Artificial intelligence (AI) is reshaping business law practices by streamlining contract drafting, enhancing due diligence and improving compliance monitoring. For law firms, AI offers significant efficiency gains but also raises ethical considerations under the Tennessee Rules of Professional Conduct (TRPC). This article explores AI’s applications, its impact on Tennessee’s legal landscape and the ethical obligations attorneys must navigate to ensure responsible use, while cautioning against over-reliance.

AI tools, such as those from Thomson Reuters’ CoCounsel, automate the drafting of standard legal documents like non-disclosure agreements and service contracts, reducing drafting time from hours to minutes. These tools use pre-designed templates and natural language processing to generate precise, enforceable clauses tailored to client needs. For example, a corporate law firm might use AI to produce initial drafts of commercial contracts, allowing attorneys to focus on strategic customization. AI also analyzes contracts for inconsistencies or compliance issues, minimizing errors. A 2024 Thomson Reuters report notes that AI can save lawyers up to four hours per week on such tasks, potentially generating $100,000 in new billable time annually per lawyer[1].

In due diligence, AI platforms like Luminance Diligence and DealRoom AI excel at processing vast document sets, extracting critical information and flagging potential risks. For mergers and acquisitions, these tools analyze financial records and contracts swiftly, identifying problematic clauses or regulatory concerns. A firm handling a corporate acquisition could leverage AI to review thousands of documents in hours, a task that traditionally took days. This efficiency enhances accuracy and reduces costs, as noted in a 2025 study by the Harvard Law School Center on the Legal Profession, which highlights AI’s role in improving client outcomes[2].

AI aids compliance by continuously tracking regulatory changes and assessing their impact on business operations. Tools like ContractPodAi monitor updates to corporate governance laws, alerting legal teams to adjust strategies proactively. For instance, AI can analyze past case law to predict compliance risks, enabling firms to mitigate liabilities. A 2024 ContractPodAi study found that 51% of in-house legal professionals report leadership encouraging AI use for compliance, underscoring its growing adoption[3].

However, AI in the legal field must be implemented with caution and in compliance with all ethical rules. Tennessee’s Rules of Professional Conduct impose strict ethical obligations on attorneys using AI, particularly in competence, confidentiality and supervision. Rule 1.1 requires attorneys to provide competent representation, including understanding the benefits and risks of relevant technology. Tennessee adopted the ABA’s technology competence amendment in 2017, making it one of 27 states emphasizing this duty[4]. Attorneys must grasp AI’s limitations, such as potential inaccuracies or “hallucinations” (false outputs) and verify AI-generated work. For example, an attorney using AI for legal research must cross-check citations to avoid errors, as seen in cases like Mata v. Avianca, where attorneys were sanctioned for submitting AI-generated fictitious case law[5].

TRPC Rule 1.6 mandates protecting client information. Using public AI tools like ChatGPT risks breaching confidentiality, as these platforms may retain or share input data. Firms using AI must use secure, SOC2-compliant tools like Paxton or Transcript Genius, which do not store client data post-session. Attorneys should review AI vendors’ terms of service to ensure data security and obtain client consent if confidential information is involved, as advised by the ABA’s Formal Opinion 512[6].

TRPC Rule 5.3 requires attorneys to supervise non-lawyer assistants, including AI systems, to ensure compliance with ethical standards. Firms must establish policies for AI use, train staff, and monitor outputs. For instance, a firm might create a protocol requiring attorneys to review AI-drafted contracts for accuracy before client submission. The New York State Bar Association’s 2024 AI Task Force report recommends dedicated oversight teams to enforce such policies [7].

Over-reliance on AI poses risks, including diminished professional judgment and undetected biases in AI outputs. A Texas attorney was fined $2,000 in 2024 for submitting AI-generated fictitious citations, highlighting the need for human oversight[8]. Attorneys should treat AI as a tool, not a replacement, for legal reasoning. Regular training, clear AI policies and rigorous output validation are essential to mitigate these risks.

AI is revolutionizing business law by enhancing efficiency in contract drafting, due diligence and compliance monitoring. However, adherence to TRPC’s ethical standards— competence, confidentiality, and supervision — is critical. By implementing robust policies and maintaining human oversight, attorneys can harness AI’s benefits while upholding professional responsibilities, ensuring client trust and legal integrity in an AI-driven era.

Tommy Fridy is a corporate associate in the Memphis office of Wyatt Tarrant & Combs, LLP. He assists with counseling clients regarding mergers, acquisitions, dispositions and provides operational, regulatory and general transactional support. His practice also includes the development, leasing, acquisition and disposition of commercial real estate and lending.

[1] How AI is transforming the legal profession (2025)