Can Legal AI Know When It Is Wrong? And Do Students Know When It Is?

Integrating Large Language Models (LLMs) into the Indian judiciary promises access to justice but introduces severe risks. We identify the 'inertia of confidence'--an overconfidence phenomenon analogous to the Dunning-Kruger effect where LLMs provide incorrect legal verdicts with near-maximum confidence, driven by a hypothesized 'precedent overfitting' bias. Phase I of our socio-technical audit tested ChatGPT (GPT-5.2), Meta AI, and Perplexity AI on a 60-case battery regarding the Indian Contract Act, 1872, and the shift toward statutory enforcement of specific performance. We introduce the High-Confidence Error Rate (HCER) to quantify incorrect verdicts delivered with dangerous certainty (>= 9 on a 1-10 scale). All models struggled with statutory updates. Meta AI proved most vulnerable (31.7% HCER), frequently misapplying pre-amendment rules with a 9.1/10 mean confidence, followed by Perplexity (15.0%) and ChatGPT (6.7%). Phase II investigated human vulnerability to this overconfidence via a survey of Indian law students (N=380). Verification often functions as a reactive adaptation to machine hallucinations: students encountering fabricated citations reported higher verification scores (4.2/5) than those with no such encounters (2.8/5). Furthermore, while 81.6% knew submitting hallucinated cases can lead to contempt-of-court, 71.1% received no formal training on ethical AI use. We propose shifting toward adversarial legal research pedagogy and implementing source-grounded verification architectures to prevent systemic professional negligence.