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The use of artificial intelligence as a tool for achieving greater efficiency has touched virtually every industry. However, the depth of its impact varies widely from one to the next.
In the legal field, for example, AI has made some inroads when it comes to automating time-consuming tasks. A recent survey conducted by Law.com cites “summarizing documents/generating transcripts” as the top AI use case currently being employed by law firms. “Legal research” was cited as the next most common.
Another use case identified by the Law.com survey that has proven to be a bit more controversial involves using AI to draft legal materials. A judge fined two attorneys and their firm in June 2023 when they submitted a legal brief written by AI. The brief was found to contain non-existent court opinions as well as fabricated quotes.
Using AI to write contracts is a similar application some lawyers feel should not be encouraged — at least not without human oversight.
“I do not think it is possible, let alone advisable, to use AI tools to draft contracts without the supervision of a lawyer, at least not for important contracts,” says Patrick Gruhn, Founder of Perpetuals.com. “Contracts are tools used for incorporating the interests of legal parties in optimal ways. Even the basic components of a contract, such as those that articulate the interests of the parties, can involve several factors that are easily confused. International contracts, for example, must involve provisions that address questions of jurisdiction and applicable laws. An experienced attorney is required to ensure all key factors are included, and their full impact is understood.”
Gruhn was a Partner at K&G Lawyers, a Swiss law firm specializing in digital assets that was later renamed Crypto Lawyers. Perpetuals.com is a MiFID II market infrastructure startup that empowers the trading of perpetual futures and other crypto derivatives.
AI lacks needed creative and strategic thinking capabilities
Gruhn points out that a strong legal contract also anticipates potential areas of conflict between the parties involved and provides an agreed solution to solve those conflicts should they arise in the future. He believes AI does not have the capacity to provide the strategic or creative thinking required to properly address those concerns. He also believes they lack the power to consistently consider the implications of related legal areas such as security or tax law.
“In some areas of contract law, such as a shareholder agreement for a family business holdings, the potential areas of conflict are less economic but pertain to emotional and personal situations,” Gruhn explains. “AI cannot appropriately handle or predict those situations. Additionally, the real power of contracts is realized when they are used to create unique new contractual rights, such as in the use of contracts for novel crypto projects that use tokens to represent a novel and unique asset. AI tools cannot reliably perform with that level of creativity.”
Individualized solutions require human involvement
As the business world continues to explore AI’s potential, it is finding that the most impactful applications involve partnerships with human counterparts. Rather than eliminating the need for human involvement, AI manages tedious tasks while humans use the additional time AI tools free up to focus on higher-value work.
“An AI-powered platform can significantly enhance the contract creation process by freeing up lawyers to focus on the areas that involve nuanced concepts,” Gruhn says. “AI can use its understanding of best practice clauses for the parts of the contract that do not require an individualized solution, with competent lawyers taking up the task afterward to fill the gaps and personalize the finished project.”
Once again, Gruhn points to the importance of attorneys anticipating the ultimate application of contracts — including how they might be challenged — during the drafting process. AI, at least at this point in its evolution, can’t be counted on to think through and prepare for the variety of scenarios a legal contract is meant to address.
“In the end, a court might be the entity determining what the contract says,” Gruhn points out. “Consequently, it is important that a good lawyer who understands how such a court would interpret the contract is ultimately reviewing any draft. The same is true for standardized contract terms like Terms of Service and similar documents used by businesses.”
AI tools have already established a beachhead in the legal industry, with experts anticipating it will ultimately transform the legal profession. For attorneys, the key to properly leveraging AI will be finding the balance between unleashing its strengths and guarding against its weaknesses.
“Don’t get me wrong. AI is an extremely powerful tool that should be employed in the legal space, especially with the ever-increasing flood of information today’s attorneys must deal with,” Gruhn says. “But when it comes to developing contracts that do their job of solving conflicts before they arise, we still need human lawyers.”
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