Allen & Overy, a magic circle law firm, has developed a tool for artificial intelligence-based contract negotiations. This technology threatens to disrupt traditional legal practices.
The UK-based group, in partnership Microsoft and legal AI startup Harvey, developed the service that draws on existing templates of contracts, such non-disclosure agreement and merger and purchase terms, to create new agreements, which lawyers can amend or accept.
ContractMatrix is being introduced to clients to generate new revenue, increase business, and save time for internal lawyers. A&O estimated that it could save up to seven-hours in contract negotiations.
Over 1,000 A&O attorneys are already using this tool. Five unnamed clients, from the banking, pharmaceutics, technology, media, and private equity sectors, have signed up for the platform to be used in January.
The Dutch manufacturer of chipmaking equipment ASML and the health technology company Philips used the service in a test run to negotiate the “world’s very first 100% AI-generated contract between two firms”.
The legal industry is struggling with the rise in generative AI – technology that can extract, review and write large passages resembling humanlike text. This could lead to job losses and revenue reductions by reducing billable hour and entry level work for junior staff.
David Wakeling, A&O’s partner and head the market innovation group that developed ContractMatrix said the firm aimed to “disrupt” the legal industry before anyone else did.
He added, “We see it as a great opportunity.”
Wakeling said that the firm also plans to offer this service to clients who are a result of its $3.5bn merge with Shearman & Sterling in the US, due to be completed by May.
A result of the popularity of Google Bard and Microsoft’s ChatGPT, the legal industry has been among the first to experiment and adopt generative AI. While some companies have invested heavily in new products and services, others are still waiting to see which tools will be the most successful.
A&O has previously used , an AI-powered bot for internal use. Addleshaw Goddard and Travers Smith, as well as Macfarlanes, have all implemented generative AI internal pilots.
A&O did not provide specific financial details around the contract negotiations tool, but stated that clients would pay a subscription fee of $125 per year for each licence. A minimum purchase is five users. The law firm aims to have hundreds of subscriptions by the end next year.
In the first half 2024, Microsoft will make this product more widely available to businesses through its enterprise software marketplaces Azure and AppSource. Microsoft stated that the project will “deliver significant benefits to [A&O] clients”.
There have been concerns raised about using generative AI for legal purposes due to issues related data privacy, client confidentiality and so-called “hallucinations”, where a model produces incorrect information.
Wakeling stated that ContractMatrix could cause hallucinations, but these were greatly reduced due to the templates on which its underlying technology was trained. He also said that no client data is used to train AI models, which underpins the software. Inputs and outputs of the software are also encrypted.
A&O has said that if a client wants to personalise and make the tool even more useful, it can work with them to refine the model.
“We see it as an open market opportunity. . . Wakeling continued, “because in-house attorneys need to improve their efficiency and productivity as well.” They can be much faster and more efficient than competitors. You would expect this to be appealing to clients, because it is generally cheaper, faster, and a little bit better.