What Needs to Be in My Contract? (And why LLMs can’t answer that)
Contract review and drafting is a core competency in legal work.
Lawyers, of course, take coursework in the law of contracts. There are formal elements that make it legally binding - phrases like offer, consideration, acceptance, certainty of subject, capacity, meeting of the minds… all very useful in understanding what a contract is. And if a lawyer is particularly keen on the subject, they may be able to wax lyrical about the breach, misrepresentation, Contra proferentum, so on and so forth.
But this often misses what is it about contracts that clients need, which is a contract that is useful.
Contracts should, in a sense, read like instruction manuals, such as an assembly guide for a piece of furniture at Ikea. If you open such a manual, you’ll see things like:
A parts list: For a sofa or a bed, this will be a list of different types of boards, slats, screws, plates, and which tools you’ll be supplied, and which ones you’ll need to get yourself. Contracts are similar - a list of definitions, the people who will be involved in the contract, the things they will be doing, and often, the things they won’t be doing.
An assembly guide: Step by step - and often with illustrations - the pieces are assembled. In a contract, the step-by-step guide might be broken up between sections of the document or placed at the end in an Appendix or a Schedule, but you should have something in the document that describes how the end product will come to be, and the intervening steps.
A picture of the finished product: It’s not just a good piece of advertising - showing the finished product lets the assembler know if they’ve done the work correctly. A contract should likewise be clear about the final result so both sides can know if they’re following their responsibilities.
A troubleshooting guide: Often, the assembler will make a mistake. Common mistakes are usually caught by the manufacturer and the fixes are placed right in the guide. In a contract, it’s an excellent idea to have provisions and default mechanisms for what happens when things go wrong - how the parties will fix them, and what happens if they can’t be fixed.
Instructions for replacement: I’m stretching the analogy a little here, but the back of a guide will often tell you if you need to call a number or return the product to the store for replacements or serious help when the troubleshooting has failed. In a contract, you can think of this as the dispute resolution clauses - are you going for mediation? Arbitration? Court? Or do the parties just get to walk away?
Key to all of this is that the contract needs to talk about what happens when things are going right, and what happens when things go wrong. It’s often too late to negotiate the failure clauses when you’re in the middle of the failure.
If your contract isn’t clear like an instruction manual, that’s a great indication that you should be looking for professional assistance. A lawyer will absolutely be able to help keep the document legal, but the combination of long experience and relative unfamiliarity with your specific contract means they will likely be able to spot all of locations where the contract is relying on your unstated assumptions, and suggest fixes.
Some of these fixes will require further negotiation with your opposite party in the contract, but this, in my opinion is a very good thing, because it means the lawyer has found a spot where you and your opposite party both made assumptions, and your assumptions disagreed, which is potentially an expensive fight down the line.
This is a skill, by the way, that ChatGPT and other LLM models are excessively bad at - because they are designed to make logical, mathematical predictions, otherwise known as assumptions about the text of a document, they will often look at an unclear contract and hallucinate a rational reason for what they’re seeing and just run with it. Since they’re not self-aware and don’t know what they’ve done, they will never ever clarify their assumption with the contract parties.
The day may come when that is not true, but for now, I would still leverage a human legal mind for contract review and revisions.