Chatting with ChatGPT: Will attorneys be able to use AI to draft contracts?

April 1st, 2023
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Picture source: Gallo Images/Getty

Prof Michele van Eck

OpenAI’s development of ChatGPT has opened the world to the wonders of technology and the potential of artificial intelligence (AI). ChatGPT is a tool that provides information in a real-world setting. It is changing the way in which things are done and has the potential to disrupt both legal education and the way the law is practised. As there has been much media attention about this technology, particularly the claims that ChatGPT is a threat to jobs, I decided to test the capabilities of ChatGPT to see whether it is truly a threat to the function of an attorney as a contract drafter. In this process, I investigated whether the function of an attorney (as a contract drafter) was at risk to be replaced by this technology. In doing so, I asked ChatGPT a series of questions, the first was a relatively easy question that a law graduate should be able to answer, and each follow-up question progressed in difficulty and complexity until finally testing ChatGPT’s capabilities in an exercise that a seasoned contract drafter should be able to navigate.

Difficulty level one: Novice drafter

The first question asked was to test the accuracy of the chatbot’s ability to answer a practical question faced by an inexperienced contract drafter or a law graduate. I posed the following question to ChatGPT: ‘My client is concerned that future amendments to the contract may be agreed to verbally but that there would be no written record of such agreements to amend the contract. What clause can I include in a contract to address my client’s concern and provide an example of such a clause?’

Chatbot GPT’s response was legally correct and read as follows:

‘Here’s a sample clause that addresses the concern of future verbal amendments to the contract:

“This agreement may only be amended in writing and signed by both parties. No verbal agreement or understanding shall alter or modify the terms of this agreement.”

This clause ensures that any changes or additions to the contract are documented in writing and signed by both parties, providing a clear and undisputed record of any amendments to the contract.’

Difficulty level two: Competent drafter

An astute contract drafter would have noticed that the non-variation clause (or amendments clause) that ChatGPT provided did not consider the nuances of the law involved in drafting such a clause. This notwithstanding, what makes ChatGPT unique is that it recognises previous questions and interactions. Therefore, my second question was a follow-up question to test how it would respond to changing its draft clause and I asked the following: ‘Amend the draft clause you provided earlier to exclude the application of the Electronic Communications and Transactions Act of 2002’.

The exclusion of the application of the Electronic Communications and Transactions Act 25 of 2002 (ECTA) follows from the use of electronic signatures in the matter of Spring Forest Trading CC v Wilberry (Pty) Ltd t/a Ecowash and Another 2015 (2) SA 118 (SCA) and such exclusions of the ECTA have become common drafting practices in South African contracts. Although there are several ways to exclude the application of the ECTA, ChatGPT’s attempt was commendable, especially considering ChatGPT is not specifically designed to be a legal tool. The chatbot provided the following amended clause:

‘This agreement may only be amended in writing and signed by both parties. No verbal agreement or understanding shall alter or modify the terms of this agreement. The provisions of the Electronic Communications and Transactions Act of 2002 shall not apply to any amendment of this agreement.’

Difficulty level three: Seasoned drafter

Up to this point, ChatGPT performed well. However, I also wanted to test the chatbot’s ability to address nuanced drafting practices (which a seasoned contract drafter would be able to navigate), specifically that of entrenching the formalities of writing within the non-variation clause by applying the Shifren principle. Here ChatGPT showed the first signs of difficulty. Not only did it not appreciate the meaning of the Shifren principle, it could also not correctly identify nor apply the Shifren principle to the non-variation clause. When asked to explain what the Shifren principle is, the chatbot provided the following:

‘The Shifren principle, or “No Oral Modification” (NOM) clause, is a legal principle that states a written contract can only be amended in writing and not orally. It means that any changes to a written contract must be agreed to in writing and signed by all parties involved. The principle provides certainty and prevents disputes by ensuring that all changes to a contract are documented and agreed upon by all parties. The Shifren principle derives its name from the 1932 English case of Shifren v. Spiro and has since been applied in many jurisdictions around the world, including the United States, Canada, and Australia, to protect against fraudulent or mistaken claims of an oral agreement to modify a written contract’.

ChatGPT response references the incorrect case, application and jurisdiction as the source of the Shifren principle. The Shifren principle actually relates to the entrenchment of the formality of writing and signature within the non-variation clause itself and originates from the case of SA Sentrale Ko-op Graanmaatskappy Bpk v Shifren en Andere 1964 (4) SA 760 (A). The application of the Shifren principle in written contracts have, to a large extent, become standard practice in drafting non-variation clauses. However, ChatGPT’s difficulty may stem from the fact that the SA Sentrale Ko-op Graanmaatskappy Bpk case was both old and was reported in Afrikaans. This notwithstanding, ChatGPT fared much better when discussing the implications of the post-constitutional recognition of non-variation clauses in the case of Brisley v Drotsky 2002 (4) SA 1 (SCA). However, it again failed to appreciate the requirement for such formalities to be entrenched in the non-variation clause itself. When asked what the Brisley case said about the Shifren principle, the chatbot responded with the following:

Brisley v Drotsky is a South African case that confirmed the application of the Shifren principle. The court held that an oral agreement to extend the deadline for the payment of a purchase price was not binding because the written contract required any modifications to be in writing and signed by both parties. The decision reinforced the importance of complying with the formalities of a written contract in South African law and highlighted the need to avoid relying on unverifiable oral agreements. The case serves as a reminder that the Shifren principle is a fundamental principle of contract law that applies in many jurisdictions and upholds the integrity of written contracts’.

ChatGPT incorrectly refers to the facts of the Brisley case as the non-variation clause did not relate to a contract of sale, as implied with the words ‘purchase price’, but rather relates to a contract of lease. Again, the inaccuracy of the response may be influenced by the case being reported in Afrikaans.

Difficulty level four: Master drafter

Although ChatGPT failed at level three of this exercise, there was one more exercise to establish ChatGPT’s proficiency in drafting contracts and its ultimate threat to attorneys. I asked ChatGPT to redraft a lengthy contractual clause found in G4s Cash Solutions (SA) (Pty) Ltd v Zandspruit Cash & Carry (Pty) Ltd and Another 2017 (2) SA 24 (SCA) at para 4 into plain language so that an average person with no legal knowledge and minimal commercial knowledge would be able to understand the meaning of the clause. To compare ChatGPT’s performance, I have included a version of the redrafted clause (see blue block) that an experienced (human) contract drafter provided using plain language principles.

ChatGPT’s version Experienced (human) drafter’s version

‘9.1 [The Supplier] won’t be responsible for any loss or damage the client might suffer during or as a result of their services unless it was directly caused by the gross negligence or theft of a [the Supplier] employee while on the job. In that case, [the Supplier]’s maximum liability is R 20 000 for drop cash services and R 100 000 for other services. [The Supplier] also won’t be responsible for any loss or damage caused by threats to their employees or their families.

9.2 Unless specified in the agreement, [the Supplier] has no other responsibilities for any loss or damage. If the client breaches the agreement, [the Supplier] won’t be obligated to fulfil its duties until the breach is fixed.

9.3 If the client or their employees cause loss or damage due to a breach of the agreement, [the Supplier] won’t be responsible for it.

9.5 [The Supplier] won’t be responsible for any indirect loss or damage.

9.6 The client is responsible for the security of their premises and if there is a loss on their premises due to criminal conduct that wasn’t caused by [the Supplier], they will bear the risk of the loss and not [the Supplier].

9.7 [The Supplier]’s responsibility for any loss starts when they physically collect the money and ends when they physically deliver it. Their responsibility won’t continue after delivery.

9.8 [The Supplier] won’t be responsible for shortages in a container if it wasn’t tampered with.

9.9 The client must immediately notify [the Supplier] of any loss and provide written confirmation within 24 hours. [the Supplier] won’t be responsible for any claim unless written notice is given within 3 months and legal action is taken within 12 months of the event.’

9.1 We [the Supplier] will be responsible for the risk in the goods from when we collect the money until it is delivered. Notwithstanding this, we will not be liable for any loss suffered or claim brought by yourselves, unless –

9.1.1 such loss or claim arises as a result of gross negligence or theft by our employees acting within the scope of their duties;

9.1.2 such loss is reported to us within 24 hours of you becoming aware of such loss; and

9.1.3 you notify us in writing of any claim within three months and issue us with summons within 12 months from the date of the event giving rise to a claim.

9.2 Subject to clause 9.1, should we be found liable then our liability will at all times exclude consequential and indirect losses and damages and our liability will be limited to R 20 000 for drop cash services and R 100 000 for all other services.

9.3 We shall be relieved of our obligations in terms of this agreement if you or your employees breach this agreement and fail and/or refuse to remedy such breach within reasonable period of time.

Although ChatGPT has the potential of redrafting the clause in plain language, clearly the version from an experienced (human) drafter is more refined and polished.

Concluding remarks

These short exercises highlighted that ChatGPT (and similar chatbots) has the potential of changing drafting practices, but the fear of such technology replacing attorneys as contract drafters is premature. As illustrated at levels three and four (above), the technology is not yet at the level of sophistication to truly provide a nuanced understanding of contracts and the drafting thereof. Therefore, it is safe to say that the attorneys’ function as contract drafters are (for the time being) still safe and not under threat by ChatGPT.

Prof Michele van Eck BCom (Law) (RAU) LLB LLM (UJ) LLD (UP) BTh (SATS) is an Associate Professor and head of the Department of Private Law at the University of Johannesburg.

This article was first published in De Rebus in 2023 (April) DR 12.

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