Blockchain-based smart contracts could make commercial transactions more predictable by automating payments, escrow releases, and other measurable obligations, but they cannot fully replace courts, arbitration, or other legal dispute-resolution mechanisms, according to a 2026 study by Warmiyana Zairi Absi of the College of Law Pledge of Youth, Indonesia, and Rika Mulyati and Sinung Suakanto of Telkom University, Indonesia. Published in the Journal of Legal and Cultural Analytics (JLCA), the study argues that the most workable approach is a hybrid model that combines automated blockchain execution with conventional legal mechanisms.
The
research is relevant as blockchain technology becomes increasingly connected
with commercial transactions. Smart contracts are computer programs designed to
execute predetermined contractual obligations automatically, reducing the need
for human intervention. This automation can improve efficiency and provide a
clear record of when certain transactions occur. However, the researchers note
that commercial contracts often involve circumstances that cannot be reduced to
computer code, including questions of good faith, changing conditions, product
quality, and responsibility for unexpected events.
How the researchers examined smart contracts
Absi,
Mulyati, and Suakanto conducted qualitative normative legal research rather
than a survey or experiment involving human participants. They examined legal
rules, legal doctrines, academic literature, and relevant decisions and cases
to assess the legal position of blockchain-based smart contracts and their
possible integration into commercial dispute resolution.
The
analysis focused on Indonesian legal frameworks, including the Civil Code, Law
No. 11 of 2008 on Electronic Information and Transactions as amended by Law No.
19 of 2016, and Law No. 30 of 1999 on Arbitration and Alternative Dispute
Resolution. The researchers compared these legal sources and analyzed them
through legal interpretation and legal argumentation.
Two possible roles for smart contracts
The study
identifies two broad ways smart contracts can function in commercial
agreements.
The first
treats the smart contract itself as the contract, with its clauses, conditions,
and execution mechanisms encoded entirely on a blockchain. The second uses a
written contract as the main legal document while employing a smart contract to
automatically execute selected obligations, such as payments, escrow
arrangements, or digital-asset transfers.
The
researchers found that the second model is more compatible with legal
certainty. A written contract can address matters that are difficult to encode
completely, including interpretation, force majeure, changes in circumstances,
liability, and dispute-resolution procedures.
Under
Article 1320 of Indonesia’s Civil Code, the researchers state that a contract
does not become invalid simply because part of it is implemented through code.
The more important issues are whether the parties actually agreed to the
contract and whether the identity and authority of the parties can be
established.
Electronic
records can also have evidentiary value under Indonesia’s electronic
transactions framework. However, a blockchain address does not automatically
establish the legal identity of the person controlling it. Contracts therefore
need clear provisions concerning blockchain addresses, account control,
authentication, and procedures for compromised or lost private keys.
Smart contracts work best with measurable
obligations
One of
the clearest findings concerns the type of contractual obligations that can
benefit from automation.
Smart
contracts can increase certainty when obligations can be represented as
objective data. Examples include:
- Automatic payments
- Escrow releases
- Late-payment penalties
- Digital-asset transfers
- Recording the timing and
sequence of transactions
Blockchain
records can provide a chronological trail showing when an action occurred and
what the system executed. This can reduce factual disagreements about whether a
measurable obligation was performed.
The
limitations become more apparent when obligations require human judgment.
Product quality, service standards, “best effort” requirements, supply-chain
delays, and other contextual issues cannot necessarily be determined by computer
code alone.
The
researchers also identify technical risks. Bugs, incorrect configurations, or
failures in external data sources can cause a smart contract to execute
incorrectly. Written contracts should therefore establish responsibility for technical
failures, code audits, system updates, emergency termination, and procedures
for correcting erroneous execution.
Blockchain records can strengthen evidence—but do
not tell the whole legal story
Blockchain
records may provide useful evidence in commercial disputes because transactions
are recorded chronologically and are difficult to alter. Such records can help
establish payment times, escrow releases, blockchain addresses involved in
transactions, and the output of smart-contract execution.
However,
the researchers emphasize an important distinction: blockchain records activity
associated with an address, not necessarily the legal identity of a person or
company. Additional evidence may therefore be required to establish who
controlled an address and whether a particular blockchain action represented
fulfillment of a contractual obligation.
The study
recommends combining on-chain evidence with off-chain materials such as
correspondence, transaction documents, system logs, audit trails, and expert testimony.
Why courts and arbitration still matter
The study
finds that smart contracts cannot fully replace conventional dispute resolution
because legal disputes frequently involve interpretation and judgment.
A court
or arbitrator may need to examine the purpose of an agreement, commercial
practices, ambiguous or conflicting clauses, changes in circumstances, or
whether a party acted in good faith. These issues cannot always be translated
into objective computer instructions.
The
researchers also point to disputes involving product quality, supply-chain
disruptions, service standards, force majeure, and compensation. Such matters
may require evidence and contextual assessment beyond what a smart contract can
automatically process.
A hybrid model could connect technology with legal
protection
Absi,
Mulyati, and Suakanto therefore propose a hybrid approach. Under this model,
the written contract establishes the parties’ rights, obligations,
responsibilities, and dispute-resolution forum, while a smart contract
automatically performs selected obligations and generates technical evidence.
In
litigation, blockchain records could help establish the sequence of contractual
events while judges determine issues such as default, damages, cancellation,
and recovery. Arbitration may offer additional flexibility for handling
technical evidence, while mediation and negotiation can help resolve disputes
requiring compromise or adjustments.
The
researchers describe the central principle as keeping automated execution
within a broader legal framework. Their analysis indicates that the efficiency
of smart contracts is strongest when contractual conditions can be objectively
verified, while legal uncertainty increases when transactions become more
complex or dependent on external information.
In
practical terms, the research suggests that businesses using blockchain-based
contracts should not rely on code alone. Contracts should clearly identify the
parties and blockchain accounts, allocate technical risks, establish procedures
for technical failures, define the treatment of electronic evidence, and
specify whether disputes will be handled through litigation, arbitration, or
alternative dispute resolution.
What the research means for businesses and
policymakers
For
businesses, the findings suggest that smart contracts can be particularly
useful for transactions involving clearly measurable obligations. Their use may
reduce disputes over whether and when automated performance occurred, while
blockchain records can provide additional evidence.
For
policymakers and legal institutions, the study highlights the need to develop
rules and procedures capable of dealing with blockchain evidence, digital
identities, technical failures, and disputes involving automated contracts.
Courts and arbitration institutions may also need sufficient technical
understanding to evaluate blockchain-based evidence.
The
researchers ultimately characterize smart contracts as evidence tools and
partial execution mechanisms connected to established dispute-resolution
institutions, rather than replacements for those institutions.
Author Profiles
Warmiyana
Zairi Absi —
College of Law Pledge of Youth, Indonesia. The article identifies Absi as the
corresponding author and lists the research focus in contract law,
blockchain-based smart contracts, and commercial dispute resolution.
Rika
Mulyati — Telkom
University, Indonesia. The article identifies Mulyati as one of the researchers
examining the legal integration of blockchain technology and commercial
contracts.
Sinung
Suakanto — Telkom
University, Indonesia. Suakanto is listed as a co-author of the research
addressing blockchain-based smart contracts and commercial contract dispute
resolution.
The
article does not state the authors’ academic degrees, so no degree information
is added here.
Source
Article
title: Integration
of Blockchain-Based Smart Contracts in the Resolution of Commercial Contract
Disputes
Journal: Journal of Legal and Cultural Analytics (JLCA)
Publication: Volume 5, No. 1, 2026, pp. 1–18
Authors: Warmiyana Zairi Absi, Rika Mulyati, and Sinung Suakanto
Affiliations: College of Law Pledge of Youth, Indonesia; Telkom
University, Indonesia
DOI: https://doi.org/10.55927/jlca.v5i1.16233
Official journal: https://journal.formosapublisher.org/index.php/jlca
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