Standard contract for purchase and sale of bitcoin

[suntsu]

Hi,

I wonder what kind of contractual documentation - if any - bitcoin traders use to document their OTC transactions. I believe the bitcoin community would benefit from having a standard contract for the purchase and sale of bitcoin. Such standard contract could be posted on the bitcoin wiki for example

Such contract could be quite simple. Below a draft for discussion purpose.

Do you believe bitcoin traders would use such contract to document their trades ? Why (not) ?

Any clauses that need to be added/modified ?

Views and feedback welcomed.


Single Agreement for the Purchase and Sale of Bitcoin

Between Party A (“Seller”)
and
Party B (“Buyer”)

(referred to jointly as the “Parties” and individually as a “Party”)

This Agreement governs the purchase, sale, delivery and acceptance of Bitcoin between the parties. The terms used in this Agreement have the meaning set out in the Annex 1.

1. Delivery of Bitcoin

The Seller shall deliver or cause to be delivered the Contract Quantity of Bitcoin on the Bitcoin Address of the Buyer on or before the Delivery Date and Time. Proof of delivery will be the inclusion of the transaction in the second block published by the bitcoin network after the Delivery Date and Time.

2. Failure to Deliver

In  case the Seller fails to deliver the bitcoin according to para.1, the Seller shall pay the Buyer as compensation for damages an amount for such undelivered bitcoin equal to the product of:
(a) the amount, if positive, by which the price, if any, at which the Accepting Party acting in a commercially reasonable manner is or would be able to purchase or otherwise acquire in the market the quantity of undelivered bitcoin exceeds the Contract Price; and
(b) the quantity of undelivered bitcoin.

3. Payment

The Buyer shall pay the Seller no later than the Due Date the amount equal to the Contract Price times the Contract Volume by bank transfer on the Bank Account.

4. Overdue Payments

Overdue payments shall accrue interest from, and including, the Due Date to, but excluding, the date of Payment at the Interest Rate

5. Confidentiality

Parties will not disclose the terms of this agreement to any third party.

6. Term and termination

This agreement remains in force until the latter of:
- delivery of the bitcoins
- payment (including late payments and the penalty for non-performance)


7. Dispute Resolution

This agreement is governed by the laws of Switzerland and any disputes arising in connection with this Agreement shall be referred for resolution to the courts of Geneva.

8. Execution of this agreement

This agreement shall be executed by email in the following procedure. The Seller shall email from the Seller Email Account the Buyer on the Buyer Email Account with the PDF copy of this Agreement in attachment and the words: “I offer this Agreement”. The Buyer shall reply by email to Seller with the words : “I accept this agreement”.


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Annex 1

Bitcoin Address of the Buyer   1MPvGwjwn6zSFnV7bnQRE5BxJkQoP5u4D7
Contract Volume   300 Bitcoin
Contract Price   0.72 USD per Bitcoin
Interest Rate   LIBOR + 2%
Delivery Date and Time   21st of March, 12h CET
Due Date   23rd of March
Seller Email Address   alice@venus.com
Buyer Email Address   bob@mars.com
Buyer Bank Account   IBAN XX 1234 5467 8789 1011

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[theymos]

You might want to specify exactly what is required of the sender. Like:

The sender will provide the service of creating and digitally signing a valid Bitcoin transaction according to the Bitcoin protocol, as defined by the current implementation available on bitcoin.org. One of the outputs of this transaction will contain the following script: "OP_DUP OP_HASH160 <pubKeyHash> OP_EQUALVERIFY OP_CHECKSIG", and this output will have a value of 5000000000. The transaction is considered "valid" if it appears in one of the blocks that an unmodified version of Bitcoin would consider part of the "main chain", and if this block is succeeded by at least five other blocks that are also part of the main chain.

The transaction sent by the sender must exclusively use inputs that have never been used in a Bitcoin transaction in the past, and the sender must never use those same inputs to create another Bitcoin transaction after creating and signing the transaction to the recipient.

[Stefan Thomas]

Having a contract should be standard practice for larger transactions. You still need to trust the other party, but a contract does help ensure everybody is on the same page. It might even help in case of a Paypal dispute for example.

The technical definition theymos posted is great, I think though you should also have a way for a novice to verify the transaction. For now perhaps a reference to Blockexplorer would help? "The Bitcoins are considered delivered once a transaction to the Bitcoin address 1xxxx.... appears in the Bitcoin block chain as displayed by blockexplorer.com" or something to that effect.

Right now everyone is happily trading without a contract, but let's say I buy 15000 bitcoins as 0.7$ and the next day they're at 0.9$ and the seller doesn't want to deliver at the agreed price. It just takes one botched transaction like that for people to appreciate the value of written terms.

A lot of people in the community I think are looking at technical/procedural solutions for the trust issue (like ClearCoin), but the legal system provides some great tools as well. It definitely wouldn't hurt to have both available.

[kiba]

I don't like my transaction being subjected to a terrestrial court.

[rebuilder]

I don't like my transaction being subjected to a terrestrial court.

Then you would presumably want to modify the dispute resolution clause. I think it would be difficult or even impossible, depending on the jurisdiction, to form a contract where the parties involved abandon their legal protections and have a court accept it. Perhaps a do-not-sue clause would still be beneficial, since at least then, when taking up legal action, the party doing so would incur some loss of reputation in the Bitcoin community due to breach of contract. Assuming many people actually take such a strict view of contracts, of course.

[Jered Kenna (TradeHill)]

I don't like my transaction being subjected to a terrestrial court.

Vlad he could mean it to say "I don't want a record for the court to use against me" and that would make plenty of sense and I can understand that.

[casascius]

I don't like my transaction being subjected to a terrestrial court.

Vlad he could mean it to say "I don't want a record for the court to use against me" and that would make plenty of sense and I can understand that.

I drafted one such thing in an earlier thread about PDF document signing.

I had posted a sample here: http://166.70.147.8/btc/AgreementToDeliverBitcoins.pdf

Never used this however

[casascius]

What on earth (pun intended) by the way is a terrestrial court?  Perhaps don't you mean the same thing as "civil court"?  I am unaware of any courts not located on Earth, so I am not sure what the distinction is supposed to mean.  That the court is located on land, as opposed to, say, under the sea?

[Jered Kenna (TradeHill)]

What on earth (pun intended) by the way is a terrestrial court?  Perhaps don't you mean the same thing as "civil court"?  I am unaware of any courts not located on Earth, so I am not sure what the distinction is supposed to mean.  That the court is located on land, as opposed to, say, under the sea?

"Only god can judge me now?"

Not that I adhere to that but could be what he's going for.