This article is written by Mushkan Pandey, during internship at LeDroit India.
Drafting is essentially the process of putting into writing the details of an agreement, contract, or transaction in a clear and precise manner. It’s a way to ensure that all parties involved are on the same page and that everyone understands their roles, responsibilities, and obligations. By drafting a formal document, you can avoid misunderstandings, prevent disputes, and create a legally binding agreement that protects everyone’s interests.
What is a Contract?
A contract is an agreement enforceable by law, as per Section 2(h) of the Indian Contract Act of 1872. It’s a promise or set of promises made by one party to another, with the intention of creating a legal obligation.
An agreement, as defined under Section 2(e) of the Act, is “every promise and every set of promises, forming the consideration for each other.” On the other hand, an agreement is when one person promises to give something to another person in return for fulfilling a promise.
The key elements of an agreement are:
- Promise: One party makes a promise to another party.
- Consideration: The promise is made in return for something of value, such as money, goods, or services.
- Legality: The promise and consideration must be lawful.
If any of these elements are missing or unlawful, the contract becomes null and void.
Illustration: A promises to deliver 100 units of goods to B in exchange for ₹10,000.
In this case:
- Promise: A promise to deliver goods.
- Consideration: B pays ₹10,000.
- Legality: The promise and consideration are lawful.
This agreement forms a contract enforceable by law. However, if A promises to deliver stolen goods, the contract becomes null and void due to unlawful consideration.
Artificial Intelligence:
John McCarthy, a pioneer in computer science, coined the term “Artificial Intelligence” in 1955, marking the beginning of AI as a field of research. John McCarthy’s contribution to AI goes beyond coining the term, he also developed the programming language LISP (List Processing) in 1958, specifically designed for AI applications. LISP’s flexibility and expressive power made it a popular choice among AI researchers and developers.
Although its usage declined in the 1990s, LISP experienced a resurgence in popularity in the 21st century, particularly in the open-source community. This renewed interest can be attributed to LISP’s unique features, such as its macros, recursion, and symbolic computation capabilities, which make it an attractive choice for AI-related projects, including machine learning, natural language processing, and computer vision.
The Oxford Dictionary defines Artificial as the capacity of a computer, robot, or software application to perform tasks analogous to human learning and decision making, such as speech recognition or question answering. This definition encompasses the ability of AI systems to mimic humanlike capabilities, and the importance of teaching human values to these artificial intelligences. The field of AI is a branch of computer science focused on designing systems that can imitate human intelligence and thought, enabling them to perform tasks that typically require human cognition.
FUTURE OF CONTRACT DRAFTING
Key Words:
Scope of AI in Contract Drafting, Capacity of AI in Contract Law, Impact of AI on Contract Law, Legal AI Tools.
Introduction:
As the field of artificial intelligence (AI) continues to advance and reveal its remarkable capabilities, it is becoming increasingly important for legal practitioners and stakeholders to understand the potential impact of this transformative technology on the contract creation process. The process of drafting contracts plays a crucial role in legal documentation as it ensures that the agreements between the parties are clearly defined and legally binding. AI contract creation, based on advanced machine learning and natural language processing algorithms, is changing the way lawyers approach creating and managing contracts.
The use of AI in contract law enables efficient contract formation and execution, enhances accuracy, and reduces errors. It also streamlines dispute resolution and allows for personalized contracts tailored to individual needs. However, these advancements raise crucial legal concerns, including the question of whether AI systems can truly express contractual intent or act as agents. It is essential to ensure that AI decisions can be understood and explained, particularly in cases where contracts are enforced or disputed.
The handling and protection of sensitive data is another critical concern. AI’s involvement in contract law requires ensuring the secure handling and protection of data, in accordance with data protection regulations. Moreover, the adherence to traditional contract law principles is crucial, as AI contracts must comply with existing laws and regulations. To address these concerns, it is necessary to develop new legal frameworks and regulations, update existing contract law principles, and establish clear guidelines for AI’s role in contract formation and execution. Ensuring transparency, accountability, and explainability in AI decision-making processes is also vital.
Future and Scope in Legal System:
A contract is a written or spoken agreement enforceable by law, serving as evidence of the parties’ mutual obligations. But what exactly are AI contracts, and why are they necessary? The benefits they offer to the legal system are numerous.
Artificial intelligence (AI) has transformed society in unprecedented ways, permeating every aspect of our lives. Its applications have improved efficiency, reduced costs, and increased accuracy across various fields, revolutionizing industries like education, finance, healthcare, and more. Despite significant advancements in AI, its adoption in the legal system remains in its infancy. Countries like the United States, United Kingdom, Canada, China, Singapore, and Australia are exploring and implementing AI in their legal systems. In India, however, AI’s use in the legal domain is still limited, although some initiatives aim to integrate AI into the legal framework.
The future of AI contract drafting is promising, driven by its benefits and advancements in law. As the legal landscape becomes more digital, smart contract technology and AI-powered contract drafting solutions will become essential. To remain competitive, legal firms must integrate AI into their business models, combining human expertise with technology-driven insights. This merger will enhance the legal industry’s efficiency, accuracy, and innovation, marking a significant shift in its future.
AI Contracts:
AI contract drafting is the process of using AI technology to create, review, and manage contracts. This solution applies machine learning, natural language processing, and deep neural networks to help lawyers streamline the drafting process. AI contract drafting software leverages data analysis capabilities to provide feedback, proofread, and improve contract language. By doing so, it reduces the risk of errors and inconsistencies, enabling lawyers to spend more time on high-level tasks that require a personal touch. AI contract drafting involves developing contract templates that can be customized to suit a particular transaction. Once the template is created, the AI software uses natural language processing to understand the content and context of the contract. It then scans multiple databases to retrieve relevant clauses, case law, and legal language, which it uses to generate a comprehensive contract. AI software is also capable of analysing the language used in existing contracts to identify patterns and provide recommendations. It can flag discrepancies, loopholes, and other issues that may not be noticeable to human lawyers, enabling them to make adjustments and avoid legal risks.
Capacity of AI in Law of Contract:
The emerging role of Artificial Intelligence (AI) in contract formation and the necessary preparations for humans and their laws to accommodate this shift. As AI advances towards robust agency, it will be capable of participating in contracts as a contracting agent, alongside humans.
There are essentials properties for AI agents to possess in this context are:
- Cognitive functions to act with intention: AI must be able to make decisions and take actions based on its own intentions, rather than simply following pre-programmed instructions.
- Recognition and respect from humans: Humans must be able to recognize and respect the intentions and actions of AI agents, treating them as valid contracting parties.
- Shared intentions: AI must be able to engage with humans and other AI in shared goals and plans, enabling collaborative contract formation.
- Recognition of legal obligations: AI must understand and respect the practical authority of law and legal obligations, ensuring contracts are formed in compliance with relevant regulations.
- Understanding of binding commitments: AI must recognize and accept the binding nature of contracts, acknowledging the commitments and responsibilities that come with them.
- Ability to participate with humans or in hybrid forms: AI must be able to engage in contract formation with humans, either independently or in hybrid forms that combine human and AI capabilities.
Impact of AI on Contract Law:
The integration of Artificial Intelligence (AI) in contract law raises significant concerns regarding capacity and intent, transparency and understanding, and electronic contracts.
In traditional contract law, parties must have the legal capacity to enter into an agreement and mutual assent or intent. However, AI systems lack legal personhood and independent intentions, making it challenging to determine capacity and intent. When an AI system autonomously negotiates terms, it is unclear whether true intent exists, especially if the AI’s actions reflect its programming rather than a human’s explicit intentions.
Transparency in contract negotiations is also compromised by AI’s complexity. Ensuring that parties clearly understand the terms becomes difficult, leading to issues of fairness and informed consent. This is particularly concerning if one or both parties are unaware of an AI’s involvement in drafting or negotiating the contract.
The use of AI in contract law necessitates a re-examination of traditional principles and the development of new guidelines to ensure fairness, transparency, and accountability.
Disadvantages of AI Contract:
AI contracts offer efficiency and automation but come with risks like reduced human interaction, leading to communication issues and potential misunderstandings. They can be vulnerable to deception if not carefully managed, as AI systems rely on the data they’re given. Cybersecurity threats, such as hacking, pose a significant risk, and technical failures or poor maintenance can disrupt contract execution. Additionally, lack of expertise in handling AI contracts may lead to flawed implementations. Therefore, careful handling and strong security measures are essential to mitigate these risks.
AI Tools for Legal Industry:
Legal AI tools are innovative solutions that harness the power of artificial intelligence and machine learning to support legal professionals in their work. These intelligent tools act as virtual assistants, automating mundane and time-consuming tasks, analysing vast amounts of data, and identifying patterns that might elude human detection. By leveraging Legal AI tools, legal professionals can streamline their workflow, enhance productivity, and make more informed decisions.
There are some AI tools for legal industry as follows:
- Contract Safe: offers a comprehensive solution for managing contracts efficiently. It focuses on data extraction to provide quick insights, allowing users to track key details such as dates and obligations without manually searching through documents. Its centralized contract storage ensures that all contracts are organized and easily accessible, reducing the risk of losing important documents. Contract Safe also uses AI to categorize and tag documents automatically, which streamlines organization. The platform’s advanced OCR search capability enables users to find keywords within scanned documents, making retrieval faster. Additionally, automated reminders and notifications ensure that important deadlines are never missed. Contract Safe integrates seamlessly with other business tools like Salesforce and Dropbox, facilitating smooth data flow across platforms.
- Lex Machina: is a powerful tool for legal analytics, providing detailed insights into courts and judges, helping lawyers predict case outcomes based on historical data. It offers evaluation tools for assessing opposing counsel’s track record, which aids in developing more informed litigation strategies. Lex Machina also provides tools for assessing the strength of a case by analysing past rulings and trends. The platform tailors its analytics to specific practice areas, such as intellectual property and employment law, offering specialized insights that cater to different legal domains.
- Everlaw: focuses on AI-powered document review, automating the process of sifting through large volumes of data to identify relevant information. Its predictive coding feature uses machine learning to prioritize documents most likely to be relevant, improving the efficiency of the review process. Everlaw also provides visual search and storytelling tools that help legal teams map out case narratives, making it easier to present complex information in a clear and understandable way.
- Latch simplifies: the language in legal documents, making contracts more accessible to non-legal professionals. It automates source referencing, ensuring that all necessary legal citations are accurate and up-to-date. Additionally, Latch generates concise summaries of lengthy agreements, providing quick insights into the main points and saving time for users who need to grasp the essence of a document quickly.
- Smith.ai: offers virtual receptionist services that operate 24/7, handling calls, messages, and client inquiries around the clock. The platform is also capable of gathering initial information from potential clients, helping law firms focus on qualified leads. Smith.ai includes appointment scheduling features, reducing administrative burdens, and can forward important calls to the relevant attorney or team member, ensuring timely responses.
- Relativity: is a robust platform that leverages AI for data collection from various sources, such as emails and social media, for use in litigation and investigations. It provides advanced analytics tools that help legal teams make sense of large data sets and identify patterns that are relevant to their cases. Relativity also automates the redaction of sensitive information and offers document translation services, streamlining the review and preparation of legal documents.
- PatentPal: specializes in the drafting of patent applications, automating much of the process to reduce the time and effort required to create compliant and comprehensive documents. The platform ensures that all documents meet the formatting requirements of the patent office, reducing the likelihood of rejection. PatentPal’s AI provides suggestions for drafting claims and descriptions, helping users create robust and precise applications.
- Legalese Decoder: is designed to translate complex legal jargon into plain language, making legal documents easier to understand for those without a legal background. It breaks down complicated legal concepts, offering detailed explanations that help users grasp the implications of specific clauses. Legalese Decoder is particularly focused on accessibility, catering to non-legal professionals who need to navigate legal documents with confidence.
- Casetext CoCounsel: provides AI-powered legal research, offering relevant case law, statutes, and other legal resources based on the context of a document or query. The platform assists in drafting legal documents, offering templates and AI-driven suggestions to streamline the process. Casetext ensures that all documents are processed securely, protecting sensitive client information throughout the research and drafting phases.
- Luminance Diligence: offers multi-language and multi-domain analysis, making it versatile for international firms handling complex legal matters across different jurisdictions. The platform is designed to handle large volumes of documents, making it ideal for due diligence processes that require extensive document review. Luminance is cloud-based, offering remote access and a quick setup, which is particularly useful for legal teams working in distributed environments.
- Harvey: provides contract analysis and due diligence assistance through AI-powered tools that ensure compliance and identify potential risks. It also offers support for litigation, including document review, case management, and analytics to help legal teams stay on top of their cases. Harvey’s regulatory compliance guidance helps firms stay up to date with legal requirements, while its personalized training modules ensure that users can maximize the platform’s features.
Conclusion:
The integration of Artificial Intelligence (AI) in the legal industry has brought about significant benefits, including enhanced research capabilities, predictive technology to aid judges, and increased efficiency in law firms. AI’s applications extend beyond the legal field, with various technologies being utilized by students, workers, IT professionals, and others.
AI has made substantial contributions to the legal system, but it will not replace lawyers. Instead, lawyers who leverage AI and technology will have a competitive edge. AI is best utilized as a tool to assist lawyers, augmenting their capabilities and increasing productivity.
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