In recent months, AI chatbots, such as ChatGPT, have attracted worldwide attention with their ability to engage in a human-like digital conversation on virtually any topic. Designed to communicate in a natural way, these chatbots are increasingly being used to increase user productivity. Meanwhile, chatbots can perform various legal tasks, including drafting agreements. Such an agreement may initially look useful, but is engaging ChatGPT for your agreement actually such a smart move? We tried this out and asked ChatGPT to draft a confidentiality agreement.

The case study

To create this confidentiality agreement, we came up with the following case study: you are the owner of Urban Vegan Cafe, a popular hotspot for vegan food in a vibrant city, and have developed a unique and secret recipe for a new dish: the 'Ultimate Vegan Burger'. The recipe, which offers a perfect combination of flavours and textures, has contributed to the café's growing popularity. You are therefore considering sharing the recipe with an external supplier for large-scale production, but want to ensure that the recipe remains secret. Despite having little understanding of legal matters, you have heard that such arrangements are governed by a non-disclosure agreement and therefore you ask ChatGPT to draft one for you.

The instruction

To carry out this particular assignment, you will need to give ChatGPT an instruction. You would like a non-disclosure agreement to be drawn up, but as a layman, you do not know exactly what it should contain. You give ChatGPT the following instruction:

"I want to partner with an external supplier to start producing a dish (a vegan burger) on a large scale. I want to ensure that everything I discuss with him remains secret. Can you make a confidentiality agreement for me?"

ChatGPT's confidentiality agreement

Based on the instruction entered, ChatGPT responds as follows:

 

CONFIDENTIALITY AGREEMENT

This confidentiality agreement (the "Agreement") is entered into and takes effect on [date] (the "Effective Date"), by and between:

[First party's name, address and company name, if any] ("Party 1")

 

and

[Name of second party, address and company name, if any] ("Party 2")

Jointly referred to as the "Parties" and individually as a "Party".

 

WHEREAS

1. Party 1 and Party 2 intend to enter into a cooperation in relation to the large-scale production of a vegan burger (the "Cooperation").
2. The Cooperation may require the Parties to disclose confidential information to each other.
3. The Parties wish to set out the terms of this disclosure in this Agreement.

 

                AGREE AS FOLLOWS

1. Definition of "Confidential Information" means any information, whether written or oral, disclosed by one Party (the "Disclosing Party") to the other Party (the "Receiving Party") which is designated as confidential or which, according to the nature of the information or the circumstances surrounding the disclosure, should be considered confidential.
2. Obligations of the Receiving Party:the Receiving Party agrees to keep the Confidential Information strictly confidential and not to disclose it to third parties without the prior written consent of the Disclosing Party. The Receiving Party will only use the Confidential Information for the purpose of the Cooperation. The Receiving Party will take all reasonable measures to maintain the confidentiality of the Confidential Information at least equal to the measures it takes to protect its own Confidential Information.
3. Exceptions: the obligations set out in Article 2 do not apply to information that the Receiving Party can prove was already publicly known at the time of disclosure or has become publicly known without the Receiving Party's responsibility.
4. Duration: this Agreement shall take effect on the Effective Date and shall remain in force for [Number of years, e.g. 5] after the last disclosure of Confidential Information.
5. No Licence: nothing in this Agreement shall be construed as granting to the Receiving Party a licence, express or implied, under any patent, trademark, copyright or other intellectual property right of the Public Party.
6. Return or Destruction of Confidential Information: at the request of the Disclosing Party, the Receiving Party shall promptly return or destroy all copies of the Confidential Information.
7. Governing law: this agreement shall be governed by and construed in accordance with the laws of (Country/State).
8. General provisions: amendments to this Agreement shall only be binding if agreed in writing and signed by both Parties. If any provision of this Agreement is found to be invalid or unenforceable, the remainder of the Agreement shall remain in full force and effect. This Agreement constitutes the entire agreement between the Parties regarding the handling of Confidential Information.

 

         SUBJECT

IN WITNESS WHEREOF, the Parties have signed this Agreement from the Effective Date.

 

Party 1 [name or company name]

Name:

Function:

Signature and date:

 

Party 2 [name or company name]

Name:

Function:

Signature and date:

 

Make sure both parties sign the agreement and keep a copy for their records. It is also advisable to seek legal advice to ensure that the agreement fully suits your specific needs and jurisdiction.

There is also a warning at the bottom of ChatGPT's website: 'ChatGPT can make mistakes. Check important info.'

 

Our review of ChatGPT's non-disclosure agreement

It is impressive that ChatGPT can create a non-disclosure agreement within seconds based on the instructions entered. As an example, the agreement is also quite useful. Nevertheless, it lacks some important provisions that are essential for a good non-disclosure agreement. We will go through some of them:

1. Confidential information: the definition

The definition in the confidentiality agreement above is a vague definition of confidential information. This can create ambiguity about what exactly counts as confidential information and what may or may not be shared.

Thus, for a good confidentiality agreement, it is essential to clearly define what is covered by confidentiality. This can be determined by defining what the parties consider confidential information and therefore what should not be shared with third parties.

2. Poor agreements on duration and termination

In our view, the agreement drafted by ChatGPT falls short on agreements on duration and termination. Indeed, when drafting confidentiality agreements, it is very important to pay careful attention to the duration of the agreement and the options for termination. The discloser benefits from keeping this information secret for as long as possible. Including a specific duration, as is the case in the above agreement, often does not benefit the discloser.

Moreover, it is important to agree on the possibility of interim termination. Especially in the case of mutual confidentiality, you want to prevent one of the parties from being able to terminate the agreement prematurely, as this compromises confidentiality.

3. No fine or compensation

When drafting a good confidentiality agreement, the inclusion of a penalty clause is crucial. By including such a clause, there is an extra incentive to ensure confidentiality between parties. ChatGPT's confidentiality agreement does not include a penalty clause.

The inclusion of a penalty clause should be done carefully. For instance, such a clause should always include the possibility to claim damages in addition to the fine. Indeed, without this proviso, the legal rule applies that the fine replaces the right to damages. In addition, it is also important that the discloser of the information ensures that the recipient not only pays a one-off fine per violation, but also a daily amount as long as the violation continues.

So is an agreement drafted by ChatGPT such a good idea? 

The above shows that the confidentiality agreement drafted by ChatGPT is quite useful as an example. Nevertheless, the result is still not enough to speak of a good and comprehensive non-disclosure agreement. It is therefore always advisable to engage a specialist to make sure your agreement is waterproof and your confidential information remains truly protected!

Want to make sure your business information and ideas are properly protected and/or want help drafting agreements? Contact SPEE lawyers & mediation for expert legal advice and guidance.