AI vs Human intelligence in Contracts

It's a fight between artificial intelligence ('AI') and natural stupidity.

Jokes apart, there's a lot of discussion these days on increasing use of AI in contract drafting, review and negotiations.

As I've discussed many times, the biggest challenge in contracts (be it drafting, review or negotiations) is non-application of mind on part of parties themselves and the professionals navigating them through it. A mechanical approach as you may call it! With the introduction of AI, it's going to be even worse, I dread.

Human intelligence (if any, and if applied, in that order!) still remains crucial and differentiator in the processes of drafting, reviewing, and negotiating contracts, even as AI is increasingly integrated into contract management processes.

More often than not, contracts contain complex and context-specific language that requires a nuanced understanding. Humans can comprehend subtleties and implied terms within contracts that AI might frequently misinterpret or overlook completely.

Depending on the business context, contract terms may need to be tailored to fit unique situations. Human intelligence is essential for crafting clauses that optimally align with the strategic objectives and specific respective needs of parties.

Humans can consider ethical implications and ensure that the terms and conditions uphold the reputation and ethical standards of the organization, something AI lacks the ability to fully assess.

While AI can identify discrepancies and flag potential issues, the final legal judgment on whether the contract terms comply with the current laws and regulations must be made by a trained professionals.

Negotiating contracts requires strategic thinking and an understanding of human behavior. Experienced negotiators use their intuition, experience, and expertise to gauge the other party’s intentions and reactions, which helps in securing more favourable terms for their respective clients.

During negotiations, humans can make real-time, on-the-spot adjustments, considering the broader business context, potential future impacts, and the prospect of long-term relationships between the parties. Each transaction comes with a lot of variables and there can be no one size fits all approach, particularly when it comes to negotiations.

Humans can identify creative solutions to complex contractual issues that AI might not be able to generate. This creativity is crucial for resolving disputes or navigating complicated contractual frameworks.

Crafting and deploying sophisticated negotiation tactics that consider psychological elements and leverage non-verbal cues are beyond the capabilities of AI.

Despite the efficiency of AI in preliminary contract drafting and review, human oversight ensures all details are accurate and no critical aspects are overlooked. This quality assurance step is vital to prevent any legal or financial repercussions.

Humans can verify that all elements of the contract are consistent with business policies and objectives, reducing risks of ambiguous or conflicting terms.

Building and maintaining trust with contract partners often requires a human touch. Personal interactions and reassurances provided by professionals or business negotiators help strengthen business relationships.

Effective communication tailored to the specific concerns and objectives of the contracting parties fosters better understanding and agreement, which AI is not equipped to handle effectively in all cases.

Thus, we can assume that while AI significantly enhances the efficiency and accuracy of contract management processes, the indispensable role of human intelligence ensures that contractual agreements are contextually sound, legally compliant, strategically valuable, and ethically robust.

Integrating AI and human expertise creates a synergistic approach that leverages the strengths of both, ultimately leading to better contract outcomes.??

AI, like any other tool, is good as long as it is an enabler, an enhancer, a facilitator. However, if you rely completely on it, you live with the unintended prospect of having created a Frankenstein monster, out of your control.

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