Arizona Tribune - Humans Hallucinate too. 60% of Public Company Contracts Contain Errors.

TORONTO, ON / ACCESS Newswire / June 23, 2026 / Spellbook, the leading AI infrastructure for contracts used by over 4,500 in-house legal teams and law firms, today released a new report showing that 60% of contracts filed with the U.S. Securities and Exchange Commission contain drafting issues. 40% of those issues are 'high-risk,' defined as serious enough to change a clause's meaning or how it operates. The study, published by the company's research and analytics division Spellbook Labs, analyzed more than 3,000 executed agreements filed by over 500 public companies across 22 years.

Contracts are the invisible layer of the world economy. $30 trillion runs through them annually in the US alone, yet, despite that volume, the drafting and review process is still heavily manual. The thousands of publicly available agreements filed daily with the SEC - from merger documents to large equity awards - are some of the most scrutinized legal filings in the world. Even the highly-visible recent SpaceX IPO filing had 11 issues which, while minor, prove that money can't buy perfection when it comes to human review at scale.

"AI hallucinations get the headlines, but humans have been making costly drafting mistakes at scale for as long as we can measure," said Scott Stevenson, CEO and co-founder of Spellbook. "These issues used to stay buried but now anyone can easily find and exploit them, including the counterparty across the table. Pairing legal judgment with AI that catches mistakes and makes suggestions based on context and real-time market data will be the new operating mode."

Key findings:

• Market cap was no guarantee of quality. Several of the world's most valuable companies had the highest number of issues by count. And, notably, the gap between the cleanest and messiest companies was over 18x, a significant spread.

• Company age showed a positive correlation with lower issues. Businesses founded before 1900 averaged about one issue per contract whereas companies founded in the 2000s averaged 50% higher issue rate. Some of the cleanest contracts came from well-known legacy brands such as IBM, John Deere, Lockheed Martin and Bank of America.

• No industry was issue-free but some fared better than others. Media, Telecom, and Travel had the highest high-risk rate, with 6.8% of contracts containing at least one high-risk issue, nearly five times the 1.4% rate found in Healthcare and Pharma.

• The riskiest issues clustered in purchase agreements. Note, stock, and asset purchase agreements ran a 12-15% high-risk rate, roughly four times the study-wide average of 3%. These are deal documents where the terms are drafted under pressure clause by clause.

• The issue rate has not improved in 20 years. While contract management has gotten easier over the years, human review has remained the same. So it's no surprise that analysis shows issue rates per contract held essentially flat from 2005 to today.

Ultimately, this study points to a structural flaw, not individual or company carelessness. Contracts are long, complex documents assembled from precedent and revised under deal pressure. No legal team can reliably police them at the pace of today's business environment. Increasingly, they won't have to. For the full Spellbook Labs report, visit spellbook.com/labs.

Methodology

This study should be treated as a proxy for how much humans miss. Spellbook Labs analyzed material contract exhibits filed on EDGAR from 2005 to 2026, covering more than 500 public companies. Each contract was reviewed with Spellbook Reviews run in a deliberately conservative mode, limited to issues visible within the filed exhibit itself. We could only measure what is objectively incorrect, not whether an agreement was signed outside policy, drifted off market, or gave away more than it should have, let alone what sits inside the millions of private contracts never filed at all. The findings should be read as a floor.

About Spellbook

Spellbook launched the first GenAI tool for lawyers in 2022 and continues to be the leading provider of legal AI for transactional law. It's helped over 4,500 legal, sales, procurement, and HR teams improve their contract workflows and eliminate legal drudgery. Powered by large language models like OpenAI's GPT-5, Spellbook is optimized to use legal-specific approaches for superior contracting performance. Spellbook is backed by investors including Khosla Ventures, Thomson Reuters Ventures, Inovia Capital, The Legaltech Fund, Bling Capital, and Moxxie Ventures. For more information about Spellbook go to https://www.spellbook.com.

About Spellbook Labs

Spellbook Labs researches and publishes findings on issues that impact how businesses operate. Our goal is to give the teams navigating complex legal environments reliable information to help them keep pace with the rapidly changing landscape of the world economy.

Media Contact:
Abigail Metsch
[email protected]

SOURCE: Spellbook

View the original press release on ACCESS Newswire

G.P.Martin--AT