Literature Review: Smart Contract Semantics <s> Meaning that something is prohibited if it is obligatory not to do it <s> Abstract: Contracting is an essential aspectof doing business. Electronic contracting uses telecommunications and artificial intelligence to improve contracting processes by streamlining red tape enforcing legal correctness. To do this, the underlying conceptual structures of contracts and contracting must be carefully understood. A logic model is presented that emphasizes temporal, deontic and performative aspects of contracting. <s> BIB001 </s> Literature Review: Smart Contract Semantics <s> Meaning that something is prohibited if it is obligatory not to do it <s> Implementing smart contracts to automate the performance of high-value over-the-counter (OTC) financial derivatives is a formidable challenge. Due to the regulatory framework and the scale of financial risk if a contract were to go wrong, the performance of these contracts must be enforceable in law and there is an absolute requirement that the smart contract will be faithful to the intentions of the parties as expressed in the original legal documentation. Formal methods provide an attractive route for validation and assurance, and here we present early results from an investigation of the semantics of industry-standard legal documentation for OTC derivatives. We explain the need for a formal representation that combines temporal, deontic and operational aspects, and focus on the requirements for the temporal aspects as derived from the legal text. The relevance of this work extends beyond OTC derivatives and is applicable to understanding the temporal semantics of a wide range of legal documentation. <s> BIB002
Lee BIB001 adopts deontic logic in developing his formal model for contracts. Lee also adopts a set of axioms to complete the model. He also introduces an adaptation of the sanctions operator: Sφ ′ which was first proposed by Anderson  . Lee adopts a relaxed version of Anderson's model: This means that for some action to be obligatory, there must exist some sanctions for non performance of that action. In the real world the nature of these sanctions may not be defined explicitly in the contract, and may instead be decided by a court or some form of arbitration. This system satisfies requirement 3 as specified by Hvitved. Namely, it allows us to model the commitments a party has. However, in reality the deontic aspects in a contract are most often accompanied by some temporal or conditional constraint. For example, obligations may have deadlines, prohibitions may apply only for some specified time period, or some permission may be granted only after some obligation is fulfilled. Clack and Vanca BIB002 provide a thorough report on this subject, identifying many such examples within the ISDA Master Agreement. The model described above cannot express these links between deontic elements of the contract and associated discrete temporal instances, continuous temporal time spans, or conditions.