Considering the amount of changes, and the terrible interface that Word has for viewing history/tracking changes, Google Docs is perfect for making these kinds of edits, reviewing history and tracking changes. To top it off, legal documents have none of the "requirements" of the "extra features" that people normally complain about when it comes to why they can't stop using Microsoft Office products.
They could still print them out, red-line them by hand, and keep legal assistants employed who update the canonical on-line version.
I've received attachments from someone sent to multiple people with instructions of "make your changes and send it back to me". And then the sender spends time manually merging people's changes into a single document. What a waste.
The amount of effort and time saved in not having to keep track of the most recent version from the multitude of revisions that litter your inbox as attachments and which one is/should be considered canonical would more than make up for any other perceived drawback.
It's purely momentum that keeps MS Office entrenched in this area.