Abstract
The use of artificial intelligence is increasing in Indian legal practice for drafting & reviewing of documents, including clause library applications & AI drafting assistants. This article assesses how A.I. tools are employed in India, what efficiency & accuracy improvements exists & what roles automation can and cannot play. It studies legal framework for the concept within Indian Contract Act, the provisions of Bharatiya Sakshya Adhiniyam. Also talks about lack of regulation with regard to use of A.I. in legal practice to demonstrate that while current regulatory culture supports this concept, no clear guidance exists as to issues relating to verification & disclosure.
Introduction
It has been customary for lawyers to dedicate a substantial amount of time for contract drafting and reviewing due to need for accuracy in terms of language, definition consistency & compliance with law. Nowadays lawyers use artificial intelligence right at the core of the legal practice & particularly of contract lifecycle management. The Indian AI market for the legal industry is valued at USD 29.5 million in 2025 & is expected to grow up to USD 106.3 million by 2030.
It is worth mentioning that not only big law firms & MNC’s get benefits from AI. Any small or medium companies from construction, manufacturing, healthcare or IT industries make use of AI for contract review, clauses extraction & redlining. The article will provide a very narrow perspective upon current developments, namely the application of AI tools in contract drafting & reviewing in India as well as efficiency they bring.
How AI is used in Contract Drafting & Review
There are three main kinds of artificial intelligence tools for using during contract drafting. The first type is clause-library systems, which apply massive collections of validated by lawyers’ contract language samples, as well as contingency clauses and playbooks that ensure compliance with standard rules. The systems, such as LegalOn, keep a library of thousands of ready-to-use contract types & rely on the work of contract professionals to constantly update the data to meet the evolving market requirements. Natural language processing tools fall into the second category of artificial intelligence solutions. They are applied to analyse either signed or draft agreements to classify clauses & identify important terms. Finally, the newest type of AI instruments includes artificial intelligence systems that create first drafts of contract clauses based on language instructions.
In Indian context, it utilises not only globally operating tools but tools especially designed for India. This is due to the fact that Indian commercial contracts are drafted in conformity with Indian laws implementing procedures & clauses reflecting provisions of the respective laws, namely references to state stamp acts in stamp duties clauses, the relevant provisions of the Income Tax Act & arbitration clauses related to Arbitration & Conciliation Act of 1996. As a consequence, foreign-developed tools have a less pronounced efficiency when applied to Indian contracts as compared to programmes developed in accordance with Indian realities. This difference is significant as tool can be skilled in language but unaware of legislations. Therefore, it can give a clause written according to the structure but not corresponding to Indian laws.
Accuracy & Efficiency: What the Evidence shows
Claims of efficiency gains from AI-assisted contract review are significant & increasingly validated by independent survey data. Legal teams that use dedicated AI contract review platforms report spending seventy to ninety percent less time on each contract when compared with fully manual reviews. A December 2025 survey of over one hundred active users of one of those platforms discovered that in-house lawyers used an average of fourteen hours of work per week & overwhelmingly reported measurable benefits from first month of usage. The above numbers mean that in case of contracts that are repeatedly signed on a large scale like NDA, vendor agreements or standard procurement contracts, using AI assistance increases efficiency without inconsistent harm in quality.
Still, accuracy remains a sensitive topic. A 2025 report indicated that a prominent large-scale language model passed in only three out of four business law areas, with 68 percent of answers about contracts being considered sound by attorneys meaning that one-third of its responses would require meaningful amendment. Commentaries on subject tend to coincide, stating that human oversight is indispensable irrespective of whether AI is producing something that sounds expert, humans will still need to interpret legal implications of whatever the machine produces, as difference between a clause that seems reasonable & one that has legal validity represents place where the risks arise.
Legal Validity of Artificial- Intelligence assisted contracts under Indian Law
The fact that a contract is created or examined by artificial intelligence doesn’t change rules on what valid contracts are under Indian Law. According to clauses 10 & 13 of Indian Contract Act 1872, it is necessary for parties to make a legal offer & accept it, to provide consideration, to agree freely on the terms of the transaction, and to share their understanding of the subject of their agreement. If tools of AI are used only to assist humans to compose the text of contract, the requirement mentioned should remain valid. The validity of agreement depends on consent of the parties to the process, but not on the medium in which text is created.
In India, there have been cases in which courts have extended the principles of contract formation to online transactions. In case of Trimex International FZE v. Vedanta Aluminium, Supreme Court concluded that there was a valid contract even though no formal signed contract had been produced. This conclusion was made because the correspondence between the parties accepted essential conditions such as delivery, price, and quantity. The same conclusion applies to contracts that have been written with help of artificial intelligence. It is important to note the fact that the parties accepted the essential conditions of their agreement & not that their draft was written by a human or computer software. The effects of case have now been cemented by Bharatiya Sakshya Adhiniyam, 2023, which provides for admissibility of electronic or digital records, provided there is compliance with certification requirements stated in section 63. Therefore, an AI generated draft would be admissible in similar proceedings if relevant certificate identifying record & device that produced it is present at the time of admission.
Professional Responsibility & the Regulatory Vacuum
As of now, there is no separate legal or Bar Council of India framework regulating the use of artificial intelligence in legal drafting in India. The Bar Council of India contends that, in light of fact that artificial intelligence does not enjoy legal recognition as per Advocates Act, 1961, the accountability for misleading or incorrect content produced through its use is completely on lawyer who is taking its assistance in legal work. This effectively transfers burden of verification to the concerned lawyer irrespective of how the erroneous citation or clause has been created.
The consequences of poor verification have already been witnessed in Indian courts. In February 2026, in a case where the petition mentioned a fictitious case called “Mercy v. Mankind” as binding precedent, a bench of Supreme Court termed the trend of fake citations produced through artificial intelligence in filings to be alarming. They observed that even in cases where actual judgments have been cited, the quotations were at times completely fabricated. Even though the segment in question dealt with art of preparing litigation documents, the essential message comes through a software that produces judicial citations with ease can produce invalid electronic contracts as well.
As there has been no binding national framework so far, institutions have started making do without the national rules. In July 2025, Bombay Bar Association issued guidelines related to supervision, client transparency & confidentiality of client data. Shortly thereafter, Kerala High Court adopted a policy on use of AI software in courts. By mid-2026, Supreme Court had its own committees conduct public hearings concerning the proposed regulations of artificial intelligence technologies in legal proceedings, which shows that even highest level of Indian Judiciary is unaware of final decision. Thus, commentators claim that India needs a set of rules regulating AI use, as well as control that senior attorneys must exercise while checking job performed under AI instructions.
Data Protection consideration in Contract Review
When reviewing contracts, businesses are often confronted with sensitive data pertaining to their employees, customers or vendors, which raises importance of Digital Personal Data Protection Act, 2023. Upon uploading contracts containing personal data to an artificial intelligence platform located outside India, a law firm or a legal department may simultaneously act as a data fiduciary, becoming bound by data protection obligations related to purpose limitation, data minimization & security measures. The issue mentioned is separate, but compatible with the previously discussed accuracy issue of artificial intelligence tools: the use of even accurate artificial intelligence tools for drafting & reviewing contracts may entail compliance risks due to unverified data-handling principles.
Conclusion
As perceived, AI has greatly improved the speed of drafting & reviewing contracts in India while enabling lawyers to spend more time on negotiations and intricate advisory tasks. However, the consistency of this tech remains inconsistent and dependent on the context, especially since the drafting practices in India differ from the data being used by these generic tools. The important principles contained in Indian contract law, which include the requirement of consensus ad idem under the Indian Contract Act, 1872 & evidence of electronic records in context of Bharatiya Sakshya Adhiniyam, 2023, can be applied to drafting that involves artificial intelligence & do not need alterations. What lacks here is not the ability of the principles but the official help. This refers to the regulations established by the Bar Council and legislative bodies that deal with such issues as verification rules, requirements for information disclosure as well as the boundaries of legislation and what can be done by AI in this regard.
THIS ARTICLE IS WRITTEN BY ASHNA AHMAD FROM DEPARTMENT OF LAW, PRESTIGE INSTITUTE OF MANAGEMENT & RESEARCH, INDORE
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