What Are the Risks of Using ChatGPT to Write Contracts?

There is no doubt that using ChatGPT to write contracts is a very attractive idea. It gives us instant results, uses sophisticated language and is able to adapt the writing style and tone to provide us with the best answers to our questions. 

However, in another post, we spoke about the risks that ChatGPT can bring to your business and many of these risks also apply to contract drafting. If you’re a freelancer, service provider or business owner, contracts are at the core of everything you do. Contracts protect you and help you to clarify your business relationships. 

With the advancements of AI software like ChatGPT, many people now consider doing things like writing contracts or legal arguments using this instead of a lawyer. Let’s take a look at some of the risks involved with using ChatGPT to write contracts.

Accuracy

Precision is vital in contracts. If they are disputed they need to be relied on, which means the terms must be legally binding and accurate. While impressive, ChatGPT is not infallible. Its accuracy depends on user interactions and the data it was trained on so it can miss recent and important law updates. Although it produces content swiftly, accuracy isn’t assured. So you would have to carry out significant research to understand and shape the necessary contract components.

Legal Experience

AI chatbots can't replace human lawyers, they lack legal expertise, experience and understanding. Drafting contracts requires delicate legal interpretations, something ChatGPT can't fully grasp. Similarly, personalisation is also beyond its capabilities.

Validity

ChatGPT can generate faulty or unenforceable contracts. Although ChatGPT will generate a contract based on your prompt, the document it generates is pretty much a collection of similar legal contracts it came across in the past. So there is the risk of having an incomplete contract or a contract that is not compliant with the applicable laws. You would still need a lawyer to assess the validity of the contract generated by ChatGPT or any other similar AI tool, otherwise, its validity could be questioned. 

Privacy

If you give ChatGPT personal information about what you want to be included in your contract, the data or information that you provide is not entirely safe. In fact, Italy banned ChatGPT for a data breach that happened on 20th March 2023 in which user conversations and payment information were leaked. As such, in contract drafting, make sure that the information you give AI is not confidential or personal. 

When Reliance on ChatGPT in Law Went Wrong

Recently in Manhattan, USA, Judge P Kevin Castel fined a law firm and two lawyers $5,000 (£3,935) for submitting fake case citations generated by ChatGPT in a court filing related to an aviation injury claim. 

The judge noted that while some aspects of the AI-generated decision resembled real ones, other parts were "gibberish" and "nonsensical." The judge acknowledged AI's potential in legal work but stressed that accuracy is crucial for lawyers and so reliance on ChatGPT to construct legal arguments was not acceptable. 

How Does ChatGPT Write a Confidentiality Clause in Practice?

We decided to test this out on ChatGPT and look at exactly how it responds to contract drafting questions. This is what ChatGPT came up with when we asked it to write a confidentiality clause:

"Both parties hereby agree that any information shared between them during the course of this agreement shall be treated as confidential. 

This includes but is not limited to, proprietary business information, trade secrets, customer data, and financial records. 

The receiving party shall use reasonable efforts to protect and maintain the confidentiality of such information and shall not disclose it to any third party without the express written consent of the disclosing party. The obligations of confidentiality shall continue even after the termination of this agreement."

This is not bad, but it is quite standard, very basic and lacks specifics. You could ask ChatGPT to change the clause to make it more specific and add in timescales to clarify things like how long the obligations of confidentiality will continue because it is unreasonable to say that they will continue forever for instance. 

This is where a good lawyer will help you. It is unlikely that this clause will hold up in court if a contractual dispute arises because it is too broad and just doesn’t give the detail that you need in the contract terms. However, there is no doubt that it is a very good starting point and the tone and use of language are appropriate. 

Should You Use ChatGPT to Draft Your Contracts?

We have seen that whilst ChatGPT can be very sophisticated and convincing when it comes up with incredible answers to our requests, we just can’t rely on it. A number of lawyers have been caught out when they tried to use it to support cases in court. 

It may be that ChatGPT becomes so smart that it is able to draft outstanding contracts, but right now, we can’t be sure. Human lawyers have years of knowledge, experience and expertise behind them, unlike ChatGPT. ChatGPT learns from the information it is given by its users. The problem is, we don’t know if users are providing it with accurate information. 

In addition, when we are using this AI for law-related guidance, we want to be sure that it is giving us relevant and suitable information for the jurisdiction we need so that it meets compliance requirements. But again, we can’t expect ChatGPT to meet legal compliance requirements.

Automate Your Contract Drafting Securely and Accurately With Our Legal Bot

Gerrish Legal has created an automation tool to help you prepare your own bespoke Service Agreements and Confidentiality Agreements through our Contract Portal. Unlike ChatGPT, your personal data and sensitive information is safe with our chatbot. 

Our legal bot has been created by our specialist contract lawyers which means that you can rely on the contract it produces for you. The terms and clauses have been pre-drafted by our team based on years of experience.

Your contract will be unique to you and tailored around your services as opposed to ChatGPT which will produce a generic standard contract that may not be legally binding. 

Depending on the answers you give, the bot will put together the terms of the contract and will customise your unique contract. All you have to do is input the necessary information and you’ll instantly receive the final contract straight to your inbox saving time, and effort and minimising mistakes.  

You and your contracting party will have a secure and coherent agreement that you can rely on, giving you the peace of mind you need when doing business with third parties.  If you want to benefit from our automated contract drafting tool, you can access our contract portal here. You can also book a 30-minute consultation with one of our human lawyers if you need any bespoke advice!

To find out more about the Gerrish Legal Contract Portal visit our website here.

How Can Gerrish Legal Help?

Gerrish Legal is a dynamic digital law firm. We pride ourselves on giving high-quality and expert legal advice to our valued clients. We specialise in many aspects of digital law such as GDPR, data privacy, digital and technology law, commercial law, and intellectual property. 

We give companies the support they need to successfully and confidently run their businesses whilst complying with legal regulations without the burdens of keeping up with ever-changing digital requirements. 

We are here to help you, get in contact with us today for more information.