Artificial intelligence has increasingly become a convenient tool used by businesses to create marketing programs, draft contracts and policies, write emails and even prepare legal documents. The speed and apparent efficiency of chatbot generated documents make them attractive propositions for many businesses and cost-effective compared to using a lawyer to create the required documents.
However, AI generated material has potential, inherent legal problems which may make documents created by AI chatbots unenforceable. This article explores the pros and cons of AI generated commonly used documents required by businesses.
Advantages of using AI for contract drafting
Understandably, businesses are constantly looking at ways to reduce costs and save time wherever they can. AI generated documents, like employment agreements, vendor contracts and partnership agreements at first sight appear to do exactly that. The speed with which a chatbot can seamlessly create a lengthy agreement or contract which appears to be professionally crafted has now become phenomenal.
A summary of the main advantages of using AI in document generation includes the following:
- access to templates without the need to hire a lawyer;
- convenience for startups and small businesses;
- easy customization;
- faster document creation;
- lower upfront legal costs.
Despite the obvious apparent advantages, the potential downside of using AI alone comes when there is an assumption that the material is accurate, aimed at specific requirements, conforms to individual state laws and is legally sound.
Why AI generated contracts may be legally unenforceable
1. AI contracts may not be relevant to specific businesses
1. AI contracts may not be relevant to specific businessesThis is one of the main weaknesses of AI generated documents. Agreements and contracts must be tailored to the specific business they are used by, but the chatbots do not discriminate well between different businesses that they are generating documents for.
For example, AI generated vendor contracts may not correctly highlight the following:
- confidentiality protections;
- delivery deadlines;
- indemnification clauses;
- insurance requirements;
- liability limitations;
- payment disputes; and
- termination rights.
AI generated partnership agreements may not correctly highlight the following:
- deadlock resolution;;
- decision-making authority
- exit strategies;
- fiduciary obligations;
- intellectual property rights;
- ownership disputes; and
- profit-sharing conflicts
The problem for businesses that have drafted documents, such as these using a chatbot, fail to realize the legal issues until an actual dispute arises, when it is too late to adjust the original agreement or contract. Disputes can then become an expensive exercise for the businesses involved if they face litigation.
2. AI contracts may not be state specific
Contracts and other legal documents are typically created according to specific state contract law. If a document has been drawn up using AI without oversight, it may not be enforceable or be invalid in that state.
- arbitration clauses;
- automatic renewal provisions;
- consumer protections;
- employment classifications;
- limitation of liability clauses;
- non-compete agreements.
3. AI contracts may contain ambiguous language
AI generated documents do not necessarily provide the precise wording that many contracts require. Legal disputes often arise when a legal document contains ambiguous language, but chatbots are not (yet) designed to provide drafting which is legally precise enough, typically because they are designed to provide text which sounds more ‘natural’ sounding.
Examples of phrases that may be too ambiguous for legal precision in a document might be:
- “adequate performance;”
- “fair compensation;”
- “reasonable efforts;”
- “timely delivery.”
Disputes can arise when phrases such as these are not defined sufficiently clearly. If an agreement or contract has led to a dispute, then the ambiguity in the wording of an AI generated document may be used by the litigating party against the business owner. The court is unlikely to be sympathetic when it transpires that the document had not been reviewed by a professional lawyer before being endorsed for use.
4.AI contracts may provide incorrect legal information
Without oversight or modification by a professional lawyer, AI generated documents may appear to be legally correct, but on closer inspection contain wording that is legally incorrect. This is often referred to as ‘hallucination’. For example, AI generated documents may:
- use legal terminology not used in the U.S.;
- refer to outdated legal standards;
- use conflicting concepts;
- refer to laws that are invalid.
The problem for many business owners is that they typically do not have the legal training and knowledge to know whether the wording in a chatbots generated document is correct or not. In many cases, the sophistication of the document may lead the owner into a false sense of trust that they are legally valid documents.
5. AI chatbox generated documents may compromise confidentiality
Businesses may not realize that sensitive and confidential information has been imputed into a publicly accessed AI system, which can potentially expose the business to the risk of litigation if privacy and confidentiality has been compromised. Information which is typically considered sensitive and kept confidential includes:
- business strategies;
- client information;
- financial details;
- pricing structures;
- trade secrets.
The role of AI should be an accompaniment to professional legal guidance
AI still has a role to play in helping to draft legal documents as long as its limitations are appreciated and a professional lawyer is used to edit and proofreads the document before implementation. Useful ways to use AI currently may include such things as:
- generating outlines;
- organizing ideas;
- preparing points for discussion;
- summarizing concepts;
- creating first drafts to be reviewed by a lawyer.
For more information, visit our website or contact us for a free initial legal consultation today.