Aarthi D Asrani, LL.M (Corporate and Financial Law), O.P Jindal Global University.
ABSTRACT
Integration of Artificial Intelligence in commercial contracts represents a paradigm shift in drafting, reviewing, and enforcing legal agreements. Conventionally, managing contracts has involved time-consuming scrutiny and interpretation by humans, but AI technologies, particularly those that leverage NLP and ML, are also increasingly transforming processes for higher accuracy, efficiency, and cost-effectiveness than ever before. This paper discusses the varied use of AI in current contract management and analyzes its impact on the legal sector.
AI-powered drafting of contracts employs past data and contract templates to automate the generation of legal documents. Such software could produce boilerplate clauses, and even apply them according to customizing specific requirements, saving lawyers' time spent in repetitive work. This may increase efficiency, but one needs to consider the risk of bias that comes along with the data the AI model is trained on. In addition, the application range of AI tools remains mainly at standard contracts, with complex and bespoke ones still requiring substantial human guidance. The partial automation thus makes it worthwhile to question how much AI can substitute human judgment in drafting agreements that normally depend on in-depth legal nuances.
Advances in AI have also revamped the contract review and due diligence process, which were extremely time intensive. NLP-based tools can scan voluminous contracts, flag unusual clauses, identify potential risks, and ensure compliance with legal standards. This capability enables businesses to accelerate due diligence processes, especially in large-scale transactions, mergers, and acquisitions. Automated review of large volumes of documents by AI reduces the risk of human error and facilitates consistency across contracts. However, the dependability of AI for contract review throws up issues like interpretability and transparency. Legal professionals are held accountable for ensuring that AI systems function within the lines of ethics and law while establishing appropriate mechanisms to correct errors and omissions on the part of the tool.
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