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In some scenarios, it makes sense to program in hooks for upgrading functionality. Since contracts can call other contracts, you can just write a new contract and point the old contract at the new functionality if the architecture is suited for it.

Other than that, you basically write smaller, well-tested programs that don't irrevocably lock up people's assets.

Simple! When a bug is found, someone (or even everyone) involved with the contract loses their money. It's one of the many downsides to handing control of your cash over to an irreversible computer program.

Which part of the current legal system are you afraid of losing?

You would have to create a new contract, and broadcast to people that they should use the other contract. All these systems heavily rely on decentralised reputation - not just for users but for contracts as well.