Shortcut or Pitfall? Should You Trust Artificial Intelligence to Draft Your Business Contracts?

✨Introduction

In Part One of this series, we explored the appeal and hidden pitfalls of off-the-shelf contracts.

In Part Two, we consider AI. If templates were the “old school” shortcut, Artificial Intelligence is the shiny new one, but the risks haven’t gone away and, in some cases, they’ve even increased.

AI tools like ChatGPT are becoming more capable every day. They can draft emails, suggest marketing ideas, and organise data. But when it comes to creating your business contracts, the short answer is you shouldn’t rely on them however tempting it may be.

 🧩One size doesn’t fit all

Every business is different. Whether it’s payment terms, intellectual property rights, or responsibility for delays, the details need to reflect your specific situation. AI can draft something that looks polished, but it won’t necessarily include the finer points your business depends on.

Important issues like licensing, data ownership, confidentiality, liability for outputs, and regulatory compliance often get missed in generic AI contracts. That’s why it’s much safer to have agreements drafted by a professional who can make sure your interests are properly protected.

⚖️Laws change

Legislation is always changing, and AI tools aren’t always up to date or may pull information from unreliable sources. In addition, AI is prone to “hallucinations”.  It can generate text that looks plausible but is completely made up. In a contract, this could mean inventing legal terms, citing laws that don’t exist, or combining clauses that contradict each other. These issues can be difficult for someone without legal training to spot, leaving your business vulnerable to disputes, unexpected liabilities, or accidental breaches of the law.

📈Thinking ahead

A good contract doesn’t just set out what should happen it also prepares for what might go wrong. Missed deadlines, insolvency, or data breaches might seem unlikely but can happen. AI won’t necessarily spot these “what ifs” unless you supply it with every possible scenario. This can give a false sense of security and by the time an issue arises, it may be too late to fix it.

🔐 Confidentiality concerns

To get a personalised AI draft, you need to share sensitive details about your business. Depending on the platform, you may not know where that information is stored or who can access it. This raises data security concerns and its definitely worth considering before uploading anything confidential.

✅ Conclusion

AI can be a great tool for generating ideas, summarising information in plain language, or explaining legal jargon. But when it comes to drafting the contracts that underpin your business relationships, there’s no substitute for human expertise.

This isn’t another sales pitch just a friendly reminder that contracts are much more than a piece of software, however tempting AI might look!

If you missed Part One, where we explored the dangers of off-the-shelf contracts, you can find it here https://www.clariclegal.co.uk/post/a-quick-fix-or-a-big-risk-do-off-the-shelf-contracts-spell-danger

 💬Do you have questions about your contracts? Let’s have a chat.

Contact Richard Jenkins 024 7698 0613 or richard@clariclegal.co.uk

Disclaimer: This blog is for general information only and isn’t legal advice. For guidance tailored to your situation, please consult a qualified legal professional.