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While automated contracting is about executing agreements through predefined conditions, AI contracting extends this by involving algorithms capable of independently assessing, negotiating, and recommending contract terms—including the crucial aspect of consideration. This shift raises practical and legal questions that businesses using AI systems must carefully navigate.
AI Contracting: Beyond Automation into Negotiation and Valuation: From Execution to Interpretation: How AI Is Rewriting Value in Contracting
In AI contracting, artificial intelligence systems perform tasks typically reserved for human negotiators or lawyers. These tasks include analyzing market conditions, determining optimal terms, and even predicting the appropriate consideration based on historical data and ongoing trends.
AI-driven platforms like Perplexity AI or advanced legal-tech solutions can independently draft agreements, propose suitable compensation, and predict negotiation outcomes. As these technologies mature, more businesses rely on them to streamline processes and enhance efficiency.
Practical Examples of AI’s Role in Evaluating Consideration
- Negotiation Support Systems
AI-powered negotiation platforms analyse previous contract data to suggest appropriate values for transactions. For instance, a company licensing software might employ AI to recommend license fees based on comparable deals. While this significantly accelerates the process, it relies entirely on past data and statistical averages, which may not always reflect specific contextual nuances. - Custobots as Automated Consumer Representatives
Custobots—algorithmic agents acting autonomously on behalf of consumers—regularly make contractual decisions, such as subscribing to services, based solely on quantitative metrics like price. For example, a custobot might automatically select the cheapest health insurance plan without adequately evaluating intangible considerations such as customer support quality or coverage adequacy, potentially leading to unintended contractual obligations for consumers. - Employment and Service Agreements
Companies now use AI-driven recruitment and contracting systems to generate employment offers automatically, including salary and benefit proposals. The AI assesses candidates based on past hiring patterns and market trends. However, without human insight into a candidate’s unique value, these AI systems may undervalue or misrepresent actual consideration, risking disputes later.
Critical Legal and Business Challenges to Consider in AI Contracting
- Recognition and Valuation of Intangible Consideration:
AI algorithms typically excel at evaluating monetary consideration but struggle significantly with intangible forms such as reputation, goodwill, or future collaboration promises. Companies employing AI contracting should maintain robust human oversight to ensure intangible values are appropriately considered and documented. - Liability and Intent in AI Decisions:
When an AI proposes and negotiates terms, it raises questions about intent and liability. If an AI undervalues or overvalues consideration, is the resulting agreement legally enforceable? Companies should ensure clear accountability structures are in place, assigning ultimate responsibility to humans rather than algorithms. - Adequacy and Fairness of Consideration:
AI-driven suggestions are based on historical and statistical data. Market volatility, unique transaction contexts, or unforeseen circumstances can render AI-determined consideration inadequate or unfair. Businesses must incorporate safeguards to allow for renegotiation or human validation of AI-proposed terms, especially in high-stakes agreements. - Compliance with Diverse Regulatory Standards:
Consideration in contracts is regulated differently worldwide. AI algorithms trained in one jurisdiction might not accurately reflect legal requirements elsewhere. Businesses must regularly audit AI systems to ensure they remain compliant across all jurisdictions in which they operate.
Conclusion: Ensuring AI Supports, Not Replaces, Human Judgment
AI contracting offers tremendous potential to enhance the speed and efficiency of contract formation and negotiation. However, it also introduces complex legal and operational challenges, particularly when it comes to identifying and evaluating valid consideration. legal and operational safeguards must also evolve in parallel. While algorithms can assist in decision-making, they lack the contextual understanding and legal discernment required to ensure fairness and enforceability. To navigate this evolving landscape, organisations must embed AI within robust human governance frameworks and establish clear audit and oversight mechanisms. Now is the time to build these guardrails, before the tools outpace the rules.
White Bison can help your team develop these governance frameworks and audit protocols to ensure AI-generated agreements meet enforceability standards across jurisdictions.
