How Far Can AI Translation Be Used for Contracts? Differences from Human Translation and Tips for Effective Use

1. Basic Knowledge Required for Contract Translation

1.1 What is Contract Translation?

Contract translation refers to the task of accurately converting legal documents that define rights and obligations between different languages. Its essence lies in the "reproduction of the legal agreement content," and since the translated document itself holds legal binding force, each and every word carries an extremely heavy responsibility. It is a highly specialized field that requires both technical backing and legal interpretation.

How to Translate Contracts? Explanation of Points to Note During Translation and Methods to Improve Accuracy!

1.2 Differences from General Business Document Translation

The following three elements are indispensable when translating contracts.

1. Expertise in Legal Context, Contractual Practices, and Specialized Terminology
Not only is logical consistency required, but a deep understanding of the unique legal context, contractual practices, and advanced specialized terminology is essential. Mere language skills alone make it difficult to grasp the true intent of the provisions.

2. Handling Contract-Specific Phrasing
It is necessary to accurately distinguish archaic legal expressions that differ from everyday language (such as hereinafter, whereas) and modal verbs that strictly define the strength of rights and obligations (such as shall, may, must). Incorrect translation of these terms carries the risk of creating unintended legal obligations.

3. Accurate Translation
Since discrepancies in interpretation can directly lead to substantial damages and legal disputes, not only mistranslations but also ambiguous expressions must be eliminated with extremely high accuracy. The quality of the translation directly impacts business risk management.

1.3 Types of Contracts Subject to Translation

In business settings, a wide variety of contracts are subject to translation depending on the form of transactions and the operational objectives of the organization.

・Outsourcing Agreement
This defines the scope of the outsourced work, ownership of deliverables, payment terms, and more. Especially, clauses limiting liability and concerning damages require extremely careful translation to avoid future disputes.

・Employment Contract
Includes provisions not only on salary and position but also on termination conditions and non-compete obligations in compliance with each country’s labor laws. Since differences in interpretation across jurisdictions may lead to labor disputes, translation that takes into account the local legal context is indispensable.

・Non-Disclosure Agreement (NDA)
This defines information, protection periods, and exclusions. While speedy execution is required, any deficiencies in definitions can lead to fatal information leakage risks, so rapid and accurate translation is emphasized.

・License Agreement
This defines the terms for the licensing of intellectual property such as patents and copyrights. Since it involves a mix of highly specialized technical and legal terminology, including the scope of use, exclusivity, and royalty calculation methods, a high level of expertise is required.

2. Methods of Contract Translation: Comparison Between AI Translation and Human Translation

To select the optimal translation method, it is necessary to consider the balance of cost, speed, and risk, and to properly understand the characteristics of each. The advantages and challenges are as follows.

2.1 Using AI Translation Tools

Advantages: Thanks to recent advances in neural machine translation, it is now possible to achieve translation accuracy far beyond that of conventional automated translation. The greatest advantage is its overwhelming speed, enabling the translation of vast texts spanning hundreds of articles in just minutes—something that would take humans several days to accomplish—making this a significant strength.

Challenges: There are certain costs involved in the initial investment and learning to operate the tools. Additionally, since AI carries the risk of misinterpreting context, it is always necessary to assume "post-editing" (human review and correction), and the final judgment on specialized terminology must be made by humans.

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2.2 Outsourcing to Companies with Legal Document Experts

Merit: Since legal professionals such as lawyers and administrative scriveners are involved in translation and legal checks, the legal validity is ensured at a high level. It is ideal when highly accurate translations are required that eliminate legal risks to the utmost extent, such as documents submitted to courts, where public trustworthiness is essential.

Challenges: Compared to using AI, costs tend to be significantly higher, and it also takes a considerable amount of time until delivery. Additionally, since highly confidential contract details are entrusted to external organizations, there are physical and organizational management costs related to the risk of information leakage (such as concluding non-disclosure agreements, auditing the counterpart's security systems, and establishing a secure data transfer environment), along with the associated effort and responsibility.

3. Points to Note When Using AI Translation for Contracts

AI translation is useful, but due to the nature of contracts, the following points need to be carefully considered.

・Hallucination (plausible falsehoods)
AI sometimes produces translations that are grammatically perfect but contain incorrect facts or legal interpretations. Therefore, review by experts (post-editing) is essential.

・Management of Confidential Information and Security
Free cloud translation tools may use the input data for AI training, posing a risk that the data could be leaked as responses to other companies in the future. When using such tools for business purposes, it is essential to choose corporate tools that prohibit secondary use of data.

・Understanding Practical Legal Concepts
Even if the wording is correctly replaced, if the legal background such as the governing law (which country's laws apply) and jurisdiction (which court will handle disputes) is not reflected, a contract may be formally concluded but practical risks cannot be fully eliminated.

・Traceability When Outsourcing
Even when requesting work from an external translation company, it is essential not only to conclude an NDA but also to understand the security environment under which the work is being conducted.

4. Key Points for Successfully Utilizing AI Translation in Contract Translation

To enjoy the convenience of AI while mitigating business risks, it is important not just to use the tools, but to establish a "systematization" tailored to their characteristics. Here, we explain three strategic points to lead to success.

4.1 Improving Accuracy by Utilizing Glossaries and Translation Memories

Although AI has a strong ability to grasp context, it cannot autonomously adhere to company-specific definitions or past agreements. To complement this, the use of glossaries and translation memories (TM) is essential.

・Unifying Terminology through Glossary Integration
In contracts, consistency in defined terms is extremely important. By registering specific legal terms and company-specific jargon as a glossary and having AI refer to it, confusion and misunderstandings caused by variations in translations can be prevented in advance.

・Reuse of Past Assets through Translation Memory
Previously human-reviewed and finalized “perfect translations” are databased and reused. Since contracts often contain standardized clauses, utilizing existing translations not only stabilizes quality but also directly reduces translation costs for duplicate sections and shortens delivery times.

4.2 Using a Secure Environment Suitable for Confidential Documents

Contracts are among the most critical corporate secrets, and ensuring security throughout the translation process is essential. Free cloud translation services use input data for AI learning, posing a risk of future leaks to other companies. Therefore, always use corporate tools that prohibit secondary use of data. Our AI translation service, MTrans for Office, guarantees an operation that "does not allow data learning" through API connection.

4.3 Establish an Outsourcing and Review System for Post-Editing

Thoroughly enforcing the operational rule of "not relying solely on AI translation" ensures the final quality.

・Hybrid Workflow of "AI + Human"
The initial translation (draft) is done instantly by AI, while humans (in-house legal staff or professional translators) focus on advanced judgments such as "checking legal validity" and "adjusting delicate nuances." This enables a more efficient system than performing the entire process manually.

・Outsourcing Strategy to Minimize Management Costs
If there are insufficient review resources in-house, the output after AI translation can be outsourced to a specialized company for "post-editing." This approach reduces costs compared to outsourcing translation from scratch, while leveraging the translation company's strict security management and professional expertise, thereby minimizing total management costs.

Post-Editing (MTPE) | Machine Translation | Human Science, a Widely Accomplished Translation Company