The Dangers of Using AI Instead of an Attorney for Contract Drafting
Artificial intelligence can be a useful tool for everyday tasks. It can help organize ideas, draft an email, or create a starting outline. But a legally binding contract is different.
A contract can determine who bears risk, what happens if someone fails to perform, how disputes are resolved, and whether a business deal succeeds or becomes an expensive legal dispute. AI may be useful for generating questions or a preliminary draft, but it should not replace advice from an attorney who understands the transaction, the applicable law, and your goals.
Here are several reasons to use caution before relying on AI to draft a personal or business contract.
Laws Differ by State
Contract law is not the same everywhere. A clause that is enforceable in one state may be limited, invalid, or interpreted differently in another.
This can matter in provisions involving noncompetition restrictions, attorney fees, arbitration, automatic renewal, interest, indemnification, real estate, consumer rights, electronic signatures, and notice requirements. A generic AI-generated clause may sound polished but fail to comply with the law governing your particular transaction.
A Generic Contract May Not Protect You
The best contracts are written for the specific deal and the specific people involved. AI can generate language based on patterns, but it cannot fully understand your risk tolerance, bargaining position, future plans, or concerns unless someone with legal judgment asks the right questions.
For example, a business purchase agreement may need carefully negotiated provisions on representations and warranties, indemnification, disclosure obligations, payment terms, closing conditions, and liability limits. Even seemingly small details—such as knowledge qualifiers—can materially affect what a party is promising. In other words, a contract may look complete while omitting the terms that matter most if the relationship, transaction, or business plan does not go as expected.
AI Can Be Wrong
Generative AI can provide inaccurate, incomplete, outdated, or fabricated information. In legal work, that can include nonexistent cases, incorrect legal standards, or contract provisions that do not apply in the relevant jurisdiction.
If AI invents, misstates, or omits a key legal rule in a contract, the problem may not be discovered until a dispute arises. Once that happens, it is too late to correct an initially poorly written contract.
Confidential Information Matters
Contracts often include sensitive information: financial terms, business plans, customer data, employee information, ownership details, or information about a dispute.
Before entering that information into an AI platform, users should understand how the platform stores, uses, and protects their data. Attorneys must consider confidentiality obligations when using generative AI tools, including whether client information could be disclosed to a third-party provider. Businesses and individuals should exercise the same caution. Do not assume that every AI platform handles confidential information the same way.
Lawyers Provide Judgement and Accountability
A lawyer does more than fill in a template. An attorney evaluates risk, identifies missing protections, negotiates unfavorable language, and helps ensure the contract reflects what the parties actually agreed to.
An attorney can also identify when a new agreement conflicts with an existing lease, operating agreement, loan document, employment agreement, or other legal obligation.
On the flip side, AI does not form an attorney-client relationship, advocate for your interests, assess conflicts, or take professional responsibility for the document it produces.
Conclusion
In general, use caution when using AI to help create legally binding documents. AI can be helpful for brainstorming or identifying questions to discuss with counsel. But before you sign a contract prepared by AI, it is wise to have an attorney review it. Jabbour Law can help draft agreements tailored to your goals, negotiate contracts, and review existing agreements to help protect your interests.
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