Will AI enter the courtroom or replace lawyers in legal document drafting? This question is frequently being asked these days. While artificial intelligence offers an interesting new frontier for life in the 21st century, relying on artificial intelligence to prepare contracts can be problematic. In a June 2, 2023 interview on CNBC’s Squawk Box program, a guest discussing artificial intelligence confidently stated that the legal field is in “big trouble” because companies are already using artificial intelligence to generate complex contracts instead of having attorneys draft those documents. While it is true that artificial intelligence will impact the legal field, relying on artificial intelligence to prepare contracts is likely a recipe for trouble.
Contracts are the means by which individuals and businesses organize their economic activities with one another. See, Richard A. Posner,The Law and Economics of Contract Interpretation, 83 Tex. L. Rev. 1581, 1587 (2005).
The main purpose of contracts is to enable performance to unfold over time without either party being at the mercy of the other, as would be the case if, for example, a buyer could refuse to pay for a custom-built house for which there were no alternative buyers at or above the agreed price. So contracts regulate the future, and interpretive problems are bound to arise simply because the future is unpredictable. Stated otherwise, perfect foresight is infinitely costly, so that, as the economic literature on contract interpretation emphasizes, the costs of foreseeing and providing for every possible contingency that may affect the costs of performance to either party over the life of the contract are prohibitive.
Id. at 1582. While predicting the future is difficult, it is important to put time and effort into the preparation of contracts that may last for years and which have significant financial impacts. Houston Harbaugh’s litigation attorneys frequently represent clients in contract disputes that involve disagreement about what contract terms mean, contracts that are unclear, vague or contradictory or, sometimes, disputes involving contracts are unclear, vague and contradictory and the parties disagree with their meaning. Many of these issues result from clients who did not wish to hire a lawyer on the front end to draft a contract or who “pulled something from the internet and shaped it into what we wanted.” This is the classic scenario for later misinterpretation by one or both parties and the defenses raised against enforcement like vagueness, mistake and the claimed need for parol evidence.
Contrary to the CNBC guest’s suggestion that artificial intelligence drafting contracts will negatively impact attorneys, just the opposite seems true and both individuals and businesses should be aware of the limits of artificial intelligence and the dangers of relying on artificial intelligence to prepare contracts. While artificial intelligence is rapidly advancing, it presently has serious issues with “hallucinations”, where the program invents things that do not exist. Recent news stories confirm that relying on artificial intelligence for legal brief writing has problems, such as citing to nonexistent cases.
The impacts of teething issues like these are often downplayed in favor of a belief in technology that promises to solve all problems more cheaply, efficiently and easily than the past. That is where the danger lurks for individuals or businesses relying on artificial intelligence for things like complex contracts. There is no promise or guarantee that artificial intelligence will prepare better contracts than have existed in the past. And, worse yet, trusting and relying on artificial intelligence alone to prepare contracts may result in individuals having even less knowledge about what is in their contract. So, instead of artificial intelligence greasing the skids of commerce and eliminating the time and expense of hiring attorneys to prepare contracts, contracts drafted by artificial intelligence may result in even more contract litigation. Houston Harbaugh’s attorneys can assist on both fronts.
Preparing contracts involves more than inputting prompts into computer programs. It fundamentally involves counseling and guidance so that clients have a thorough understanding of what is in the contract and how the provisions operate in the real world. The parties must clearly express at minimum, offer, acceptance, expectations and remedies and the failure to do so clearly is generally a recipe for later litigation disputes. Whether AI can capture those essential elements and nuances is doubtful. How will parol evidence be generated if it is needed to combat a charge of vagueness?
