Milan Court: Smart Contract Breach and Oracle Liability

1. The facts

   According to Il Sole 24 Ore and Altalex, the dispute stems from the activation of a parametric insurance policy based on blockchain technology. An agricultural company had entered into a smart contract providing for automatic compensation in the event of prolonged drought, defined by objective meteorological parameters. However, despite the occurrence of the adverse weather conditions, the code did not execute the payment because the oracle, namely the provider of the weather data feed, transmitted incorrect or incomplete information. The case, brought before the Court of Milan in the first instance, pits the insured against the technology service provider. The injured party claims economic damage resulting from the failure of the automation, alleging negligence in data maintenance by the oracle. The current procedural stage concerns the determination of the causal link between the technical error and the damage suffered, in a context where the defense argues that the provider is not liable for unforeseeable protocol bugs.

2. The rules at play

   The regulatory pillar of the case is Art. 8-ter of D.L. 135/2018, which defines a smart contract as a computer program whose execution automatically binds two or more parties based on predefined effects. This rule is fundamental because it grants legal value to automation, provided the written form requirement is met through digital identification. Secondly, Art. 1218 of the Civil Code governs contractual liability: a debtor who fails to perform the due obligation exactly is liable for damages unless they prove that the non-performance resulted from causes beyond their control. In this scenario, the oracle acts as an auxiliary or a trust service provider. Finally, Art. 2712 of the Civil Code regulates the evidentiary value of electronic records, allowing blockchain logs to be produced in court as evidence of on-chain events, unless specifically contested regarding their conformity to those facts.

3. What jurisprudence says

   Merit jurisprudence, with particular reference to the Enterprise Section of the Court of Milan, has begun to consolidate the view that blockchain technology does not exempt parties from general civil law rules. Judges have clarified that the Code is Law principle applies only within the technical system and cannot derogate from mandatory rules on breach of contract. In previous precautionary measures, courts established that reports extracted from distributed ledgers constitute suitable documentary evidence to support injunctions or seizures, provided the parties' identities are attributable to certain subjects. Furthermore, the prevailing approach suggests that the oracle's liability must be evaluated according to the professional diligence required of a qualified technical operator, ruling out that the decentralized nature of the network can serve as a shield for failure to monitor data flows sent to the contract.

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8. What it teaches professionals

   1. Drafting safeguard clauses: it is essential to include dispute resolution procedures in the off-chain contract for cases of oracle failure.
   2. Technological due diligence: lawyers must verify oracle redundancy, suggesting the use of multiple data sources to minimize single-point-of-failure risks.
   3. Identification and form: ensure that smart contract signing follows AgID guidelines to guarantee full evidentiary effectiveness as a private deed.
   4. Evidence management: gain training on the preservation and court submission of hashes and transaction logs to support compensation claims.

References: Articolo 8-ter D.L. 135/2018Articolo 1218 Codice CivileArticolo 2712 Codice CivileArticolo 1227 Codice Civile

Editorial oversight: Avv. Federico Papa·ICAMUpdated 15 September 2026Content drafted with AI support and subject to editorial source checks. Despite these controls, inaccuracies may remain: reports and rectification requests are welcome. Report a correction