatory team can assist with development agreements, technology licences, partnership arrangements and regulatory assessments. Herrington Carmichael helps businesses connect contractual protections with the way their blockchain project will operate.
Before signing a development or collaboration agreement, or committing investment, speak to our team about reviewing technology rights, risk allocation and regulatory responsibilities. Contact us today.
