Lately, more and more clients are coming to me with contracts that were generated using AI tools like ChatGPT. While the technology is impressive, the contracts often aren’t. From critical omissions to clauses that create more risk than they manage, these AI-drafted agreements can cause real headaches.
If you’re a business owner tempted to automate your legal documents, here are four reasons to proceed with caution:
1. AI doesn’t understand your deal
Contracts aren’t one-size-fits-all. AI can mimic legal language, but it doesn’t know your business objectives, your relationships, or what’s normal in your industry. I’ve seen agreements where standard AI-drafted terms completely contradict the intent of the parties.
2. Errors aren’t always obvious — until they are
AI tools can miss crucial protections, use language that introduces ambiguity, or even create conflicts between provisions. These aren’t always caught until a dispute arises — at which point, it’s too late. I recently reviewed a software license agreement that lacked a clear limitation of liability clause. That’s a ticking time bomb in tech deals.
3. Jurisdiction matters — and AI doesn’t always get it right
State-specific legal rules matter. For example, what’s enforceable in Delaware might not be in Michigan. I’ve seen AI-generated agreements that copy boilerplate language from another state’s laws, completely undermining enforceability in the client’s home jurisdiction.
4. AI can draft language — but not judgment
Legal drafting is as much about business judgment as it is about words. Should you include a non-solicit? Is that indemnity clause commercially reasonable? Are you over-promising in your warranties? AI won’t warn you when you’re taking on too much risk — but I will.
Final Thoughts:
AI is a useful tool. It can help get a first draft on paper, or speed up internal processes. But it’s not a substitute for experienced counsel. If you’re using AI to draft agreements, make sure a lawyer reviews them — before you sign.
Whether you need an experienced attorney to review a contract or advise on other business matters, I’m here to help. Feel free to call me at (248) 740-5672 or email [email protected].
