The contract equivalent of a software bug is called a residual, an area of research Oliver Hart earned a Nobel in economics for, and subsequently applied as a m

The contract equivalent of a software bug is called a residual, an area of research Oliver Hart earned a Nobel in economics for, and subsequently applied as a model for understanding smart contracts and their shortfalls. You are correct, it would be madness to let software alone manage a legal contract, which Hart showed was impossible to free of residuals. A smart contract can be seen as an abstraction from the legal contract underpinning it in order to self-execute where residuals do not arise. The devil in the details resides of course in the specific contract implementations.