Why an AI-Drafted Contract Costs More to Fix Than to Draft Properly

We regularly receive contracts that clients have generated using AI tools because they believe that giving their attorney a draft will reduce the amount of legal work required.

It does not.

A contract is not simply a collection of provisions. It is a legal instrument that must reflect the parties' actual business arrangement, allocate rights and risks deliberately, address applicable law, and work as an integrated whole.

When a layperson uses generative AI to produce a contract, the software does not perform the legal analysis that an attorney must perform before drafting. It generates language that may look polished and complete without determining whether the legal structure is appropriate, whether important provisions are missing, whether provisions conflict, whether the agreement complies with applicable law, or whether the document actually protects the client.

The attorney must still do all of that work.

The difference is that, instead of starting with the client's business objectives and drafting the agreement that is needed, the attorney must first analyze an existing document, identify what is wrong with it, determine what is missing, explain those deficiencies to the client, and then draft the agreement that should have been prepared in the first place.

That is additional work, not less work.

A Contract Review Is Not a Proofreading Exercise

Clients sometimes assume that because an AI tool has already produced five, seven, or ten pages of contract language, the attorney's remaining task is to review the document, make a few corrections, and approve it.

That is not how legal review works.

Before an attorney can responsibly advise a client to sign a contract, the attorney must determine, among other things:

• whether the document reflects the transaction the client actually intends;
• whether the parties' obligations are stated correctly;
• whether the agreement allocates risk appropriately;
• whether material provisions are missing;
• whether provisions contradict one another;
• whether the agreement addresses the laws and regulations applicable to the business and the transaction;
• whether defined terms, cross-references, exhibits, schedules, and signature provisions work correctly;
• whether the payment, termination, liability, indemnification, intellectual property, confidentiality, and dispute provisions are appropriate; and
• whether the agreement operates coherently as a whole.

An AI-generated draft does not eliminate any of that work.

It adds another layer of work because the attorney must first determine whether the generated language is usable at all.

Polished Legal-Sounding Language Is Not Legal Analysis

One of the principal problems with AI-generated contracts is that they often look better than they are.

The document may contain familiar headings such as:

• Confidentiality
• Intellectual Property
• Indemnification
• Limitation of Liability
• Termination
• Governing Law
• Dispute Resolution

The existence of those headings creates the appearance of completeness.

But the question is not whether the contract contains a paragraph labeled "Indemnification." The question is whether the indemnification provision appropriately allocates the risks presented by that particular business relationship.

The same is true of every other material provision.

Common problems in AI-generated contracts include:

• legally significant provisions that are missing entirely;
• provisions that are incomplete;
• provisions containing unresolved placeholders;
• incorrect cross-references;
• inconsistent provisions;
• terms that do not reflect how the parties will actually operate;
• generic language that does not address the client's industry or regulatory environment;
• provisions that unintentionally shift risk to the client;
• legal concepts imported from unrelated transactions;
• vague standards that create uncertainty rather than resolving it; and
• language that sounds sophisticated without accomplishing the legal objective.

These are not cosmetic drafting problems. They concern the substance of the agreement.

The Attorney Still Has to Determine What Agreement the Client Needs

Before drafting a contract, an attorney must understand the transaction.

That includes understanding the client's business, the services or products involved, the economics of the relationship, each party's responsibilities, applicable legal and regulatory requirements, foreseeable disputes, and the risks that should be allocated by contract.

Those decisions determine the agreement.

Generating contract language before that analysis has occurred reverses the proper sequence.

The result is often a document built around assumptions that were never identified, facts that were never confirmed, and legal issues that were never considered.

The attorney then has to work backward through the generated document to determine what assumptions were embedded in it before moving forward with the actual legal work.

Why We Recommend Starting Over

Clients sometimes ask us to "clean up" an AI-generated agreement.

That may sound less expensive than preparing a new agreement. It is not.

If the document's underlying structure is defective, revising individual provisions can be inefficient and risky. Fixing one provision may require corresponding changes elsewhere. Retaining poorly conceived provisions can create internal inconsistencies. And attempting to preserve generated language simply because it already exists can make the finished agreement less coherent.

In those circumstances, the more efficient approach is to stop repairing the AI-generated document and prepare a new agreement properly.

That may mean starting from an attorney-drafted form appropriate for the transaction.

It may mean drafting the agreement from the ground up.

The objective is not to preserve as much of the AI-generated document as possible. The objective is to produce the contract the client needs.

What Clients Should Provide Instead

Clients can help reduce legal fees by providing accurate business information rather than attempting to draft the legal agreement themselves.

Useful information includes:

• what each party is expected to do;
• what is being purchased, sold, licensed, or provided;
• how and when payments will be made;
• important deadlines and milestones;
• who will own work product or intellectual property;
• what information will be exchanged;
• what could go wrong in the relationship;
• what business outcomes are especially important to the client; and
• any unusual terms already discussed with the other party.

That information helps the attorney perform the legal analysis and draft the agreement efficiently.

An AI-generated contract does not substitute for that process.

If You Already Have an AI-Generated Contract

Send it to us if it is the document you are currently considering.

We need to know what the client is being asked to sign and what assumptions have already been built into the proposed agreement.

But clients should understand that providing an AI-generated contract does not reduce the amount of legal work required.

It increases it.

The relevant question is not how many pages have already been generated.

The relevant question is how much legal analysis and drafting remain before the client has an agreement that is appropriate for the actual transaction.