Introduction

Artificial Intelligence (AI) has become a familiar concept for most people engaging with advanced technology. AI is powering the next wave of technological transformation across numerous industries. The global legal technology market has seen substantial growth in recent years, and with the rise of generative AI (GenAI), this growth is set to accelerate further. According to Gartner, Inc., the market is projected to reach a value of $50 billion by 2027.

AI is undeniably transforming the way legal contracts are reviewed, a task traditionally handled by lawyers to ensure the legal integrity of clauses and safeguard their clients' interests. Contract law has long been a fundamental aspect of commercial transactions, holding significant value in the professional world. While humans have historically managed every step of the contract process like drafting, vetting, and reviewing, they too face inherent limitations. AI, however, is not without its own challenges. A key question to explore is what a comparative analysis of the margin of error between humans and AI reveals. This article seeks to uncover just that.

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The Role of Human Expertise in Contract Law

Contract law is among the oldest fields in human civilization. While the formalization of legal rules came much later, it gradually evolved over time. Eventually, humans began to codify contractual terms in writing, becoming the architects of contracts. As the legal profession advanced, it became the responsibility of legal professionals to evaluate these documents, ensuring that the terms, clauses, and provisions aligned with the applicable laws and accurately reflected the intentions, desires, and interests of the parties involved.

The ability of lawyers to understand complex legal nuances and meticulously review contracts to fulfill the specific needs of parties or industries is highly regarded. Human lawyers excel in applying legal principles to intricate situations and unique circumstances, drawing on their understanding of the context, the intent behind relevant rules, and, at times, their practical judgment.

Traditionally, lawyers have meticulously reviewed contractual documents, examining them line by line and page by page to identify any contradictions with applicable law, manipulative drafting that could harm their client, or unfair terms that limit their client’s rights. This process has relied on their subjective judgment, shaped by their experience, expertise, skill, and knowledge. 

For example, in high-stakes mergers and acquisitions, seasoned lawyers use their expertise to carefully analyze every detail of each clause to safeguard their clients' interests.

The Role of AI in Transforming Contract Law

Today, AI is increasingly being trained and deployed to enhance or automate various contract-related tasks, including review, drafting, and vetting for legal soundness. Using sophisticated algorithms, these systems can analyze vast amounts of data, identifying patterns and recommending clauses or edits based on precedents and best practices. AI is now integrated across multiple stages of the contract lifecycle, from drafting and review to risk assessment.

AI systems are continually being trained, striving to approach natural intelligence, which means they are rarely, if ever, fully “finished.” One of AI’s key strengths in contract law is its ability to process extensive workloads in seconds or minutes, handling tasks like drafting, reviewing, risk assessment, and flagging potential issues with remarkable speed. AI is also used to evaluate contract fairness, ensuring terms protect both parties equitably or identifying potential biases. It can recognize standard clauses and variations in meaning, thereby improving efficiency, enhancing consistency, and significantly reducing the time needed to complete tasks that human lawyers would otherwise handle.

The global legal AI market was valued at approximately USD 1.04 billion in 2022, with an anticipated compound annual growth rate (CAGR) of 18.2% from 2023 to 2030.

Addressing Human Errors in Contract Drafting and Review

Although human lawyers have traditionally relied on their personal knowledge, judgment, and skills when working with contracts, their work is still susceptible to errors. These may include overlooking critical clauses, misinterpreting the meaning of a clause due to clever drafting, misunderstanding legal nuances, or even simple typographical mistakes that can change the meaning of a provision. The subjectivity inherent in human judgment can also affect consistency in contract drafting and review. Fatigue, workload, and the complexity of legal language further complicate the process. Additionally, human errors may result in the oversight of regulatory compliance issues.

Such mistakes can jeopardize a client’s interests, potentially leading to litigation, financial loss, or damage to business relationships.

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The Limitations of AI in Contract Law

AI provides significant benefits in terms of time savings, efficiency, consistency, and the reduction of oversights. However, its use in contract law is not without challenges and it is not entirely error-free. AI systems can struggle to understand the context or unique drafting of certain clauses tailored to specific situations. 

Additionally, AI may have limitations in grasping the nuances of human language and adapting to new circumstances without human intervention. The data it is trained on can also restrict its understanding. Nevertheless, since humans are responsible for training AI, its limitations are generally well understood and can be addressed through regular checks.

Comparing Capabilities: Human vs. AI

A 2018 study by LawGeex revealed that human lawyers achieved an average accuracy of 85% in identifying risks in NDAs, while AI attained 94% accuracy. Additionally, AI completed the task in an average of 26 seconds, compared to 92 minutes for human lawyers. Another study from the University of Southern California found that AI-assisted contract review reduced error rates by up to 90% compared to manual reviews alone. These findings suggest that AI generally has a narrower margin of error in contract review.

While humans possess strengths in creative negotiation, contextual understanding, and recognizing unique drafting intentions tailored to specific party interests, AI demonstrates advantages in consistency an essential factor in contracts to avoid interpretive ambiguities.

Furthermore, AI operates at high speed without a loss of efficiency, whereas human efficiency can decline as the speed of work increases, though sometimes only marginally. Unlike humans, AI does not experience fatigue, meaning error rates remain unaffected by workload in tasks such as drafting, reviewing, or researching contracts.

In terms of data processing, pattern recognition, and consistency, AI has shown superior performance, helping to further reduce errors. From a comparative standpoint, it is increasingly evident that AI has the upper hand in error reduction. However, human lawyers retain a distinct advantage with their natural intelligence, which allows them to apply context and recognize specific intentions behind clauses, an area where AI still has limitations.

Comparing Capabilities: Human vs. AI

A 2018 study by LawGeex revealed that human lawyers achieved an average accuracy of 85% in identifying risks in NDAs, while AI attained 94% accuracy. Additionally, AI completed the task in an average of 26 seconds, compared to 92 minutes for human lawyers. Another study from the University of Southern California found that AI-assisted contract review reduced error rates by up to 90% compared to manual reviews alone. These findings suggest that AI generally has a narrower margin of error in contract review.

While humans possess strengths in creative negotiation, contextual understanding, and recognizing unique drafting intentions tailored to specific party interests, AI demonstrates advantages in consistency an essential factor in contracts to avoid interpretive ambiguities.

Furthermore, AI operates at high speed without a loss of efficiency, whereas human efficiency can decline as the speed of work increases, though sometimes only marginally. Unlike humans, AI does not experience fatigue, meaning error rates remain unaffected by workload in tasks such as drafting, reviewing, or researching contracts.

In terms of data processing, pattern recognition, and consistency, AI has shown superior performance, helping to further reduce errors. From a comparative standpoint, it is increasingly evident that AI has the upper hand in error reduction. However, human lawyers retain a distinct advantage with their natural intelligence, which allows them to apply context and recognize specific intentions behind clauses, an area where AI still has limitations.

Conclusion

AI is increasingly proving to be a powerful tool not only for legal professionals but also for everyday users, with its efficiency rapidly improving each day. Continuous updates, training, and rigorous testing have enhanced AI’s ability to minimize errors in contract review, drafting, and even negotiation. Notably, AI tends to have a narrower margin of error than human lawyers, as it isn’t affected by factors like fatigue, oversight, or delays.

At Speedlegal, we have developed AI systems to deliver exceptional results in contract review, enabling quick comprehension of both simple and complex contract provisions for all users. This tool helps you not only understand the terms of a contract but also grasp its broader implications based on the contract type. Additionally, Speedlegal’s AI provides valuable insights on how contractual language can be refined to better protect your interests in any agreement.