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Artificial Intelligence in Contract Drafting: Efficiency vs. Legal Risk

Introduction

Artificial Intelligence (AI) is increasingly changing the way businesses operate, and the legal profession is no exception. One of the most promising fields where AI is making a significant contribution is contract drafting. Contract drafting has always been an unduly time-consuming and tedious process for attorneys. It consists of getting accustomed to client requirements, reviewing legality in words, verifying lawfulness, and verifying each clause meticulously. The process takes hours or even days, depending on the complexity of the deal.

All this has become possible through AI. The work is now quicker and easier. Contract drafts can now be created in minutes using templates, legal libraries, and intelligent suggestions driven by AI-based tools. AI-based tools also assist in flagging errors, making recommendations for improvement, and ensuring consistency of terms. It saves lawyers' time and enables them to spend more time on more sophisticated tasks such as negotiation or strategy.


What is AI in Contract Drafting? 

AI for contract drafting refers to the application of computer programs or software in assisting the drafting and examination of contracts legally. AI can: 

  • Employ templates to prepare boilerplate contracts. 

  • Suggest or modify clauses depending on the nature of agreement. 

  • Verify errors, omissions, or legal pitfalls. 

  • Match the contract against the law or comparable documents. 

  • Assist attorneys to collaborate by monitoring changes and updates.

Some of the most widely used AI software that is used in contract drafting are Genie AI, ChatGPT, Meta AI, Spellbook and Lawgeex, etc.


Advantages of Applying AI to Drafting Contracts 

  1. AI can generate or review contracts in minutes rather than hours, hence saving a significant amount of time. 

  2. It is cost-saving as less lawyer time used translates to lower legal fees.

  3. AI technology also helps in identifying missing pieces or unclear terms in contracts, resulting in reduced mistakes.

  4. AI-generated contracts are in a similar format and language, and thus they are uniform.

  5. Additionally, AI tools are available 24/7 and don’t need breaks, making them highly efficient and always accessible.


Challenges and Legal Risks

Even though AI has many benefits, it also has some problems:

  1. AI does not completely comprehend emotions, context, or special circumstances and therefore might not manage complicated or unusual contracts well.

  2. It improves and learns from data, which can cause data breaches or invasion of privacy legislation in case of sensitive data.

  3. In case a contract produced by AI is legally faulty, nobody is responsible, the lawyer, the firm, or the AI system.

  4. Only qualified lawyers are permitted to perform legal work in certain nations, and therefore the use of AI is equivalent to the practice of law without authorization.

  5. If the AI is trained on unbalanced data, the AI will generate discriminatory or unjust contracts.

  6. Lawyers tend to over-rely on AI and forget to verify the contract, which can cause fundamental errors.


Solutions and Recommendations

  1. If the contract has been AI-generated, a trained attorney must review it before signing.

  2. Employ open, reliable AI tools and abide by local laws.

  3. Utilize AI tools with proper security measures and safeguard confidential information.

  4. Law students and attorneys must learn to use AI tools responsibly and not solely rely on them.

  5. The bar associations and governments must implement clear rules or legislation regarding the use of AI in court proceedings.

  6. Implement AI systems that are familiar with the local language and legal system, so that they yield better results.


The future of AI in Contract Drafting

The future of AI-enabled contract drafting will involve a careful mix of sophisticated technology and human legal acumen. Though AI has the potential to significantly enhance efficiency, it is important that lawyers retain robust core competencies in order to apply and interpret AI-driven outputs judiciously and not over-rely on automation.

Law firms need to invest in ongoing training so that legal experts can integrate AI with conventional skills properly. Access to AI tools also needs to be equitable to avoid creating disparities across the legal profession, enabling small practices to remain competitive. Lastly, proper guidelines have to be established for ensuring ethical and responsible use of AI, addressing issues such as bias, transparency, and accountability, and enabling sustainable integration into legal processes.


Conclusion

AI is a technologically advanced tool that can make contract writing faster, reduce the cost, and also increase accuracy. AI can also free lawyers from routine work and enable them to spend more time on more important legal tasks. But, after all, nothing is best. AI still requires human intervention and can also threaten privacy, legality, and equity.

With the use of AI responsibly and smartly, keeping human guidance in place, we are capable of reaping the advantages of technology without sacrificing legal quality or ethical standards. The objective must be to couple AI's quickness with human lawyers' experience. 


References

 

DISCLAIMER- This article has been submitted by Anurag, trainee under the LLL Legal Training Program. The views and opinions expressed in this piece are solely those of the author.

 
 
 

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