Can a DAO be held liable for breaches of contract by its members or decision-makers?
Regarding contractual liability it makes no difference whether any of the contractual parties is
a DAO or not. Therefore, the general civil law rules apply. Accordingly, a DAO can be held
liable for breaches, if it is party to the respective contract.
This requires that the DAO can basically enter into a contract. Again, this means that the
DAO must be able to be subject to civil law obligations and to exercise civil law rights. Hence
it must be regarded as a legal entity under civil law. In current legal practice this is mostly the
case when the DAO qualifies as a company, either as a civil law partnership (Gesellschaft
bürgerlichen Rechts – GbR) or under certain circumstances as a general partnership (offene
Traditional legal entities, such as corporations and partnerships, can be held liable for breach of contract under certain circumstances. However, the decentralized nature of DAOs and their lack of a centralized management structure or legal entity status can create challenges when determining liability for breach of contract under traditional legal frameworks.
If a DAO enters into a contract through a smart contract, the legal enforceability of the smart contract in Polish jurisdiction is not well-established, as smart contracts are a relatively new concept, and their decentralized nature can pose challenges for traditional contract law. However, if a smart contract were to be recognized as legally enforceable under Polish law, the liability of the DAO for breach of contract would likely depend on factors such as the specific terms and conditions of the agreement and the intentions of the parties involved.
Another possibility is that individual members or participants of the DAO could be held personally liable for breach of contract, especially if they were directly involved in the agreement or acted in bad faith. However, holding the DAO itself liable for breach of contract might be more complicated due to the unique characteristics of decentralized organizations.