Terms of business are crucial documents for suppliers and purchasers. They provide essential legal protection and are designed to safeguard a business from a range of risks.
As artificial intelligence tools like ChatGPT become more sophisticated, a business might be tempted to rely on them for certain aspects of their business, such as legal advice and the production of legal documents.
Whilst tools like ChatGPT do play an important role in modern business, our Commercial solicitors deal regularly with clients who have exposed their businesses to risk by relying on templated legal documents or documents produced using AI, rather than seeking advice from a qualified solicitor.
In this article, we explore the benefits and risks to a business of relying exclusively on templates or tools like ChatGPT for their legal needs.
Contents:
Why are terms of business important?
Terms of business are vital legal documents designed to protect a supplier or purchaser of goods and/or services, irrespective of size or sector. They help to establish the rights and obligations of each party to a contract, to manage the expectations of each party, to prevent misunderstandings, and to help avoid disputes. Businesses should draft their terms of business carefully, covering specific contract details such as fees, payment terms, delivery timeframes, and contract termination rights.
Perhaps most importantly, terms of business should address the issue of limitation of liability to ensure an appropriate allocation of risk. The approach will vary, depending on whether the business is a supplier or a purchaser. In this context, the supplier will want an express limit of liability which is as low as possible, and the customer will be looking for reserve the right to recover as many losses as possible. As a result, legal documents like terms of business should always be drafted clearly and tailored to safeguard the business interests of the party seeking to base a contract on its standard terms of business.
Can you use ChatGPT to create your terms of business?
ChatGPT can be hugely beneficial to your business. The standard version of ChatGPT is currently free and can deliver instant research that can be used to gain business insights, for marketing purposes, to build knowledge, etc.
However, as with most technology, it should always be used with caution. There is ongoing debate as to its effectiveness as a source of legal advice, and we believe that it is not a substitute for the legal expertise of a solicitor. ChatGPT is an AI tool, not a lawyer, and relying solely on it in relation to your terms of business is risky.
You can use ChatGPT to:
- Conduct background research to understand the concepts behind terms of business and their benefits.
- Make suggestions as to what you should consider including in your terms of business, taking account of the specifics of your sector.
- Explore common clauses or contracts in your sector.
- Generate a list of questions you can use when speaking to a specialist solicitor about your terms of business.
For businesses with limited knowledge or budget for legal costs, using ChatGPT can help you to reduce the time that you spend with your lawyer.
What are the risks when using ChatGPT?
ChatGPT has a vast knowledge base, but you need to be aware of the risks associated with relying on it exclusively to produce your terms of business (or indeed any legal documents):
- The information provided by ChatGPT, or any AI tool may not be up-to-date or accurate, and this could lead to commercial disputes, reputational damage, or litigation.
- The outputs from ChatGPT may not be appropriate or applicable to English and Welsh law or a UK business.
- ChatGPT’s ability to draft contracts is uncertain and there could be quality assurance issues with its output. A document generated using ChatGPT could alarm your customer (or supplier) and could trigger unnecessary negotiations times, and in the worst case, a loss of trust.
- ChatGPT may well lack the specialist knowledge and understanding of your business necessary to draft a robust set of terms.
- ChatGPT cannot anticipate specific risks or 'future-proof' your terms in the way that a solicitor would.
ChatGPT is not a substitute for proper legal advice.
The crucial role of a solicitor
Our Commercial team specialise in helping you to draw up your terms of business. We ensure clarity and certainty and reduce litigation risk by tailoring your terms of business to your business, considering the following:
- The nature of your customers: are they consumers or businesses (or both)?
- The laws and regulations which are relevant to your business.
- The specific objectives and concerns of your business.
Our solicitors add value in the following ways:
- Protecting your business from potential risks and liabilities, including reducing the potential for litigation.
- Bringing a wealth of experience and a thorough understanding of the law.
- Supporting you in navigating the law and identifying current and future risk areas for your business.
- Drafting watertight, enforceable terms of business tailored to your needs and commercial objectives.
- Supporting you in streamlining your contracting processes and reducing the time spent on negotiation.
How to balance AI tools and legal advice?
As a forward-thinking law firm, we acknowledge the importance of adapting to new technologies. We believe that AI solutions like ChatGPT enable businesses to enhance efficiency, to increase knowledge and to save money.
However, you should balance ChatGPT's potential with the risks of use and one way of doing that is to obtain legal advice from an experienced commercial solicitor.
This should enable you to verify ChatGPT’s output to ensure that it does not have an impact entirely different from that which you intend - or your business could suffer!
While AI can be very useful, it cannot replace tailored advice from an experienced legal expert, not least because tools such as ChatGPT lack the nuanced understanding that each solicitor has derived from years of experience. A solicitor's expertise extends beyond drafting contracts; they provide explanations and suggestions and can anticipate consequences to generate robust and future-proof terms of business.
