AI In Contract Law: An Overview · 2020. 9. 3. · Julian Nyarko AI In Contract Law: An Overview...
Transcript of AI In Contract Law: An Overview · 2020. 9. 3. · Julian Nyarko AI In Contract Law: An Overview...
-
AI In Contract Law: An Overview
Julian Nyarko 1
August 25, 2020
1Assistant Professor, Stanford Law SchoolJulian Nyarko AI In Contract Law: An Overview August 25, 2020
-
Disclaimer
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
AI and Law: A Primer
Much potential for the use of AI in law
E-discovery
Predictive JusticePredicting what judges will doRobo-Judges (e.g. pretrial risk assessment)
AI in Regulation (e.g. directing IRS audits, predictive policingetc.)
Contracts
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
AI and the Law: A Primer
Adoption of AI-based methods slow
Practitioners:Incentive problemSocialization (extreme risk-aversion)LiabilityLack of training on both sides
Researchers:Lack of training on both sidesStrong focus on “Law of AI” rather than “AI in Law”Causal Inference vs. Prediction
Predictions in the DGP
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
B2C Contracts
Privacy policies, EULAs, ToS . . .
Readership rate of EULAs about 0.1-0.2% (Bakos et al. 2014)
No competition on terms→ Race to the bottom
Industry Goals: Lowering reading costs
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
B2B Contracts
M&A, Joint Venture, Licensing, Construction Contracts . . .
Expensive to draft
Expensive to analyze
Expensive to litigate
Principal-agent problems
Industry Goals: Make contracts cheaper
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
Project 1: Contract Analysis at Scale
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
Background: Atlantic Marine v. U.S. District Courts
Atlantic Marince Construction Co. enters into contract for childdevelopment center in Texas
Subcontract with Texas corporation (J-Crew) to provide labor andmaterials
Dispute about payment under subcontract
Where to sue? Texas? Virginia? Courts? Arbitration?
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
Background: Theories about Choice-of-ForumProvisions
Anticipate litigation over where to litigate
Theory says CoF is determined factors such as . . .CostSpeedExpertise
Bargaining power irrelevant (size of the pie)
Arbitration trumps courts
No empirical evidence
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
The Project
What CoF provisions do parties actually use?
The Data507,852 “material contracts” reported to the SEC (2000-2016)
632,442 companies and individuals registered with the SEC Parties
7,708 law firms Lawyers
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
Language Models: BoW
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
Language Models: Word Embedding Models
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
Language Models: Contextual Embedding Models
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
Training a Text Classifier
5,255 hand-labeled paragraphs
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
The Evidence
●● ● ●
●
●
●
●●
●
●
● ● ●
●●
●
●● ● ●
●
●
●
●●
●
●
● ●●
● ●
●
● ●● ● ●
●●
● ● ●● ● ●
●● ● ●
0
25
50
75
100
2000 2005 2010 2015Year
Inclus
ion R
ate
●
●
●
ForumCourtsArbitration
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
CoF by Industry
Table 1: Select Industries in the Dataset
Industry Obs. Freq. Courts Arb. Forum Law
Agriculture 13 0.00 0.23 0.38 0.54 0.85
Services 99,596 0.20 0.32 0.21 0.46 0.75
Other 9,360 0.02 0.33 0.18 0.46 0.83
Mining 31,451 0.06 0.32 0.18 0.44 0.77
Transportation 45,472 0.09 0.31 0.18 0.43 0.74
Manufacturing 175,413 0.35 0.30 0.19 0.43 0.73
Trade 40,671 0.08 0.30 0.18 0.43 0.75
Finance 100,608 0.20 0.28 0.19 0.42 0.77
Construction 5,268 0.01 0.30 0.15 0.41 0.74
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
The Conventional Wisdom
”Omitting a choice-of-forum provision is sloppy work.”
–Associate at White & Case
”Not including a forum selection clause is borderline malpractice.”
–Senior Partner at Arnold Porter
”I would be surprised if any of our contracts did not include a FSC.”
–Former GC of Apple
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
Is CoF Inclusion Governed by Law Firms?
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
Is CoF Inclusion Governed by Law Firms?
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
Is CoF Inclusion Governed by Law Firms?
Regression Table Collapse Analysis
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
The Role of Templates
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
The Role of Templates
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
After Atlantic Marine
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
Shocks to the System
Figure 1: ARIMA Model
Figure 2: Goodyear Figure 3: Atlantic Marine
Synthetic Controls
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
Takeaways
Lawyers often draft “sloppy” agreementsPrincipal-agent dilemma
Issues persist even when stakes are very high
Many theoretical results do not holdContracts not optimized
Default rules matter even in high-stakes scenarios
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
Role of AI in Research
AI with a specific scopeInformation extraction
Small N→ Big N
Generating data
Descriptive work
Use of AI may complement, but does not replace causal inference
Use of AI as a necessary, but not a sufficient condition forgenerating insights
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
Role of AI in Practice
AI may help remedy many of the deficiencies
Contract analysis tools (e.g. Kira Systems) can help with ...... monitoring
... analyzing
... drafting
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
Role of AI in Practice
AI may help remedy many of the deficiencies
Contract analysis tools (e.g. Kira Systems) can help with ...... monitoring
... analyzing
... drafting
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
Limitations of AI
Data availability“Material contracts” X
Day-to-day contracts?
International contracts?
Domain-SpecificityLegal language and legal syntax idiosyncratic
Example: Structure and Text Segmentation
ExpertiseLegal startups still use BoW
Contract analysis software lacks nuance (e.g. exclusive vsnon-exclusive CoF)
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
Future of AI in Contracts
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
Future of AI in Contracts
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
Future of AI in Contracts
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
Computable (or “Smart”) Contracts
Contracts expressed in code
Fully automatically implemented and enforced
No lawyer
No disputes
No judges
No costs
Throw in some Blockchain→ No tempering
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
Computable (or “Smart”) Contracts
Key issues:Ambiguity and Vagueness: Bug or Feature?
Ex ante design vs ex post enforcement costs
Rules vs Standards
Contract review vs code review
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
-
Identifying Lawyers
Back to The Project
Julian Nyarko AI In Contract Law: An Overview August 25, 2020
Project 1: Contract Analysis at Scale