Can AI Draft Contracts? Using AI for Contract Drafting in the Scottish Legal Sector and the Risks of Using AI Tools
AI is rapidly changing how businesses approach contract drafting, with many organisations now experimenting with using AI for contract preparation, contract review and document automation. From small businesses to large organisations, AI tools promise faster drafting, lower costs and greater accessibility to legal documents.
However, while AI technology can produce documents that look professional, there are important legal and commercial considerations that must be understood before relying on them. This article explains how AI is being used in the Scottish legal sector, the potential benefits and the risks of using AI without proper legal oversight.
If you are considering using AI for contract drafting, this guide explains what works well, what can go wrong and when you should still involve a qualified lawyer to protect your interests.
Can AI draft contracts and how does AI contract drafting actually work?
AI can draft contracts by analysing large amounts of legal text and predicting what wording typically appears in similar documents. Most modern platforms rely on generative AI and machine learning to produce documents based on patterns in existing contracts. When a user enters instructions into a chatbot like ChatGPT, the system generates suggested wording based on probability rather than legal reasoning.
In practice, AI systems are trained on large datasets of commercial agreements and legal documents. When given a prompt, they create clauses which appear consistent with common drafting styles. This means AI can be used to draft basic agreements such as NDAs, supply agreements and employment contracts.
However, while artificial intelligence can create text that looks convincing, it does not properly understand the legal context of what it produces. AI relies on pattern recognition rather than human intelligence or professional judgement. This distinction is critical because contract drafting is not just about wording, but about ensuring documents are legally sound and appropriate for specific circumstances.
What are the potential benefits of using AI for contract drafting?
There are clear potential benefits to using AI in making content. One of the main advantages is speed. AI can produce a first draft in seconds, allowing users to prepare documentation in less time than traditional drafting processes.
AI also improves accessibility. Businesses that might previously have avoided legal costs may now feel able to create initial documents. Some uses include preparing early stage commercial agreements or internal documentation before seeking legal advice.
Despite these advantages, AI should normally be viewed as a starting point rather than a finished solution. While it can assist with efficiency, documents might still require review by a solicitor to ensure they are legally enforceable and suitable for the intended transaction.
What are the risks of using AI for contract preparation?
There are several risks associated with relying on AI for legal documentation. One of the biggest risks is that AI generated documents may appear correct but contain subtle errors or inappropriate wording.
AI models do not fully understand proper and individual context. This means a clause suitable for one agreement could be completely inappropriate for another. Without careful review, a contract may not properly reflect the commercial reality of the arrangement.
There are also legal risks where AI generated contract wording fails to reflect Scots law requirements. A contract may even be unenforceable if it fails to comply with Scots Law or contains poorly drafted provisions. This is particularly relevant where businesses rely on these documents.
What mistakes can appear in an AI-generated contract?
An AI generated contract can contain a variety of errors that may not be obvious at first glance. These can include incorrect legal terminology, missing provisions or clauses which can conflict with each other.
Sometimes AI generated documents include provisions which do not apply in Scotland or reference laws from other jurisdictions. This can create confusion and may result in agreements which do not properly reflect Scots law.
AI generated text may also not include essential protections. For example, a contract may fail to include limitation of liability provisions, dispute resolution mechanisms or clear termination rights. These missing provisions can expose businesses and individuals to several risks if disputes arise later.
What are the data protection and confidentiality risks when using AI?
One of the most overlooked risks associated with AI involves confidentiality. When users enter information into AI platforms, that data can be processed or stored depending on the system being used.
This creates potential concerns where sensitive business information is entered into public systems. Users should be particularly cautious about sharing confidential information.
Within the legal profession, confidentiality obligations are taken extremely seriously. Law firms operate under strict professional rules regarding data protection and client confidentiality. Users such as businesses should therefore consider whether using AI-generated contracts without professional involvement could expose sensitive data.
Users should also ensure they understand how AI systems process information before relying on them. Understanding these risks associated with AI use is essential before incorporating these tools into contract processes.
How should AI be used safely when preparing contracts?
The safest approach is to treat AI as a support tool rather than a replacement for professional expertise. Businesses that successfully integrate AI into their processes usually do so with clear safeguards in place.
For example, AI may be used to draft initial documents which are then reviewed by a solicitor. This approach allows businesses to benefit from efficiency while ensuring the final agreement is legally enforceable.
Key things to remember about using AI for contract drafting
When considering whether to rely on AI for contracts, businesses should keep the following points in mind:
- AI can assist with drafting but should rarely replace professional review
- AI generated documents may not reflect Scots law requirements
- Templates may not reflect your specific circumstances
- Confidential information should not be entered into AI platforms without safeguards
- Complex agreements should always involve professional oversight
- AI can improve efficiency but cannot replace professional judgement
- Proper legal advice helps protect your business from future disputes
- A qualified solicitor can ensure your contract is legally enforceable
- AI should be used as a tool, not a substitute for expertise
- The safest approach combines technology with human expertise
If you are considering using AI to prepare contracts or want to ensure your existing agreements are legally sound, our experienced team can help protect your interests and ensure your documentation is properly prepared under Scots law.
By Kirsty Westbury, Legal Assistant
