DE: Digital contract generator "smartlaw" is permissible

Nov 3, 2021 Benn-Ibler Rechtsanwälte

The German Federal Supreme Court (Bundesgerichtshof, BGH) had to decide whether the legal-tech application "smartlaw", a contract document generator that creates various legal documents with the help of a question-answer system and saved text modules, is an unlawful legal service.

The action was brought by a bar association against the legal publisher Wolters Kluwer. The publisher operates a digital contract document generator online, with which contracts and other various legal documents are created. Customers can subsequently purchase them as part of a subscription or individually. The customer must first answer select questions. An algorithm then uses a collection of text modules, based on the answers given, to compile standardised contract clauses, which are then combined into a draft contract. The bar association considers the digital creation of a customised legal document to be an anti-competitive legal service and sued for omission.

The BGH ruled that operating the contract document generator is not an anti-competitive act, as it does not constitute a legal service, taking into account the wording, the meaning, and purpose of Section 2 para 1 of the Legal Services Act (Rechtsdienstleistungsgesetz, RDG). According to Sec. 2 para 1 RDG, a legal service is any activity in concrete third-party matters as soon as a legal examination of the individual case is required. In this case, the application by the user is carried out on behalf of another person, because the person acting is primarily doing so in another person's economic interest and is only indirectly pursuing an economic interest of his or her own. However, a concrete individual case application is missing here. The software only covers general issues with commonly occurring legal questions. The software may be designed to anticipate all typical and frequently occurring case constellations by means of a detailed question and answer system, but this does not change the fact that a large number of possible combinations of text modules are solutions for fictitious individual cases of an undefined group of persons. Thus, the result is merely an extension of the range of services offered by a lawyer, which can be compared to a handbook of forms. The drafting of a contract that goes beyond the standard case and takes into account all circumstances of the individual case does not exist.

BGH I ZR 113/20 (09.09.2021)