Using Generative AI to Draft Commercial Contracts? Key Risks Under Swedish Law
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Generative AI tools promise speed and lower costs, which makes it understandable to use them for first drafts of commercial contracts. The language often looks polished and familiar. But for organisations operating under Swedish law, these tools can introduce hidden risks that only become visible with proper legal review.
Jurisdictional Incompatibility
Most AI systems are trained on legal materials from many jurisdictions. As a result, they sometimes blend concepts from common law systems with civil law principles without distinguishing between them. Swedish contract law is rooted in civil law and balances freedom of contract with fairness and judicial oversight.
Terms that are standard under English or American law may therefore be unenforceable under Swedish law or lead to consequences the parties did not intend. Section 36 of the Swedish Contracts Act allows courts to adjust or invalidate unreasonable terms where there is an imbalance between the parties.
A common example:
AI tools often generate US-style limitation of liability clauses that may be considered unreasonable under Swedish law, even if they appear standard in an international template.
An AI-generated contract may therefore look correct while being unenforceable.
Contracts Are Interconnected Systems
A commercial contract functions as a coherent whole. Each clause influences others. Changing a limitation of liability clause may require adjustments to warranties, indemnities, insurance obligations and termination rights.
Correcting an AI-generated contract therefore often requires reviewing and rebalancing multiple related provisions – and sometimes modifying the entire structure. This can quickly become more time-consuming than drafting a suitable contract from the start.
Lack of Commercial Context
AI does not understand the commercial relationship between the parties, negotiation dynamics, industry standards or your organisation’s risk profile. A contract may be legally sound in abstract terms yet commercially impractical. This can hinder negotiations or create unintended exposure.
Regulatory and Compliance Gaps
Commercial contracts in Sweden often need to address data protection, industry-specific regulations, competition rules, public procurement requirements and sustainability obligations. AI tools may omit, generalise or misinterpret these elements, resulting in non-compliance or increased regulatory risk.
The False Economy
The anticipated savings of using AI for contract drafting often diminish once legal review is undertaken to ensure:
Validity and enforceability under Swedish law
Alignment with commercial objectives
Clear and consistent wording
Inclusion of required regulatory provisions
Balanced allocation of risk
This work may exceed the effort required to draft a correct contract from the outset. The potential later costs – disputes, unenforceable terms or weakened business relationships – can be far greater.
Conclusion
Contracts function as private law between the parties. Their reliability depends on legal expertise, commercial judgement and careful coordination of each clause. Generative AI can support the drafting process, but it does not assess enforceability under Swedish law or understand how contractual changes affect the agreement as a whole.
Engaging qualified counsel early is therefore not merely an expense – it is an investment in clarity, enforceability and smoother negotiations. If your organisation is exploring how to safely integrate generative AI into contract work, contact Fondia for guidance and support.