AI and Contracts: Should You Trust the Machine?

Last week, I've talked about the AI in general use, and I have received many feedback, especially I get lots of people asking me" How did AI influenced your business?" So, this week, I would like to share with you the area of AI that (could) influence my business. Start with a little conversation that I had with one of my clients.

Last week, my client, a contractor told me proudly:

“Don’t worry, Emmolina, I ran the subcontract through an AI tool, and it said everything looks fine. It is quick and almost cost me nothing to do it.”

I was curious how the AI tool works, so I asked him to share the subcontract with me. And very quickly, I found a problem: the AI tool didn’t flag a hidden liability clause that could have left him on the hook for tens of thousands. It turns out that it probably will cost him quite a lot to fix it in the future. And I am in the tricky position to proof him that.

And that, it is the real danger of using AI tools.

AI is powerful, but if you trust it blindly, you’re walking into risky territory, without you knowing it.

I am not saying you should not use the AI tools for your contract, in fact, I do encourage you to use, just to make sure that don't use AI to replace your judgement, only to replace your excuses for not checking your contract.

Why AI could works for your contracts?

If you deals with contracts often like me, you will know that contracts are very repetitive, detail-heavy and time-sensitive. Most of the clients that I work with, have their own contract templates, and when they needed to draft a new contract for the project, they naturally just reach to their template, fill out the specific details of the project, and send it to the other party to review and sign.

In other words, this sounds like perfect task for AI to do it. It just like filling a form. And in fact, right now, there are many AI tools can help you do things about the contracts already, such as:

• Summarise long agreements into key obligations

• Flag risky clauses or deviations from standard terms (even though this is not very accurate yet)

• Draft or redline based on playbooks

• Track obligations and deadlines across portfolios

  
  

But let’s be clear: AI isn’t a lawyer. It’s not a substitute for your judgement. Which means, even you have your contract template, you have your standard procedure to draft the contract, the human element still need to be participate during that process, such as does the standard terms still applies to a special project, or is the template needs to updated to better suits the new regulation, those things still need you to navigate, and you should not expected that AI can pick this up automatically for you. It can do works for you, when you have clear instructions with guardrails and restrictions, it cannot read your mind, well, at least not yet.

Tools that matter in NZ

If you are curious, and want to give it a try with AI for the help on contracts, below are some AI tools that I've found that have some support in that field, but because of the market scale, we’re slower to adopt than the US or UK, which means there are fewer tools to choose, and there are almost no AI tools that specifically focused on NZ market only:

• DraftWise: This AI tool is a precedent-powered contract drafting AI, helping lawyers to use decades of winning insight to deliver stronger contracts with total confidence, directly integrated in Word document. It connects to the firm’s complete deal history, documents, clauses, tags to draft a consistent format type of the contract.

  
  

• Ivo: Kiwi-backed redlining tool. Works in Word, flags risky clauses, suggests edits. It turns complex contracting processes into a fast processes, with reported massive productivity improvement by the users ( lawyers).

  
  

• CoCounsel (Thomson Reuters NZ): This is one of the Thomson Reuters AI tool which can scans docs, answers legal questions with citations. And it can integrated with word, teams, SharePoint, outlook software, with reported massive time saving compare to manual reviews.

The good and the bad of using AI tools in Contract

The good:

• Faster reviews (minutes, not hours)

• Consistency (applies the same logic every time and remove personal bias)

• Accessibility (contracts feel less intimidating for small contractors)

  
  

The bad:

• In general, the context of the contract, and the more special word " intent of the contract" can be different in every project. The AI could have context blind which may not best representing the true aim of the contract.

• Local law gaps, this is one of the biggest problem that I've found, as many models are trained offshore, and NZ has it's speciality of construction contracts environment, the AI answers are not considers the local practice.

• Data privacy risks, most people concerned about the privacy, especially when the content is about contract, and they are not wrong to worry about it, as many of those trained models not showing very clearly of how those information been managed.

  
  

Remember the golden rule : AI = first draft, not final answer.

What should you do at your practice

If you’re a contractor, QS, or lawyer working in New Zealand Construction environment and dealing with contracts, I would suggest you to:

1. Experiment the AI tool, but don’t outsource your brain.

2. Control your data. Check where it’s processed, and more importantly check your company policy and don't disclose any confidential information. More consider it as a "fancy" Google search engine.

3. Check the local application. Always check the results against the NZ precedents and playbooks.

4. Keep a human in the loop. AI can highlight, but you must decide.

My thoughts on the AI tools in contracts field

AI isn’t the enemy of contracts, but the complacency is.

The ones left behind won’t be those who avoid AI. It will be those who use it blindly without understanding its limits. And this is more dangerous than not using it.

When you using AI, either in contract area or just in general, think of AI as your junior assistant:

• They can be great at speeding things up, if you provide a clear instructions and guidelines.

• They can provide consistent in the work, if you have a clear procedure and template to follow.

• No matter how well they appears to be, always remember that they are nowhere near ready to run the project alone. You still need to supervise.

  
  

So, Would you trust an AI tool to review your next contract? Why or why not?