Quoine v B2C2: Applying Conventional Legal Principles to the Brave New World of High Frequency Cryptocurrency Trading through Computer Algorithms


Do conventional legal principles work, or may they need to adapt, when traders hand their affairs to computers operating by algorithm?” This question was posed specifically by Mance IJ, in a strong dissent in the seminal case of Quoine Pte Ltd v B2C2 Ltd [2020] SGCA(I) 02 (“Quoine v B2C2”), a decision of a 5-judge panel of the Singapore International Commercial Court (SICC) concerning contracts formed in the context of algorithmic trading. 

The dispute in Quoine v B2C2 

The dispute concerned several trades of Ethereum (ETH) for Bitcoin (BTC) between B2C2 and two other users over the cryptocurrency exchange platform operated by Quoine. The disputed trades were executed at approximately 250 times the going market exchange rate for ETH/BTC, in favour of B2C2. 

Quoine had, due to an oversight, failed to implement certain necessary changes to its algorithmic programme. This set off a chain of events which eventually led to the conclusion of the disputed trades by B2C2’s algorithmic trading software. When Quoine became aware of the disputed trades, it unilaterally cancelled and reversed them. 

B2C2 sued Quoine. The central issue on appeal was whether Quoine’s reversal of the trades was a breach of contract. 

Are contracts concluded by algorithms valid? 

But was there even a valid and binding contract to begin with, given that the contracting parties did not know beforehand that they would enter into the contract and were unaware of the specific terms? The Court answered this question in the affirmative, and held that when an algorithm is programmed to make an offer based on the external data it receives (i.e. Quoine’s algorithm), and another algorithm is programmed to accept an offer that falls within certain parameters based on its received data (i.e. B2C2’s algorithm), there is a consensus ad idem between 2 contracting parties for the purposes of creating a valid contract. 

Doctrine of unilateral mistake and algorithmic contracts 

Quoine’s main defence was that the disputed trades were void due to the unilateral mistake of the two other users who had entered into the trades under mistaken beliefs (i.e. that the rates at which they were entering into the trades represented, or did not deviate from, the true market value of ETH relative to BTC). 

Under conventional contractual principles, a contract is void for unilateral mistake only if the mistake relates to a fundamental term of that contract, taking into consideration the state of mind of the parties at the point of entering into the contract.  How does this apply to a contract entered into by means of deterministic algorithms? 

The Court of Appeal held that first, the relevant state of mind was that of the programmer of the algorithm, and that the relevant inquiry is “whether, when programming the algorithm, the programmer was doing so with actual or constructive knowledge of the fact that the relevant offer would only ever be accepted by a party operating under such a mistake and whether the programmer was acting to take advantage of such a mistake”. It is not an inquiry into whether the programmer could have known of the specific and precise details of the mistake arising (which will almost always not be the case).  

Second, the relevant time frame to assess the knowledge of the programmer should be from the point of programming to the point the relevant contract was formed, because any acquisition of knowledge of the potential mistake between these two points in time should be taken against the programmer if he nevertheless permitted the algorithm to continue running. 

The Court of Appeal’s decision on the application of the doctrine of unilateral mistake

Applying the above legal principles, the Court of Appeal concluded that the disputed trades were not void for unilateral mistake in common law. The Court of Appeal accepted the lower court’s findings that the programmer had not, in programing B2C2’s algorithm (which triggered the execution of the disputed trades), considered the possibility of the circumstances which would lead to the disputed trades.  

The majority of the Court of Appeal also held that the disputed trades were not void for unilateral mistake in equity. Here, the majority of the Court of Appeal accepted that the programmer was not motivated by sinister intent, but instead was seeking to ensure that the algorithm remained operational. On this basis, the Court of Appeal held that B2C2’s conduct was not unconscionable. 

It therefore followed that Quoine had acted in breach of contract when it reversed the disputed trades. 

“While the contract law concepts of offer and acceptance do sit peculiarly when we are dealing with algorithms effectively negotiating with one another, we should also keep in mind another applicable common law precept – that the Courts will not intervene to save parties from a bad bargain, whether that bad bargain arose through an error of judgment or simple carelessness. In this case, the defendants had been careless in the coding of their algorithm, and the result was a bad bargain” 

– Mr Kevin Lim, Head of Legal & Compliance, Zebpay

Cryptocurrency – a specie of property which can be subject of a trust? 

B2C2’s alternative contention was that Quoine held the cryptocurrencies on trust for B2C2 and the reversal of the trades was a breach of trust.

This argument was premised on the acceptance of cryptocurrencies as a specie of property. This was not disputed by the parties at first instance. Whilst accepting that there was much to commend this premise accepted by the parties, the Court of Appeal preferred not to rule on this issue, as the claim for a breach of trust would in any event have failed for lack of certainty of intention to create a trust.1  


So do conventional legal principles work in the world of cryptocurrency algorithmic trading? At least insofar as such contracts are concluded by deterministic algorithms without any human intervention, the answer from the SICC Court of Appeal’s decision in Quoine v B2C2 is a resounding yes. 

However, the decision highlights difficulties faced by the courts in adapting traditional legal principles to novel contexts. The tension is manifest in Mance IJ’s dissenting judgment, which advocates the adaptation of the law of unilateral mistake in equity to the new world of algorithmic programmes and artificial intelligence in a way which gives rise to results that reason and justice would expect. Mance IJ was of the view that equity should intervene as it would at once have been perceived by an honest and reasonable trader that some fundamental error had occurred. 

Quoine v B2C2 without a doubt represents an exciting phase of the development of jurisprudence in this age of change. Our existing body of law will continue to be tested and the courts will be challenged to meaningfully adapt our traditional legal principles to the new normal. 

If you have any questions, please do not hesitate to contact our team below or any of your lawyers at Wee Swee Teow LLP.

Wee Swee Teow is a member of Mackrell International, an international network of law firms (www.mackrell.net).

Disclaimer: The material in this article is prepared for general information only and is not intended to be a full analysis of the points discussed. This article is also not intended to constitute, and should not be taken as, legal, tax or financial advice by Wee Swee Teow LLP. Any illustrations used in this article may not be applicable or suitable for your specific circumstances or needs and you should seek separate advice for your specific situation. Any reference to any specific local law or practice has been compiled or arrived at from sources believed to be reliable and Wee Swee Teow LLP does not make any representation as to the accuracy, reliability or completeness of such information.

1Editorial note: This issue arose in the recent New Zealand High Court decision of David Ian Ruscoe and Malcolm Russell Moore v Cryptopia Limited (in liquidation) [2020] NZHC 728 (“Ruscoe v Cryptopia”), where the Court held that cryptocurrencies are property, capable of forming the subject matter of a trust.