Don’t Use AI to Write Cannabis Contracts

29 Dec Don’t Use AI to Write Cannabis Contracts

One of the most persistent and common failures in the cannabis industry is using handshakes instead of written cannabis contracts. This is an issue I’ve written about for years (most recently here), and it doesn’t seem like there has been much of a willingness to change. A lot of companies would like to move into good contract practices, but written cannabis contracts can be too expensive or take too long to negotiate. It might be tempting to resort to AI to solve this problem, but there are a host of reasons why that’s not the case.

First off, precision is key in contract drafting. If a written cannabis contract is not precise, it could create an entirely new set of problems for the parties beyond what you’d expect in a handshake deal. While AI can be great for certain things, it would be very difficult for AI to generate a cannabis contract that precisely tackles all of the issues the parties want to negotiate. Sure, a competent individual might be able to work with the AI tool to hone in contract provisions, but that involves time and effort – the same thing an old school written cannabis contract requires.

Second, and on a related note, AI programs have been known to get things wrong or make things up. Take the case of some lawyers who were sanctioned (penalized) in part for submitting briefs with case citations that AI completely made up. Granted that was a litigation-related issue, but any transactional lawyer knows that there are circumstances where something like this could occur in a contract (say, a false representation and warranty).

Third, there have been many concerns about AI and its effect on data security laws, as well as confidentiality. To the extent that contracts contain confidential information or information that is protected by US or international data security laws, disclosing information to the AI program may lead to legal or regulatory violations or risk the confidentiality of information in the agreement.

Fourth, there are all kinds of other obscure and as-yet unresolved issues with using new technologies to draft cannabis contracts. For example, if a person inputting information into an AI program to generate a cannabis contract does so on behalf of an entity, does that constitute the practice of law? If so, that person may violate their state’s prohibition on the unlawful practice of law (commonly referred to as UPL). Or, if there is a massive error in an AI-generated cannabis contract, who can the injured party blame for the error – the person inputting the data? These issues are sure to be resolved in the coming years, but for now, it’s too early to tell how things will shake out.

Above are just a sampling of the key issues I expect to see with respect to AI-generated cannabis contracts. I’ve reviewed AI-generated contracts in the past and, while I’m sure that AI contracts will be huge in the future, I still think that what I’ve seen to date has a ways to go.