Asking an AI to write a contract is fast and cheap, and the result usually looks professional. That is exactly the problem. A contract that looks right and is wrong is worse than no contract, because you will rely on it. This is not legal advice, and the point of this piece is that you should get some.
The best-known warning comes from a courtroom rather than a contract. In Mata v. Avianca, a federal judge in New York sanctioned two lawyers and their firm $5,000 in June 2023 after they filed a brief citing cases that ChatGPT had invented. The cases did not exist, and the quotes from them were fabricated too. These were trained lawyers, and they still did not check. A public database kept by a legal researcher has since logged hundreds of similar filings around the world.
Contracts carry the same risk in quieter forms. A model may cite a statute that does not exist, misstate a notice period, or include a clause that is common in one jurisdiction and unenforceable in yours. Employment rules, non-compete limits, consumer protections and required disclosures vary by state and country, and a general model has no reliable way to know which ones apply to you.
The second risk is omission. AI tends to produce a plausible average contract, and the clauses that matter most are often the ones specific to your deal: who owns the work, what happens if a payment is late, how either side can exit and where disputes are heard. If you do not ask, the model may not include them, and it will not warn you.
The third risk is confidentiality. Pasting a draft full of client names, prices and terms into a consumer chatbot may conflict with your own confidentiality obligations. Check the provider's data settings and your client agreements before you do it.
There are sensible uses. AI is good at explaining what an unfamiliar clause means in plain English, listing questions to raise with a lawyer or turning a messy set of notes into a first draft that a lawyer then reviews. Used that way, it can cut the time and cost of a lawyer's review rather than replace it.
The short version: use AI to understand contracts and to prepare for a lawyer, not to finalize one. For anything involving real money, employment, property or intellectual property, have a licensed attorney in your jurisdiction review the final version before anyone signs.
