Artificial intelligence is quickly becoming a part of daily business. From drafting emails to analyzing data, AI tools are marketed as time-savers that can make work more efficient. Some business owners have even begun experimenting with AI to draft or review contracts, hoping to save money on legal fees. On the surface, the results can look polished and professional. But when it comes to contracts, the foundation of your business relationships, appearance is not enough.
The reality is that contracts are not just collections of words. They are legal instruments that carry obligations, financial consequences, and the potential for disputes. A single error can shift the balance of a deal or leave you without protection when something goes wrong. That is why relying on AI to create contracts is risky. Here are three key reasons why AI is not ready for prime time when drafting something as important as your legal agreements.
AI Can Misinterpret Legal Language
AI programs generate text by predicting patterns, not by applying judgment or legal reasoning. This means an AI-drafted contract may look formal yet contain clauses that contradict each other or use terms that are legally unenforceable. Even small variations in words such as “shall” and “may” can completely change the nature of your obligations.
For example, AI might draft a confidentiality clause that sounds comprehensive but leaves out exceptions recognized under the law. Without an attorney’s eye for detail, you may not realize the weakness until a dispute arises. At that point, it could be too late to fix the problem.
AI Does Not Understand Your Unique Goals
Every business deal has its own context. Maybe you want to protect intellectual property, control where disputes are litigated, or establish remedies if a party fails to perform. AI does not know your goals, your risk tolerance, or the nuances of your industry. Instead, it pulls from generic templates and publicly available examples.
This one-size-fits-all approach often leaves major gaps. For instance, a software licensing agreement drafted by AI might fail to address data security obligations. A commercial lease could ignore local zoning restrictions. These omissions are not simply oversights. They can create costly vulnerabilities for your business. A contract drafted by an experienced attorney reflects not only the deal in front of you but also the potential risks that may arise down the road.
AI Cannot Defend You in a Dispute
The value of a well-drafted contract is most apparent when there is conflict. If a dispute arises, AI cannot explain why certain terms were included, clarify the intent of the parties, or appear in court on your behalf. Judges and arbitrators look to the language of the contract and the surrounding circumstances. Without a carefully constructed agreement, you may find yourself at a disadvantage.
An attorney not only drafts the contract but also serves as your advocate if the terms are challenged. That partnership is something no AI program can replicate.
Where AI Can Help with Low Risk
Although relying on AI to draft or interpret contracts carries serious risks, there are areas where businesses can use AI safely and effectively. In these contexts, the technology enhances efficiency without creating significant legal exposure:
- Document Organization: AI tools can sort, tag, and retrieve business documents, reducing time spent on administrative tasks.
- Data Analysis and Reporting: Automating the review of financial data or operational metrics allows teams to spot trends faster while maintaining human oversight.
- Marketing Personalization: AI-driven email campaigns and content recommendations help businesses communicate more effectively with customers at low risk.
- Scheduling and Transcription: Automating calendar management or meeting notes improves productivity without impacting legal obligations.
- Proofreading: An AI can spot things like incomplete sentences, faulty cross-references and typos. Once that’s done a human should read the entire contract for context and clarity. It’s a good idea to print the contract on paper and review the hard copy a couple of days later to make sure it says why you thought you wrote.
These low-risk applications highlight that AI can be a powerful tool when applied thoughtfully, as long as businesses reserve complex, high-stakes work for qualified professionals.
Protect Your Business with Real Legal Counsel
AI is a powerful tool for many business tasks, but it is no substitute for a lawyer when it comes to contracts. The risks of misworded clauses, missing protections, or unenforceable terms far outweigh the short-term savings. Contracts are too important to leave to predictive text.
At Hamlin | Cody, we help businesses protect their interests with contracts that are clear, enforceable, and tailored to their specific goals. If you are preparing to enter a new agreement, do not leave your future to chance. Contact us today to ensure your contracts are drafted with precision and backed by real legal judgment.