A guide to Non-Fungible Tokens (NFTs), 2023 - Flipbook - Page 28
Specific terms
While the applicability of contractual principles to a smart contract
are key to its effectiveness, it is important that any contract also
reflects and gives effect to the wishes of the parties involved.
While the smart aspects of the contract can give effect to key terms, such as
transfer, there are numerous other aspects that the parties will want to consider,
and which will likely require consolidation within a natural language contract.
These can include:
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Maintaining exclusivity and digital scarcity of the NFT, that is, limiting the
use of the underlying asset for future NFT issues.
Maintaining the persistence of both the original metadata or other digital
file of the work in an asset and the blockchain relevant to the NFT. The way
this can be done will depend on how the asset is stored, see Control and
ownership.
Whether the NFT will grant rights to physical possession of the asset. See
Control and ownership for further explanation of whether this is likely to be
possible.
Dealing with any IP rights in the underlying asset and NFT. See Intellectual
property rights for further details of the considerations to be had here.
Consumer rights
Applicability
The large majority of NFTs are currently bought on online
marketplaces, and therefore by individuals acting outside any trade
or business, rather than commercial buyers.
In addition, it is quite possible that NFT sellers and creators may be acting for
purposes in relation to a trade or business (including a craft). As a result, many
NFT transactions will involve consumers and traders and therefore current UK
legislation governing advertising to and contracting and dealing with consumers
may well be applicable where NFTs are offered for sale in the UK.
