The answer is nuanced: Yes, ChatGPT can technically compare two contracts and highlight surface-level differences, but it lacks the necessary legal precision and security for reliable B2B use.
ChatGPT acts like an extremely fast proofreader where it can process vast amounts of text quickly and summarize differences.
However, for a document to be legally sound, you need confidence that the comparison is 100% accurate and that no subtle contextual changes were missed. Public AI models simply cannot deliver that confidence.
The primary limitations that turn this useful feature into a high-risk activity are:
- Security Risk: Uploading entire, unredacted client agreements to a public LLM violates confidentiality policies.
- Generic Output: Without expert prompt engineering, the results are often high-level and miss crucial, small-print differences.
- Accuracy Failure: The AI can struggle with complex formatting, tracked changes, and legal nuance, leading to potentially critical errors.
If comparison is critical, the how you compare is far more important than the if you compare.
For tasks that are low-risk or for initial contract drafting purposes, you can technically use advanced models like GPT-4 for comparison. This process involves three main steps:
1. The Secure Upload (The Mandatory Caveat)
The first step is uploading both documents BUT this should only be attempted with heavily redacted or anonymized contracts, or within a verified, secure enterprise environment.
2. Prompt Engineering is Key
A generic prompt like "Compare these two documents" will yield generic results. To get useful output, you must engineer a highly specific prompt:
- Targeted Prompts: Ask the AI to "Outline the differences between the Indemnification Clause in Document A and Document B" or "Summarize the similarities in the Payment Terms of these two contracts."
- Defining Roles: Instruct the AI to "Act as a procurement specialist" or "Act as a legal counsel" to push the output toward a specific perspective.
3. Reviewing the Output: Differences and Redlines
ChatGPT will typically return an outline or list of differences and similarities. Advanced users may attempt to have the AI generate a redline version of one document against the other, though this increases the liability risk from flawed redlining exponentially.
While ChatGPT can quickly identify textual variations, relying on it for high-stakes legal document comparison is a critical flaw in your workflow. The goal of legal comparison is precision and consequence assessment, which the AI cannot reliably achieve.
1. Accuracy Failure and Ignoring Context
General LLMs operate by identifying patterns, not legal consequence. This leads to major accuracy issues when comparing complex contracts:
- Missing Subtleties: The AI often misses subtle differences in legal phrasing or punctuation that can completely alter a clause's meaning. For example, a difference in the word "will" versus "may" is crucial but can be overlooked in a bulk analysis.
- Context Confusion: It struggles with messy, real-world documents, especially when comparing two contracts with different internal numbering, formatting, or inconsistent cross-references.
- The Hallucination Risk: As we've discussed, the AI can still generate confident, yet fabricated, summaries or differences, creating an unacceptable liability.
2. Legal Intent vs. Textual Difference
A dedicated contract comparator tool shows you the difference. A lawyer assesses the consequence of that difference. ChatGPT only performs the former.
- No Risk Assessment: The AI can spot that Document A says "net 30 days" and Document B says "net 45 days," but it cannot tell you the financial consequence to your cash flow or if the change violates your procurement policy.
- Blind to Business Playbooks: It cannot infer that a missing clause (a term removed in a new version) is a violation of your organization's mandatory negotiation playbook.
3. The Unacceptable Liability Gap
Since the output of general LLMs comes with no legal warranty, any critical error missed in the comparison falls squarely on the human reviewer. The time saved is not worth the potential cost of litigation stemming from a missed indemnification change or a crucial termination right.
Given the high liability associated with inaccurate comparisons, the only responsible solution for B2B organizations is to move away from general LLMs toward tools built specifically for legal precision.
1. The Necessity of Secure, Specialized Platforms
True legal comparison requires a secure environment that guarantees accuracy and data protection.
- AI-Native Comparators: Specialized AI-powered contract comparators are specifically trained on vast legal data to understand and precisely compare complex document structures and legal phrases, not just generic text.
- Version Control: These tools excel at comparing different versions of the same contract, highlighting every change—even subtle formatting adjustments—with 100% confidence, a feat impossible with public LLMs.
2. The Difference in Precision
Specialized software is built to handle the complexities of legal language and formatting:
- Precedent Libraries: Professional tools can compare a new contract against your firm's internal precedent library, flagging deviations that fall outside your standard risk tolerance.
- High Confidence Output: Unlike generic AI, the output from these specialized tools is audited and relies on computational methods designed for accuracy, not plausibility.
3. Human Review Remains Mandatory
Whether you use a generic LLM or a specialized platform, the output is a starting point. AI should be used to flag areas of concern, but the final assessment of legal risk and the approval of changes must always rest with a qualified legal professional.
And there you have it….
To summarize -
- If you are looking to compare two contracts for a quick, high-level overview or to identify major textual differences in a draft (using redacted or non-sensitive internal documents), a general LLM can serve as a fast starting point.
- However, for any comparison that will lead to legal execution or bind your organization financially, the final check must be performed by a reliable, purpose-built tool or a human expert.
If you would like to see what a secure, AI-powered contract review platform looks like for comparison and redlining, feel free to book a demo with us today!
We will be more than happy to guide you!