Written contracts are the backbone of business relationships. They outline the rights, obligations, and expectations between parties and provide a legal framework that ensures parties keep their promises. Absent written contracts, business relationships are less clear, trust is tenuous, and deals may be unenforceable.

Using an artificial intelligence (AI) tool to generate business contracts may seem like a good way to save money and time, but it may cost a business owner more than they save from not hiring a lawyer. The parties to a contract sometimes disagree over the terms of a contract and what they mean, especially if it was not carefully drafted by a lawyer. If a lawyer has not reviewed the contract to ensure it is accurate, complete, enforceable, and suited to the transaction, the business is left open to potential disputes and problems. These problems cannot be avoided—and may be exacerbated—by using AI tools incapable of understanding and addressing the specific goals and needs of your business to draft your business’s contracts.

Business owners might have experimented with AI programs such as ChatGPT and related technologies and marveled at their ability to save them time—and money—on a range of tasks, including generating contracts. However, relying on AI to draft your contracts involves many risks, including the following:

● Terms and conditions that are unclear, contradictory, or vague
● Terms and conditions that should be included but are excluded because AI does not understand the law or regulatory environment, industry, transaction, business involved, or other contextual nuances
● Contracts that are unenforceable because they do not meet all the necessary legal requirements of contract law in general or the law of the relevant jurisdiction
● Cookie-cutter terms that are not applicable to the specific needs and goals of the business
● Inclusion of illegal bias or discriminatory language
● Exposure to liability and litigation resulting from the AI tool’s failure to include contractual provisions that adequately protect the business
● Data security concerns arising from failure to comply with data protection regulations

Artificial intelligence can help businesses perform certain tasks faster and more efficiently, but a poorly drafted contract can be as problematic as having no contract at all. You might think you are saving time and money using AI to draft a business contract, only to find out later that important provisions are missing or do not comply with state law.

Contract creation involves much more than just entering terms into an AI tool. Preparing well-drafted contracts requires a legal professional who gets to know you and your unique concerns and has the real-world legal experience to address them in a way that protects your business and facilitates its success. Talk to a lawyer about your business contracts: contact us to schedule an appointment.