Cologne District Court considers online contract generator to be illegal

On 08.10.2019, the Regional Court of Cologne (file number 33 O 35/19) issued a landmark ruling for the assessment of legal tech offers to end-users (i.e. not to the legal profession). In it, the Regional Court of Cologne considers the “smartlaw” offer of a renowned publisher to supply legal-seekers “legal documents of legal quality” by computer as an inadmissible legal service and therefore as a violation of the Legal Services Act. The action was brought by the Hanseatic Bar Association of Hamburg, which thus pursues the protection of those seeking justice from unqualified legal services and thus, of course, the protection of the bar against unqualified competition.

In legal literature and politics, it is disputed whether and when legal tech contract generators violate the RDG. The Hanseatic Bar Association saw in the offer “smartlaw” of this provider the prototype of a product contrary to the RDG: the seekers are sold services for relatively small money, which the contract generator cannot offer at all; nevertheless, this service is presented in the advertising of the provider as a (better and cheaper) alternative to legal advice.

There is good reason why the RDG reserves the right to “act in specific foreign matters as soon as it requires a legal examination of the individual case”. Such a legal examination in individual cases is particularly necessary when compiling contractual rights and obligations in the context of contracts to be concluded. When drafting legally secure and interest-appropriate contracts, it is usually necessary, in cooperation with the client, to clarify the relevant facts and to examine whether the questions raised by the client on the drafting of the contract really make the most of it. This cannot be provided by a computer that asks different questions about the desired contract design in a question-and-answer system and then provides a contract compiled taking into account the answers. It cannot, in fact, question the value and veracity of the user’s answers, nor can he assess whether questions offered are not being asked in the interests of the user. In the decisive case, it was common ground that the computer did not have ‘artificial intelligence’ in that product, whatever that may be.

Therefore, as the Regional Court of Cologne now judges, such a “contract generator” must not be operated by companies that are not admitted to the bar or otherwise legitimate under the RDG. This also applies if the company writes in the GTC that it does not provide legal advice, but (only) a publishing product; for the clientele does not understand that it merely compiles its contract on its own on the basis of sample collections.

The judgment of the LG Köln also prohibited, as misleading, that the company states in the advertisement for the contract generator that it provides “legally secure contracts of legal quality” or “more individual and secure than any submission and cheaper than a lawyer”. This indicates that we are getting a similar quality of legal services as in the case of the legal profession, which is not right.