Why relying on AI for your contracts is risky business

- September 5, 2023 3 MIN READ

In the age of technological marvels, the allure of Artificial Intelligence (AI) is undeniable. From streamlining processes to enhancing customer experiences, AI’s potential seems boundless. Yet, is entrusting AI the smart choice when it comes to complex matters like business contracts? asks Shalini Nandan-Singh founder of Love Your Legals

AI has undoubtedly revolutionised various industries, but translating its usefulness into crafting intricate business contracts carries inherent risks.

The risks of trusting your contracts to AI

Lack of understanding of your business

Business contracts are as unique as fingerprints – tailored to the nuances of your business. While AI boasts remarkable capabilities, it lacks the profound understanding that only comes from human insight. Every business is different, operating in its own ecosystem, and attempting to replace human judgment with AI can lead to cookie-cutter solutions that fail to encapsulate your business’s distinct characteristics.

AI tools are only as good as the information you provide; even then, they can get it wrong. Your contracts must cite the correct jurisdictions, regulations, and other business obligations for your specific business. If you don’t know the law, your contracts may refer to laws that apply to entirely different countries or industries.

Serious consequences, minimal accountability:

Business contracts govern critical relationships and transactions. Relying solely on AI to draft these documents could lead to severe issues. A minor error in wording or omission could lead to massive financial losses or legal battles. The unsettling part? AI doesn’t shoulder accountability. It lacks the moral compass and awareness of the potential consequences that human expertise brings.

Using an AI tool to draft the concept of your contracts might be helpful in some circumstances, but if you do this, you should still get the contract reviewed by an experienced business lawyer. In reality, it’s usually more effective to get the contract drawn up by a lawyer who has a strong focus on understanding your business needs in the first place.

One size fits none

AI-generated contracts are crafted based on algorithms, data, and patterns. However, every business scenario is nuanced and complex. An AI might misinterpret a specific detail or overlook a vital aspect that a human with contextual understanding would grasp. A one-size-fits-all approach seldom fits anyone perfectly in the world of business contracts.

In the realm of business contracts, context is king. Imagine a scenario where an AI-generated contract fails to capture the subtleties of a negotiation that took weeks to finalise. Or worse, omitting a clause that could protect you from unforeseen circumstances. The business world thrives on precision, and contracts are the cornerstone of that precision. AI’s limitation in comprehending the intricate dance of negotiations, concessions, and strategic nuances is evident. An AI tool might provide a contract, but it won’t provide the foresight and strategic edge that a human with industry insight brings to the table.

The not-so-legal fine print

AI, while remarkable, isn’t versed in local regulations, government laws, or consumer protections. It won’t discern jurisdictional discrepancies or stay up-to-date with ever-evolving legalities. Relying solely on AI-written contracts could expose you to compliance breaches, creating a legal quagmire that AI can’t untangle.

The human element: indispensable and non-negotiable

While AI is a tool, human intuition and expertise are essential components in the complex world of business contracts. Only a seasoned business lawyer, experienced in understanding your specific industry, can navigate the intricate maze of regulations, safeguarding your interests and ensuring that your agreements align with your business goals.

An experienced business lawyer is more than a legal expert; they are your advocate, partner in strategising, and guardian against potential pitfalls. They possess the ability to decipher legal jargon and translate it into a language that resonates with your business objectives.

A contract generated by AI can’t hold a conversation, understand your concerns, or provide tailored solutions to questions you haven’t even thought of. A human lawyer’s empathy and comprehensive understanding of your business give them the edge to anticipate issues that an algorithm simply cannot. The complexities of the business landscape demand a holistic approach that combines legal acumen with genuine concern for your business’s success.

In pursuing innovation and efficiency, embracing AI for all facets of business is tempting. However, when it comes to crafting business contracts, the risks of relying solely on AI are too grave to ignore. Your business’s unique essence, the serious consequences at stake, and the intricate web of laws – all demand human expertise. AI can assist but can’t replace the irreplaceable: your experienced business lawyer. So, as you navigate the ever-evolving landscape of technology and business, remember that some endeavours, like crafting your business contracts, are best left to the wisdom of the human touch and personalised legal advice.

Ready to safeguard your business with a service agreement tailored to your unique needs?  Don’t leave the fate of your agreements to the unknowns of AI – partner with an actual human who understands your industry intricacies.

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