According to data released by ChatGPT, the AI tool has surpassed 800 million weekly active users, with billions of prompts put through daily.
These tools are being used internationally for research, proofreading, planning and generating ideas, and that’s just using the basic features.
With so many people relying on these systems every week, it is unsurprising that business owners are starting to ask whether the same tools can be used to draft legal documents.
The temptation of using AI for business contracts
We understand it may be tempting for small and medium-sized business owners to turn to AI to help draft documents like Shareholder Agreements or employment contracts.
These types of documents can seem too costly and time-consuming to produce when you get them drawn up by a legal professional, while AI is seemingly able to draft something in seconds.
However, time-saving and cost benefits should not be a reason to sacrifice legal compliance. Chances are, you will expose yourself and your business to endless risks that could have been avoided.
The risks of using AI for business contracts
Key business documents, including the likes of Non-Disclosure Agreements and Terms and Conditions, rely on precise legal terminology and an understanding of current legislation and case law to make them legally enforceable.
All it takes is one poorly phrased clause to have the whole contract be misinterpreted.
The current capabilities of AI cannot replace the professional insights, nuance and judgement of a solicitor who specialises in corporate law.
AI systems do not understand your business, your sector or the commercial relationship behind the contract.
They rely on patterns from existing material rather than an assessment of your specific circumstances, which creates several risks.
An AI-generated contract may:
- Include clauses that are inappropriate or unenforceable under English law.
- Miss key protections that are standard in your industry.
- Contain internal inconsistencies that only become apparent when a dispute arises.
- Fail to reflect the commercial reality of the deal you have agreed to.
Many of the issues these tools cause may not come to light until the contract is tested under pressure later.
One of the greatest dangers of using AI for contract drafting is the false confidence it can create.
A document that looks comprehensive may give the impression that legal risks have been dealt with, when in fact they have only been partially addressed or misunderstood.
In a dispute, a poorly drafted contract can leave a business exposed. The cost of resolving that dispute will almost always outweigh the cost of taking proper advice at the outset.
Where AI can be useful for corporate legal matters
We’re not trying to convince you that AI has absolutely no place in helping you with legal matters for your business.
For example, it can be a great tool to help business owners prepare before they instruct a solicitor.
They can prompt tools like ChatGPT or Copilot to provide some questions or issues they need to clarify with the professionals to help draft contracts that align with their needs.
Get professional advice from a solicitor
With any commercial agreement or contract, it is worth taking the time to get it right and the best way to do that is to ask a professional.
Whether you want to ask them to draft one from scratch or review one you have already generated yourself using AI, we’re here to help.
Contact our team for support with corporate contracts and agreements.