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This article is written by Anushaka Sharma, pursuing Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from LawSikho.


Artificial intelligence is an example of the fast-paced technology our world is witnessing. While there is no debate that technology has made our lives so much easier and efficient which reflects on the massive progress we have all made in our day-to-day lives. This has also been reflected in various booming industries like business and information technology. 

The legal industry which has not adopted innovative and recent trends when it comes to technological advancements can adopt this recent boom of Artificial intelligence and improve manifolds but this comes with its own set of doctrinal issues which are yet to be debated upon. In the below article, we will try to ponder upon Artificial intelligence-based contracting and the various issues it faces. 

The growing importance of artificial intelligence

Artificial intelligence can be rightly defined as “machines that respond to stimulation consistent with traditional responses from humans, given the human capacity for contemplation, judgment, and intention”. This thriving technology has been spreading its use wide in various areas of life and businesses. When it comes to businesses, the field of artificial intelligence has been booming. It is often reported that AI has often constituted a huge part of the revenue for various businesses. It’s not only the increased revenue that has been the reason for the boost in the use of artificial intelligence. The time saved by the use of this smart technology leads to better customer service and a great maintenance system through which businesses can identify the patterns which are not giving them enough profits or which might need a bit more attention. Owing to a plethora of such factors, a lot of up and coming industries are now adopting this fast-paced technology.

Artificial intelligence and the legal industry

The Indian legal scenario is very evidently not a very innovative industry. It has not adapted to the changing environment and has continued to hold on to the formative methods and procedures. But if we consider the change Artificial Intelligence can bring about in the legal industry, it can be immense. Starting from drastically reducing the manpower and the hours invested in legal research to predict the upcoming trends in a particular practice or litigation. An example of the above can be Lex Machina, which uses legal analytics to predict how judgments can proceed in the area of intellectual property law. Various legal startups like CaseMine, NearLaw, etc. are devising a feature called Natural Language Processing (NPL) to aid various firms and legal researchers to save much more time. Documentation work that is known to take months to complete can be made into a very simple process by the use of artificial intelligence which can complete them and make them ready to use within a couple of minutes. More than its time-saving quality, artificial intelligence will surely increase the quality of research and documentation by an increased accuracy rate, which is extremely essential in an industry like the legal industry.

Another important aspect of the legal industry where artificial intelligence has a lot of scope is the process of contract drafting. 

Contract drafting and artificial intelligence

Contract drafting, along with being an evergreen area of work, is also a cumbersome job to undertake. The level of accuracy, attention to detail, and research that a well-drafted contract demand is understandable but the same process can get taxing for a firm involved in the drafting of hundreds of such contracts. This is where artificial intelligence can step in and maintain the quality of every contract, irrespective of the number of contracts that need to be drafted.

Artificial intelligence can aid the contracting process in many ways;

  • Artificial intelligence can review the contracts for errors in language, contradictory clauses, or non-uniformity in writing, in less time and much more accurately. 
  • The mitigation of risks and identification of pitfalls in a contract can be performed in a better fashion by the use of artificial intelligence.
  • The law undergoes many variations and amendments. Often, due to a contract manager being unaware of these changes, can miss out on the non-compliant clauses in the contract. This risk can be steered clear of by the use of artificial intelligence which by using its own algorithm can identify and highlight the clauses which are non-compliant in nature. 

There are a multitude of ways by which artificial intelligence can prove to be a boon when it comes to the legal industry, especially contracting but as the saying goes, there are two sides to every coin. While this technology can make the process of contracting, effective and time-saving, there still remains a number of issues that need to be pondered upon and deliberated. 

Issues faced by artificial intelligence based contracting

More and more companies and firms might get attracted towards adopting the various advantages that artificial intelligence offers to give their company a higher ground but before making that decision, it’s necessary to ponder over some crucial issues that are associated with artificial intelligence based contracting.

  • Ability to contract

No matter how useful artificial intelligence and its various advantages prove to be, it cannot be completely used for contracting, simply owing to its inability to contract. Unlike companies, which are considered a separate legal entity in the eyes of law, Artificial intelligence cannot be given that separate entity status as per the recommendations from the high-level expert group of the European Commission, in their report titled “Policy and investment recommendations for trustworthy artificial intelligence“. Artificial intelligence cannot be held accountable due to its lack of property holdings and the lack of money to take up any form of liability. Moreover, it cannot be compared with the cognizance of the human mind when it comes to handling legal matters. 

  • Understanding the purpose of the contract

The purpose clause of a contract is considered to be one of the most important clauses of the contract as it sets the foundation for the discussions that advance and the terms of the contract that are decided. A contract needs to be drafted extremely well to devise an accurate purpose clause that suits one’s client. As mentioned above, the cognizance of a human mind is unmatched as compared to artificial intelligence and thus the way that a human can understand the client’s intention to enter a contract seems like a safer option as compared to completely relying on artificial intelligence to discover the real intention of a client. This can often lead to disappointment and huge damages for one or the other party to a contract. 

  • The mirage of responsibility

The accuracy and the efficiency of artificial intelligence are often praised by many legal practitioners but what looks lucrative on the surface boils down to sheer normalcy when the aspect of liberty is discussed in detail. The liability in the case of artificial intelligence based contracting can either be product liability wherein the programmers who constructed the algorithm of artificial intelligence or strict liability where the users are held accountable for any such mistake since they are the ones who avail the benefits of the technology.

  • Struggle for the courts of law

Law and justice go hand in hand. Artificial intelligence based contracting can often lead to disputes owing to the above issues mentioned in this article. To solve these disputes and give the wronged party justice, it’s imperative for the courts of law to be comfortable and aware of the various changes that will come in with artificial intelligence based contracting. There is a high chance that a shift to artificial intelligence based contracting can leave a lot of judges and judiciary members feeling unaware and not completely updated with the new norms and laws associated with the collaboration of law and technology. 

  • Need for regular updates

Being a technology-based practice, artificial intelligence contracting can require regular updates as per the law and technology guidelines. These regular changes in the database can create a risk of losing some very important data which can disrupt a lot of contracts and cause damages to some parties. Further, technology comes with its own set of risks in the form of viruses and hackings which can subject information of great importance to a risk of being leaked and misused.

The conundrum 

The problems and issues faced when it comes to artificial intelligence based contracting to need a lot of deliberations and discussions to eliminate the pitfalls and make the collaboration between legal contracting and artificial intelligence more efficient. 

On the surface, seeing the issues in general, it might appear that discussing more on the issue of granting artificial intelligence a limited legal personality status might untangle the issues but the conundrum of liability still stays as even then if there is an error caused by the artificial intelligence technology, the accountability will still most probably fall on the programmers.

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