A company suffered over CNY 200,000 in direct losses due to improper use of AI.

Company A, a European-based technical service provider, planned to commission domestic tech R&D firm Company B for a project in early 2024.

To cut CNY 10,000 in legal costs, Company A’s finance manager used AI to generate a technical development contract without professional legal review and sent it to Company B for signature.

During the R&D process, Company B’s delays caused Company A to compensate its client with CNY 200,000. Company A sued Company B for reimbursement. However, the court found the contract lacked specific clauses on R&D progress, technical requirements, acceptance standards, and liability for breach of contract. Thus, the court couldn’t support Company A’s claim.

Company A’s attempt to save CNY 10,000 in legal fees led to a CNY 200,000 loss, a decision they deeply regretted.

Dongjin reminder:

AI’s growing capabilities can enhance work efficiency and reduce costs. However, companies should be aware of AI’s limitations. Non-professionals may struggle to verify the accuracy and applicability of AI-generated information. Using such information without professional refinement and review can lead to significant losses. Professional legal experts can tailor legal documents based on a company’s specific situation. Combining AI with professional expertise is a wise choice.

If companies have questions, they’re welcome to consult Dongjin at any time.

 

Mike Chang

Partner

mikechang@shanghaiinvest.com