Blockchain and AI in Digital Contracts: A Legal Review of Smart Contract Enforcement

Abstract

The integration of blockchain and artificial intelligence (AI) in legal contract execution has revolutionized traditional contract enforcement mechanisms. Smart contracts, self-executing contracts with terms encoded into blockchain networks, have emerged as a transformative tool in business transactions, reducing the reliance on intermediaries and enhancing contract security. AI further enhances these contracts by providing predictive analytics, natural language processing (NLP) for contract interpretation, and automated dispute resolution mechanisms. However, despite their potential, the legal recognition and enforcement of smart contracts pose significant challenges. Jurisdictional issues, regulatory compliance, contract validity, and the limitations of blockchain immutability necessitate an in-depth analysis of the legal landscape governing smart contracts. This paper provides a comprehensive review of the legal and regulatory frameworks surrounding AI-driven smart contracts, identifying their advantages, limitations, and future prospects. The study examines case laws, real-time implementations, and the role of AI in streamlining dispute resolution. The findings reveal that while blockchain enhances contract security and AI assists in interpretation, the lack of uniform legal frameworks remains a major hurdle. Through comparative analysis of existing regulatory approaches and real-world applications, this paper outlines potential solutions for effective enforcement and dispute resolution in AI-enhanced smart contracts.