Early last year, the internet exploded with news of what has been described as the AI revolution, thanks to a surge in the popularity of accessible generative AI tools. With platforms like Chat GPT able to draft legal contracts and advice quickly and at little to no cost, this technological leap has left businesses and freelancers alike questioning the risk of using such tools, and how AI will impact the future role of lawyers.
Alena Makarevich, Corporate and Commercial Associate at Primas Law, delves into the advantages and potential pitfalls of businesses using AI chatbots for contract review and legal advice.
“Businesses may be attracted by the broad and advanced capabilities of an AI chatbot and no doubt may benefit from using it in limited circumstances,” Alena explains.
Positives: AI helps firms to streamline laborious admin tasks and basic templates
“Some of the benefits of using AI to help you on your way when drafting contracts include:
1. Contract review and interpretation
“Chatbots are able to summarise text quickly, allowing you to vet a draft contract received from a third party before signing by asking a chatbot to summarise key points and highlight the risks.
“But it doesn’t account for options like rejecting a clause altogether or consider the wider issues, such as the bargaining position of the parties, which are all details that a lawyer involved in drafting the clause would have knowledge of.”
2. Bullet points for discussion/negotiation
“Chatbots can be a good tool to help you prepare for a meeting. For example, ChatGPT can produce a list of points for discussion with a new customer when negotiating a supply agreement. This shouldn’t be treated as a comprehensive list but could certainly be a useful starting point and set you on the right path, allowing you to use your time more efficiently.”
3. Basic contract templates
“Basic contract templates have been available from the internet for a while but chatbots can now tailor a template to your specific instructions.
“These types of templates may be useful for very low value and low-risk transactions, where the parties want to paper the fact that they have entered into a contract and some very basic terms of the deal. However, it’s important to note that this certainly wouldn’t be fit for purpose for most transactions and is far from the standard of bespoke contract that a commercial solicitor will provide to their client.
“A Commercial solicitor will use their legal knowledge and human touch to obtain the right information from the client to produce a sound document that records the terms of the deal and protects the client, taking into account the client’s circumstances.”
Negatives: AI’s narrow application and inconsistency mean its not reliable
“Despite AI chatbots’ impressive capabilities, much needs to be said about their limitations and unreliability when it comes to contract drafting,” Alena explains. “Although there are many benefits to using AI for commercial contracts, there are even more limitations, including:
- Unreliability
“By Open AI’s own admission, ChatGPT may give inaccurate information and it is not intended to provide legal advice. The contract template it produces may look right, and answers to your questions may sound plausible, but ChatGPT is not built to be truthful or correct. Due to the way AI chatbots are trained, they often experience ‘hallucinations’ whereby a chatbot creates content that is not factually correct or does not accurately reflect reality.”
- Narrow application
“An AI chatbot is only as good as the person instructing it. Unless it is instructed to provide a specific response, it may not take into account the personal circumstances of the client or consider the wider transaction or a deal. As such, it may not be addressing the issues correctly or issues will not be addressed at all, potentially leaving significant gaps in a contract that could cause big problems in the long term.”
- Answers are inconsistent
“AI platforms can give you different results in response to the same prompt, giving a different position on the same issue. A reader who is not a trained lawyer may easily miss the implications of small changes and, when these aren’t identified, this could cause significant issues.”
- Security and risk
“Businesses need to be aware of the potential security and privacy risks of inputting sensitive business information in a chatbot. Paid-for AI-powered software, which is customised to your business needs, should have the appropriate security measures built in to ensure that this information is protected. However, it’s vital to note that publicly accessible chatbots may expose your information to data breaches or misuse, so tread carefully around what data you type in.”
Tread carefully when using AI for any commercial matters, warns Alena
“It isn’t uncommon to encounter contracts that have been drafted using the assistance of an AI platform. Unfortunately, we have found that these contracts are often in need of a substantial rewrite or complete redrafting.
“I have come across examples of contracts that referenced arbitration rules that did not exist and legislation from jurisdictions not relevant to either party, such as Australian data protection legislation in a UK contract. Often, this can make reviewing and redrafting AI-produced contracts an even lengthier process than simply drafting it from the beginning.
“If you don’t have the resources to engage a trained Commercial Solicitor or if the value of the contract is very low, then using a chatbot for contract review may be justified on balance.
“Conversely, if you need something to properly manage your risk exposure, address the relevant issues and produce a document that sets the foundation of a good commercial relationship between the parties, then you should seriously consider using the services of a professional commercial solicitor, as this will be a valuable investment in the long run. By analogy, you would most likely still choose to employ a builder to build your house, even if you had all the right tools.
“It’s not that AI-powered tools should t be avoided for contract review and drafting completely but they do need to be used by a trained commercial solicitor in order to avoid any legal error. An AI chatbot is a good tool in the right hands, but otherwise, it may be a gamble that simply isn’t worth taking. There are many paid AI-powered contract drafting tools already in existence or are being developed whose software uses reliable data to generate their responses and has appropriate security measures. If used correctly, this could be a great asset to a trained lawyer.”