Smart Contracts in the Mexican Legal System: Opportunities and Limits.

FINANCE AND BANKING / by Miguel Gallardo Guerra

The emergence of blockchain technology has introduced new legal concepts that challenge traditional structures. One of the most discussed is the smart contract, an agreement that self-executes when predefined conditions are met.

In theory, a smart contract removes the need for intermediaries, reduces transaction costs, and improves efficiency. But from a legal standpoint, there are still significant challenges to having these instruments fully recognized and used within the Mexican legal system.

What is a smart contract?

It’s not a “contract” in the traditional sense. It’s a piece of code stored on a blockchain network that automatically executes instructions when certain pre-programmed conditions are met, without human intervention. For example: if a payment is received, a digital asset is automatically released.

These contracts operate under a conditional logic such as “if X happens, then execute Y”, which allows for the automation of legal or commercial processes.

Is it valid in Mexico?

Mexican law doesn’t explicitly recognize smart contracts yet. However, Article 1803 of the Federal Civil Code states that consent may be expressed “by electronic means,” and the Advanced Electronic Signature Law provides a framework that may apply in some cases. Additionally, the Commercial Code, starting from Article 89, recognizes the validity of data messages and establishes thay legal acts may be carried out through electronic, optical, or any other technology-based means, which opens the door to considering smart contracts as a valid form of expressing intent in certain commercial contexts.

The challenge lies not in the form, but in the content, intent, and interpretation. A contract is valid if there is consent, a lawful object, and a legal cause, regardless of format. But in an automated contract, how is intent proven? What happens in the case of coding errors? Who is liable?

Opportunities:

• Facilitate complex financial transactions (e.g., tokenized derivatives).
  
• Useful in decentralized structures (DAOs, DeFi).
  
• Provide secure execution and traceability.
  

Limits:

• Cannot replace the interpretation of complex clauses.
  
• Still lack express recognition by Mexican courts.
  
• May lack flexibility for unexpected legal or commercial events.
  

From a legal perspective, smart contracts should be viewed as complementary technical tools, not substitutes for traditional agreements. Their development requires collaboration between developers, lawyers, and regulators.

The law should not fear code. It should learn to speak its language.

Let’s keep in contact!