Press Release

ChatGPT for Contracts: Foundational Models vs. Lawyer-Trained AI

LegalOn Team

ChatGPT for Contracts: Foundational Models vs. Lawyer-Trained Models

Artificial intelligence (AI) and Legal AI tools are reshaping how legal professionals approach tasks like contract review and redlining. Among the various AI technologies, ChatGPT has garnered the most attention for its potential to streamline and enhance these processes. However, as with any emerging technology, it is crucial for lawyers and in-house legal teams to understand both its capabilities and its pitfalls.

ChatGPT, along with other foundational models like Anthropic’s Claude and GPT-wrappers (a user-interface built on top of GPT models for specific use cases), offers efficiencies in some contract tasks. Its ability to quickly process and analyze text may reduce the time legal professionals spend reading through a long contract. When prompted and guided well, this technology can answer questions and draft language changes. These capabilities can help expedite a portion of the contract review process.

Despite their advancements, ChatGPT and GPT-wrappers are not without limitations. 

  • One notable challenge is the occurrence of “hallucinations” – instances where AI generates confident but inaccurate or nonsensical information. This issue is particularly critical in legal contexts where precision is paramount. Researchers at Stanford University found that “legal hallucinations are pervasive and disturbing” and that models like GPT deviate from actual legal facts or well-established legal principles 69% to 88% of the time. 
  • A second challenge is that ChatGPT and GPT-wrappers are not consistent. When used to draft a clause, for example, ChatGPT will create a different version every time it is asked. This inconsistency can create risks for legal teams as each version is different and none may be a good reflection of market standard.
  • Additionally, while ChatGPT can identify some more obvious risks in contracts, its current ability to discern nuanced or complex legal risks remains a work in progress. This limitation underscores the need for skilled legal oversight in training and refining AI's output.

Understanding the strengths and weaknesses of ChatGPT and GPT-wrappers in contract review and redlining is essential. This article aims to provide an overview of how generative AI models like ChatGPT are reshaping contract review processes, illustrating where they have strengths and where human expertise remains indispensable. You’ll learn why a purpose-built model like LegalOn’s, that is trained by actual contract attorneys, is essential for creating a comprehensive solution for lawyers and in-house legal teams.

When to Use ChatGPT for Contracts

ChatGPT is emerging as a powerful tool for some legal tasks, including contract review. . With its ability to understand and generate human-like text, ChatGPT can automate and enhance elements of the contracting process.

At its core, ChatGPT is a deep learning foundational model trained on vast amounts of text data. This enables it to “comprehend” and generate natural language. Because ChatGPT’s responses are based on its training data, it is important to avoid prompting with sensitive information unless data processing protections are in place to prevent user data from being used in model training. Some specific applications of ChatGPT in contract review include:

  1. Brainstorming Simple Legal Queries:
    • When prompted, ChatGPT can help brainstorm answers to simple legal questions. Answers should be reviewed and edited by a legal professional.
    • Legal professionals can interact with ChatGPT using natural language, asking for clarifications, explanations, or recommendations on specific contract provisions.
    • This interactive capability enhances the efficiency of legal teams by providing quick access to relevant ideas and insights.
  1. Ideating Draft Language:
    • When prompted, ChatGPT can generate language based on a user’s instructions, incorporating specific details as requested. 
    • When tasked with drafting contractual clauses, ChatGPT can generate draft text that should be reviewed and edited by a legal professional.
    • When guided, ChatGPT can draft language for legal communications, such as demand letters, tailored to specific scenarios and desired tones.
  1. Summarizing Specific Sections:
    • When prompted, ChatGPT can generate summaries of specific sections within a contract, making it easier for legal professionals and stakeholders to quickly grasp the essential points. However, it’s important to ensure a Data Processing Addendum is in place to protect sensitive data before such data is used with ChatGPT or GPT wrappers.
    • By summarizing specific sections that are unfamiliar to a reader, ChatGPT enables faster first-pass review.
    • Summaries that are shared with other non-legal teams and external parties can help aid a more effective and mutual understanding of terms.

Where ChatGPT and GPT-wrappers Fall Short

While ChatGPT offers significant advantages, lawyers and in-house counsel need much more than generic chatbots when performing contract review. Below is a list of functions that cannot be performed by ChatGPT and GPT-wrappers without additional training and customization by lawyers:

  1. Identifying Critical Clauses:
    • Large language models like ChatGPT and GPT-wrappers built on top of them fall short of consistently identifying critical clauses in contracts.
    • However, with additional training and customization by lawyers, AI can recognize and extract essential clauses from contracts, such as indemnification provisions, termination conditions, and confidentiality agreements.
  1. Suggesting Revisions:
    • Large language models like ChatGPT and GPT-wrappers sometimes “hallucinate” when drafting language for revisions.
    • With additional training and customization by lawyers, AI can learn to analyze contract language against best practices, legal standards, and company policies to suggest modifications and improvements that make sense.

  2. Ensuring Compliance:
    • Large language models like ChatGPT and GPT-wrappers sometimes miss key risks and compliance issues.
    • Nonetheless, with additional training and customization by lawyers, AI can cross-reference contracts against a company’s critical risks and compliance requirements.
  1. Safeguarding Sensitive Data:
    • Legal contracts often include sensitive, if not confidential, data. Without proper safeguards, using ChatGPT or GPT-Wrappers in contract review could expose this data, leading to data privacy, cybersecurity, and compliance risks. 
    • A recent study by LayerX indicated that 15% of employees regularly post sensitive data to ChatGPT, including regulated PII and customer data.
    • To mitigate these risks, data protection measures should be in place, ensuring that no contract data is used for training Chat-GPT or GPT wrappers and no data is stored by providers of foundational models.

LegalOn’s Purpose-Built Solution for Legal Teams

Addressing these challenges is essential for meaningfully using AI to improve contract review processes. We believe that AI solutions that are purpose-built and trained by lawyers can provide legal teams with the most effective support. So when we set out to build a comprehensive solution for contract review, we focused on solving these issues head-on:

  1. Reducing AI Hallucinations: Although AI models like ChatGPT are sophisticated, there is a risk of "hallucinations," where the model generates content that seems plausible but may not be accurate or legally sound. Human oversight and validation of AI-generated insights is crucial to ensure the accuracy and appropriateness of contract recommendations. We’ve invested in customizing our AI models to reduce the risk of AI hallucinations. We’ve built LegalOn’s AI to review and redline using accurate and up-to-date legal knowledge created by our experienced attorneys, ensuring quality results you and your business can rely on.
  1. Providing Training and Guardrails by Lawyers: Although AI models like ChatGPT are great for simpler tasks, they need additional training and guardrails in place to be trustworthy and reliable for legal professionals. We’ve invested significant resources to build a team of experienced lawyers who train our AI. This includes:some text
    1. Efficient Search and Comparison: we enable easy contract search and comparison section-by-section, even for 3rd party contracts. LegalOn can store your contracts, version history, and templates, making it easy for you and your team to manage and access contracts. This allows you to quickly find the clause or contract you need with lightning-fast search, and filter by specific parties, contract types, clause language, and more. Before signing, you can easily compare any two contracts or versions to spot unmarked changes, variations from precedent, or missing terms to have the ultimate peace of mind. 
    2. Precise Redlining: we enable precise, word-by-word redlines that match the defined terms and style of the contract you’re negotiating, avoiding overwhelming your counterparty. Say goodbye to cutting and pasting whole clauses.
    3. Off-The-Shelf Playbooks: no matter the contract or which side you represent, confidently review with 50+ complete playbooks built by our experienced attorneys. LegalOn enables industry-standard contract review on day one, without AI training or setup.
    4. Custom Playbooks: we empower you to create customizable playbooks to standardize review processes based on your organization’s best practices. LegalOn can fully tailor our AI review to your organization’s needs and pre-existing playbooks – an ideal solution for companies with high volumes of particular contracts.
    5. Ready-to-Use Templates: we provide 100+ attorney-drafted, ready-made templates to streamline your drafting processes. Draft new contracts quickly and confidently with full market standard templates written and maintained by our lawyers and tailored to jurisdiction and negotiating position.
  1. Data Privacy and Security: Your contracts are private and they should stay that way. As such, we’ve invested in robust data security measures to protect confidential data and maintain client confidentiality. With SOC 2 compliance and adherence to GDPR and CCPA regulations, we’ve built secure data storage, access controls, and encryption protocols to safeguard contract data and prevent unauthorized access or breaches.

Continuous improvement initiatives, such as re-training the model on updated legal content and incorporating user feedback, help ensure that our solution continues to improve over time. By combining the power of AI with lawyer training, LegalOn is building AI software for legal teams that actually solves  contract review.

LegalOn’s AI Assistant

ChatGPT’s ability to respond to a user’s questions and perform tasks provides flexibility for contract work.That’s why, in addition to our robust contract review platform, we built an upgraded, secure, private AI assistant to answer your contract questions. As a result, with LegalOn Assistant, you can:

  • Get Your Contract Answer in Seconds: Efficiently navigate and understand contracts by instantly clarifying legal terminology and specific clauses. Query any aspect of your contract, including amendments and exhibits, for instant insights on legal and business terms. This feature simplifies identifying crucial contract elements like service details, SLAs, payment terms, and more, to ensure a comprehensive grasp of your agreements.
  • Draft the Right Clause: Effortlessly create new clauses and modifications aligned with your contract's existing terms and language. LegalOn Assistant tailors suggestions to your business stance and preferences, enhancing your contractual rights and obligations. With LegalOn Assistant, you save valuable time and achieve fairer negotiations with AI-driven recommendations that adjust key contract terms, like termination rights or indemnification duties, to your advantage.
  • Create Summaries with Ease: Get quick, clear summaries of contracts or clauses in plain language with LegalOn Assistant. This feature enables you to grasp and convey essential contract details like obligations, risks, and benefits promptly, aiding in faster decision-making.

Conclusion

AI has the potential to serve as a transformative tool for lawyers and legal teams, particularly with contract review and redlining. ChatGPT and similar foundational models can streamline some contract tasks, offering quick analysis of text and easy interaction using natural language. However, these models have limitations, such as the occurrence of “hallucinations” and a less nuanced understanding of complex legal risks. This underscores the need for expert training and refinement.

LegalOn bridges this gap by integrating AI with legal expertise.s. Our solution reduces the risk of inaccuracies, is trained for enhanced performance, and upholds data privacy and security. With capabilities like generating instant, clear contract summaries, drafting clauses aligned with existing contract language, and offering AI-driven recommendations, LegalOn cuts contract review times by 85%.

By merging AI's power with the precision of legal training, LegalOn represents a superior tool for legal professionals. It not only expedites the contract review process, but ensures accuracy, compliance, and alignment with business objectives.

For legal teams seeking to improve their legal processes with superior AI technology, we would love to talk. We believe our AI contract review software will help you make more informed, efficient, and timely decisions. Discover how LegalOn can improve your legal processes by booking a demo today.

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