How do these smart contract deal with the real world? I can see how they can work for things that entirely involve activities that take place on the block chain (e.g., a smart contract that automatically pays a crowd funded project if and only if it meets a threshold for pledges by a deadline, and refunds the donors otherwise).
But suppose our contract is something like I will pay you $X in Ethereum when you deliver to me 125 bales of Surat cotton, guaranteed to be middling fair merchant's Dhollorah [1], delivered at the Liverpool docks from Bombay on the next sailing of the Peerless.
How do we put all of that into a smart contract? Can a smart contract trigger payment only when the cotton arrives? Can it check to make sure it arrived on the ship specified in the contract?
And what happens if it turns out that there are two ships named Peerless, unrelated to each other, one of which is sailing from Bombay to Liverpool in October, and one in December? I only know about the December one, and it is on that one that I'm expecting the cotton. You only know about the October one, and so it is on that one you send the cotton. The cotton arrives before I'm ready to deal with.
Unless dealing with all that can be included in the smart contract, and executed by the smart contract without human intervention, lawyers will still be needed...and they will be needed almost as much as they are now.
PS: my cotton hypothetical is based on a real case: Raffles v Wichelhaus, EWHC Exch J19, (1864) 2 Hurl & C 906. There really were two unrelated ships both having and neither deserving the name Peerless, and both working the India / England trade routes, both scheduled for Bombay to Liverpool, one in October and one in December.
[1] Dhollorah is a very dirty cotton of a longish staple, which when cleared is very white, as if bleached. For for more than you probably ever wanted to know on this and other types of cotton, see the book "Cotton Spinning and Weaving: A Practical and Theoretical Treatise" by Herbert Edward Walmsley, page 71. It's from the late 19th century and is public domain now I believe, and you can find it on Google Books.