SaaS startups are resource and time poor. They tackle this with innovation and problem solving with tools that can automate tasks. One area where a lot of startups are looking to create efficiencies is in their legal contract create and negotiation. If you’re in a B2B SaaS business that has to negotiate custom contracts for each customer you may have looked into how you can generate contracts with AI.
There has been an explosion of AI tools that can do this. There are significant efficiencies that can be made with the use of AI-powered tools like ChatGPT to generate legal contracts and rewrite contract clauses. While this technology offers the promise of efficiency and accuracy, SaaS startups must tread carefully to ensure they maintain compliance and protect their interests. In this blog, we will explore what LegalOps and business processes a SaaS startup should put in place to safely use ChatGPT for these tasks.
Understand the Legal Landscape
Before you start to dive into the AI-driven contract generation, it’s crucial to understand the legal landscape that your SaaS startup operates in. Different industries, products and regions may have specific regulations, contract compliance requirements, and standards for contracts. By conducting a thorough legal analysis, you can identify the specific needs and risks that your contracts must address. When you do this you should work with a legal professional to clear up blindspots. You’ll need to ensure this person has a clear understanding of your product and what it does. This step is foundational to building a successful AI-driven contract generation process.
Generate Contracts With AI: Contract Templates
SaaS startups should develop a set of standardized contract templates that align with their product, risk profile, business goals and legal requirements. These templates serve as a starting point for any push towards automated legal contract generation. By starting with templates ChatGPT, allows you to generate contracts that are consistent with your company’s policies and industry regulations. It’s essential to work closely with legal experts to create and maintain these templates. Look to get an MSA template, SOW template and an NDA template at the least.
Training ChatGPT to generate contracts is a crucial step and very misunderstood. While ChatGPT is a powerful AI tool, it still requires fine-tuning and oversight to ensure that it produces legally sound documents. Keep in mind that it’s trained on very wide data sets and without this fine tuning who knows what it will create. Train the AI using your contract templates and review the outputs. Make sure it understands legal industry-specific jargon, terminology, and nuances.
Legal Review and Approval
Even with an AI-generated contract, human oversight is possibly the most important piece to put in place. A designated legal team should review and approve the contracts generated by ChatGPT to verify their legal validity and alignment with the company’s standards. This step is a safety net to catch any errors or issues that the AI might have missed. A core piece of this is setting check-ins and approvals for a legal professional to review and approve the legal documentation produced.
Data Security and Privacy
SaaS startups must prioritize data security and privacy, especially when dealing with sensitive contract information. Ensure that the data you input into ChatGPT and the generated contracts are stored securely, and that the AI platform complies with data protection regulations such as GDPR or HIPAA.
Version Control and Audit Trails
Maintain detailed version control and audit trails for all contract-related activities. This includes tracking changes, approvals, and versions of contracts over time. This transparency is essential for compliance and accountability, and it helps identify the source of any discrepancies in the contract generation process.
In the contract negotiation phase, it’s common for parties to redline and revise contract clauses. SaaS startups should use ChatGPT to facilitate this process, allowing for efficient and clear communication between parties. Ensure that the AI can track changes and updates in real-time, making the negotiation process smoother and more transparent.
Redline What Matters
Raise Changes For Approval To Turnaround Contracts Faster
One of the difficulties with a tool like ChatGPT is that it isn’t training on the most up to date dataset. SaaS startups need to continuously monitor and adapt to changes in the legal landscape. Regulatory updates, industry standards, and judicial decisions can occur quite often and will have an impact your contract decision making. Regularly review and update the training data for ChatGPT to keep it aligned with the latest legal requirements.
Training and Education
Invest in training and education for your team, especially those involved in the contract generation and negotiation process. Educate them on how ChatGPT works and how to effectively collaborate with the AI tool. Prompt engineering isn’t just a buzzword. There’s a lot that goes into this. This will help build a team that is both AI-savvy and legally competent.
Legal Liability Mitigation
While ChatGPT can significantly reduce the risk of human error, it’s essential to have a strategy in place to mitigate legal liability in case of AI-generated contract disputes. This could involve including indemnification clauses and ensuring that contracts clearly state the role of AI in their creation.
Legal Operations To Generate Contracts With AI
Building out an effective strategy for your legal operations and the legal ops tools that you’ll use to ensure proper approval processes are in place is important. Using kanban style tools like Trello for contract management can be useful but you’ll need to go a step further. Look at using a tool designed for contract management like Contract Sent to put the correct approval processes in place.
Leveraging AI, such as ChatGPT, for contract generation can be something which cuts out a lot of manual work and cost for SaaS startups. However, with this power comes a lot of questions around legal operations to ensure legal compliance, data security, and the protection of the company’s interests. By implementing the right LegalOps and business processes, startups can safely harness the potential of AI to create contracts that are not only efficient but legally sound. As technology continues to evolve, SaaS startups should stay agile, adaptable, and committed to maintaining the highest standards in their contract generation practices.