7

If a DAO hires someone to perform a task that is not completed according to contract terms, what is the legal remedy of the DAO.

Assuming the DAO is not incorporated in any jurisdiction, can DAO members vote to appoint an agent to use the courts to seek enforcement on their behalf? Will the courts recognize the legal standing of this agent?

Please use any jurisdiction you can to cite a means of a DAO enforcing a contract.

5

The DAO's service provider would hire the person, not the DAO. The contract would be with the service provider, and the service provider could then sue the agent if the task wasn't completed as the specified.

The DAO does have to carefully arrange things so its service providers can't betray it. One way to do that is to have the DAO pay the service provider only when work is completed, as certified by a vote of the DAO.

There's some risk to the service provider that the DAO won't be able to vote them their money for some reason even if they complete the job satisfactorily. The DAO could choose to pay the service provider at a high enough rate to justify them taking this risk. Or the DAO could pay the service provider up front and assume the risk that the service provider defaults. Various escrow solutions could also be used between the DAO and the service provider.

The basic idea is that the DAO only does business directly with agents who are willing to do whatever is need to do business with the DAO, whether that's accepting delayed payment, using escrow, or whatever. Then others can enter into normal contracts with the DAO's service providers without having to deal with any legal oddities of dealing with the DAO directly.

One can imagine companies whose sole purpose is to act as service providers for DAOs. They would lose all the trust they had built if they ever betrayed a DAO that trusted them. Also, contracts could exist between these service providers and the members of a DAO, possibly even giving them standing to sue if the service provider failed to do what it promised.

  • In your example "Or the DAO could pay the service provider up front and assume the risk that the service provider defaults" is there no legal resource for the DAO? – tryinghard May 24 '16 at 12:55
  • 1
    @tryinghard The service provider could have an enforceable legal agreement with some of the members of the DAO. – David Schwartz May 24 '16 at 16:39

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