The Role of Smart Contracts in the Transformation of Contract Law: A Comparative Analysis with Emphasis on Economic Impacts and the Development of Innovative Financial Businesses

Abstract

The rapid diffusion of blockchain technology and the widespread adoption of smart contracts have initiated a structural transformation in both contract law and contemporary economic organization. Smart contracts replace traditional mechanisms of contractual performance and enforcement with automated, self-executing code embedded in decentralized digital infrastructures. This article provides a scientific narrative review using a descriptive–analytical and comparative methodology to examine how smart contracts reshape the theoretical foundations of contract law, alter legal doctrines of formation, performance, and liability, and generate far-reaching economic consequences for financial markets and business development. The study analyzes the conceptual tensions between classical contract theory and algorithmic execution, explores comparative legal responses across civil law systems, common law jurisdictions, and Islamic legal frameworks, and evaluates the regulatory strategies that are emerging to govern programmable transactions. In parallel, the article investigates the economic effects of smart contracts, focusing on transaction cost reduction, financial innovation in fintech and decentralized finance, the rise of new business models, and the systemic risks associated with automation, security vulnerabilities, and regulatory fragmentation. The findings demonstrate that smart contracts function not merely as technical tools but as a new institutional architecture that redefines contractual governance, market coordination, and legal enforcement. While offering substantial efficiency gains and innovation potential, smart contracts simultaneously introduce novel risks that challenge existing legal and regulatory structures. The article concludes that sustainable integration of smart contracts into modern legal and economic systems requires the development of hybrid governance frameworks that align technological design with legal principles, economic stability, and public accountability.