Artificial intelligence (AI) can produce something that looks like a contract within seconds, whether you're asking for a non-disclosure agreement, terms of business, an employment contract or another type of agreement. That doesn't necessarily mean it is the right contract for your business.
A contract isn't simply a collection of legal clauses. It records a commercial arrangement, sets out who is responsible for what and allocates risk if things don't go to plan. AI can be useful as part of that process. But relying on a generic AI-generated contract without checking whether it fits your business and the particular deal can create problems.
If the agreement matters to your revenue, operations or an important commercial relationship, our commercial solicitors can help you turn the deal you've agreed into a contract that works in practice.
Contents:
- Can AI draft a contract?
- A polished contract isn't necessarily the right contract
- Will using AI to draft a contract save legal fees?
- Be careful what you put into the AI tool
- How can AI help before a contract is drafted?
- What if I've already used AI to draft a contract?
- Where can AI add the most value in contract drafting?
Can AI draft a contract?
Yes. Generative AI can produce contracts, clauses and other legal-looking documents from relatively simple instructions.
The harder question is whether the document accurately reflects the arrangement you are entering into – is it fit for purpose?
Using AI to produce the wording doesn't, by itself, decide whether the resulting agreement is legally binding. The usual rules of contract law still apply. But even where a contract has been formed, that doesn't mean every clause will work as intended or be enforceable.
For a contract to work properly, the drafting may need to take account of:
- what is actually being supplied
- pricing and payment arrangements
- responsibilities and service levels
- intellectual property
- data handling
- the type of counterparty and any relevant regulatory requirements
- insurance
- liability and where particular risks sit
- termination rights
- what happens if either party fails to perform
Some agreements also have legal requirements that can't simply be solved by generating plausible wording. Consumer terms need to comply with rules on fairness and transparency. Employment relationships include statutory rights and employers have specific obligations around written particulars. And where one business processes personal data for another, the UK GDPR requires particular terms to be included in the controller-processor contract.
There is also the wider commercial context.
How does your service actually work? Which obligations can your business realistically meet? Does the contract need to work alongside other policies, order forms, service descriptions or agreements? What does your insurance cover? Which risks matter most? How much negotiating leverage do you have?
If the AI doesn't have that information, it has to work without it. That can result in clauses that sound perfectly reasonable but don't reflect the way the transaction or your business actually works.
A polished contract isn't necessarily the right contract
Generative AI is very good at producing plausible-looking text.
That is part of what makes an AI-generated contract difficult to assess if you don't already know what it should contain. A clause can sound convincing while taking the wrong approach, overlooking an important risk or simply being inaccurate. It may also draw on wording or legal concepts from another jurisdiction that are inappropriate for the contract you need.
On 17 August 2026, the Solicitors Regulation Authority (SRA) warned the solicitors and law firms it regulates about AI-generated inaccuracies, including fictitious legal references and apparently factual assertions that have no proper basis.
Professional-looking wording shouldn't be taken as evidence that a contract is legally or commercially right for your business.
Will using AI to draft a contract save legal fees?
It might, but arriving with a complete-looking draft doesn't automatically mean less legal review time.
Your lawyer will still need to understand the transaction, scope the work and establish whether the starting document is fit for purpose.
If the basic approach is sound, an existing draft may provide a useful starting point.
If it isn't, reviewing the document can mean checking almost every provision and rewriting significant sections. At that point, the drafting work hasn't disappeared. It has moved into review and correction.
There can also be a commercial cost. Poorly chosen or unnecessarily aggressive wording can create negotiation on issues that didn't need to be contentious, slowing the deal down rather than speeding it up.
In some circumstances, starting with an appropriate legal precedent or drafting the agreement afresh may be quicker.
Be careful what you put into the AI tool
Think about the information you're giving the AI as well as the wording it produces.
An existing contract, negotiated heads of terms, customer information, personal data or correspondence with the other party may contain confidential or commercially sensitive information. Previous legal advice needs particular care too.
Don't assume a tool is suitable for that material simply because it is paid for. Check your organisation's AI and information-security policies and understand the safeguards applying to the particular system before entering sensitive information.
You can often explore the structure of a deal using high-level information or placeholders rather than uploading the underlying documents.
For more detail, read our guide to what information you shouldn't put into an AI tool.
How can AI help before a contract is drafted?
One of the most useful applications of AI is helping you prepare the commercial information that will shape the agreement.
For example, you could ask:
‘Help me identify the commercial information I need to agree with a new supplier before asking my lawyer to prepare the contract. Don't draft legal clauses or give me legal advice.’
You could then work through issues such as:
- what is being supplied
- pricing and payment
- timescales and deliverables
- responsibilities on each side
- service expectations
- ownership of any intellectual property
- where the parties are based and where the contract needs to operate
- what happens if something goes wrong
- how and when the arrangement can end
That can help identify points that haven't yet been agreed and give your lawyer a much clearer starting position.
What if I've already used AI to draft a contract?
Send the draft to your lawyer.
Tell them that AI was used and, if possible, share the prompt or explain what you asked the tool to produce. It can also be useful to explain whether you gave the AI an existing contract or other source material to work from.
Knowing how the document was created can help your lawyer assess how useful a starting point it is and whether you need a focused review, a fuller review or a different draft.
There is no need to throw useful work away simply because AI was involved. Equally, it is worth establishing whether the document is a genuine shortcut before investing more time in it.
Where can AI add the most value in contract drafting?
For many businesses, AI can be particularly useful in the work surrounding the contract.
Use it to organise the commercial terms you've agreed. Use it to identify information that is still missing. Use it to prepare questions and bring your thinking together before you instruct your lawyer.
Then your lawyer can focus on translating the deal into an agreement that reflects how your business operates, complies with the rules that apply and deals appropriately with the risks you are taking.
That's where an experienced commercial lawyer's judgement adds value: not simply producing words on a page, but helping make sure the agreement supports the deal your business is actually trying to do.
