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In a world first, artificial intelligence demonstrated the ability to negotiate a contract autonomously with another artificial intelligence without any human involvement.

British AI firm Luminance developed an AI system based on its own proprietary large language model (LLM) to automatically analyze and make changes to contracts. LLMs are a type of AI algorithm that can achieve general-purpose language processing and generation.

Jaeger Glucina, chief of staff and managing director of Luminance, said the company's new AI aimed to eliminate much of the paperwork that lawyers typically need to complete on a day-to-day basis.

In Glucina's own words, Autopilot "handles the day-to-day negotiations, freeing up lawyers to use their creativity where it counts, and not be bogged down in this type of work."

"This is just AI negotiating with AI, right from opening a contract in Word all the way through to negotiating terms and then sending it to DocuSign," she told CNBC in an interview.

"This is all now handled by the AI, that's not only legally trained, which we've talked about being very important, but also understands your business."

Luminance's Autopilot feature is much more advanced than Lumi, Luminance's ChatGPT-like chatbot.

That tool, which Luminance says is designed to act more like a legal "co-pilot," lets lawyers query and review parts of a contract to identify any red flags and clauses that may be problematic.

With Autopilot, the software can operate independently of a human being though humans are still able to review every step of the process, and the software keeps a log of all the changes made by the AI.

CNBC took a look at the tech in action in a demonstration at Luminance's London offices. It's super quick. Clauses were analyzed, changes were made, and the contract was finalized in a matter of minutes.

There are two lawyers on either side of the agreement: Luminance's general counsel and general counsel for one of Luminance's clients research firm ProSapient.

Two monitors on either side of the room show photos of the lawyers involved but the forces driving the contract analysis, scrutinizing its contents and making recommendations are entirely AI.

In the demonstration, the AI negotiators go back and forth on a non-disclosure agreement, or NDA, that one party wants the other to sign.NDAs are a bugbear in the legal profession, not least because they impose strict confidentiality limits and require lengthy scrutiny, Glucina said.

"Commercial teams are often waiting on legal teams to get their NDAs done in order to move things to the next stage," Glucina told CNBC."So it can hold up revenue, it can hold up new business partnerships, and just general business dealings. So, by getting rid of that, it's going to have a huge effect on all parts of the business."

Legal teams are spending around 80% of their time reviewing and negotiating routine documents, according to Glucina.

Luminance's software starts by highlighting contentious clauses in red. Those clauses are then changed to something more suitable, and the AI keeps a log of changes made throughout the course of its progress on the side. The AI takes into account companies' preferences on how they normally negotiate contracts.

For example, the NDA suggests a six-year term for the contract. But that's against Luminance's policy. The AI acknowledges this, then automatically redrafts it to insert a three-year term for the agreement instead.

Glucina said that it makes more sense to use a tool like Luminance Autopilot rather than something like OpenAI's software as it is tailored specifically to the legal industry, whereas tools like ChatGPT and Dall-E and Anthropic's Claude are more general-purpose platforms.

That was echoed by Peel Hunt, the U.K. investment bank, in a note to clients last week.

"We believe companies will leverage domain-specific and/or private datasets (eg data curated during the course of business) to turn general-purpose large language models (LLMs) into domain-specific ones," a team of analysts at the firm said in the note.

"These should deliver superior performance to the more general-purpose LLMs like OpenAI, Anthropic, Cohere, etc."

Luminance didn't disclose how much it costs to buy its software. The company sells annual subscription plans allowing unlimited users to access its products, and its clients include the likes of Koch Industries and Hitachi Vantara, as well as consultancies and law firms.

Founded in 2016 by mathematicians from the University of Cambridge, Luminance provides legal document analysis software intended to help lawyers become more efficient.

The company uses an AI and machine-learning-based platform to process large, complex and fragmented data sets of legal documentation, enabling managers to easily assign tasks and track the progress of an entire legal team.

It is backed by Invoke Capital a venture capital fund set up by U.K. tech entrepreneur Mike Lynch Talis Capital, and Future Fifty.

Lynch, a controversial figure who co-founded enterprise software firm Autonomy, faces extradition from the U.K. to the U.S. over charges of fraud.

He stepped down from the board of Luminance in 2022, though he remains a prominent backer.

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An AI just negotiated a contract for the first time ever and no human was involved - CNBC