I use AI tools. I'll say that up front, because this isn't an "AI bad" post. I teach contract drafting, and I'd be a bit of a dinosaur if I pretended these tools weren't useful.
But more and more founders are showing up with contracts they drafted or "reviewed" with a chatbot, and some of them are fine, and some of them are a mess. The difference usually isn't the tool. It's whether the person using it knew what to look for.
So here's my honest take on where AI helps, where it hurts, and what you actually get when you hire a lawyer.
A story I see versions of all the time
Picture a founder, let's call her Dana. She's got a software contractor lined up to build her MVP. She doesn't want to spend money on a lawyer yet, so she asks an AI tool to draft a services agreement. It spits out something that looks great: clean headings, confident language, a section on intellectual property, a section on payment, even a confidentiality clause.
She sends it over. The contractor signs. The product gets built. Then she raises a seed round, and the investor's lawyer asks one question: "Where's the assignment of the contractor's IP to the company?"
The agreement has a clause that sounds like it covers that. It says the contractor will "provide" the work product to the company. It doesn't say the company owns it. It doesn't include a present assignment. And the contractor, who now knows the company just raised money, has opinions about what a fix will cost.
(Dana is a composite, not a specific client, but I've seen this exact problem more than once.)
The AI didn't write something obviously broken. It wrote something that looked right, and that's the whole problem.
Use AI to understand. Use a lawyer to rely.
Here's the line I'd draw. AI is a genuinely good tool for understanding a contract. It gets risky when you rely on it, meaning you sign something, build a business on it, or hand it to an investor because a chatbot said it was fine.
Where AI is a great helper
- Understanding a document. Asking "what does this indemnification clause mean in plain English?" is a great use of AI.
- Getting oriented before you talk to a lawyer. Showing up with a decent grasp of the basics makes the conversation faster and cheaper.
- Generating questions. "What should I be asking about this deal?" can produce a useful starting list.
- Summarizing long documents so you know where to focus.
All of these help you think. None of them ask the tool to be the last line of defense.
Where relying on it gets risky
The trouble starts when you treat the output as a finished, checked document. A few reasons that's a problem:
It sounds confident even when it's wrong. These tools are built to produce fluent, plausible text, and they don't always flag uncertainty the way a careful lawyer would. A clause can read beautifully and still not do what you need it to do.
It only knows what you tell it. A good contract is built around your deal: who's doing what, what happens if it goes wrong, what you're really worried about. Most people don't know what to include, and the tool can't ask the follow-up questions a lawyer would.
It may not account for the law that applies to you. Contract law varies by state, and some things that are routine in one place don't work in another. Non-competes are a good example. Massachusetts has its own rules, and a generic clause pulled from somewhere else may not hold up.
It tends to comment on what's there, not what's missing. This is the one that gets people. A lawyer asks what's not in the document: no limitation of liability, no termination right, no IP assignment, no dispute resolution clause. The gaps are where the damage happens.
Confidentiality is worth a pause. If you paste a contract or deal details into a public AI tool, you may be sharing information you promised to keep confidential. Check the tool's terms and settings first.
There's nobody to be accountable. If an AI tool gets it wrong, you can't call it. A lawyer owes you professional duties, carries malpractice insurance, and has a reputation riding on the work.
None of this means AI has no place in your process. It means the best use is as a helper before and alongside a lawyer, not as a replacement for one when the stakes are real.
Side by side
| AI tool | Lawyer | |
|---|---|---|
| Cost | Free or very cheap | Costs more up front (though often a flat fee for routine work) |
| Speed | Seconds | Usually days, sometimes faster |
| Knows your business and your deal | Only what you tell it | Asks questions to find out what you didn't think to mention |
| Knows the governing law | General, can be wrong or outdated | Knows the rules that apply to your situation |
| Spots what's missing | Rarely | Part of the job |
| Flags its own uncertainty | Often sounds confident regardless | Tells you when something is a judgment call |
| Confidentiality | Depends on the tool and settings | Bound by professional duties |
| Accountability | None | Professional responsibility and malpractice coverage |
| Negotiation advice | Generic | Based on what's normal and what you can push on |
| Helps after you sign | No | Yes, when the deal changes or something goes wrong |
| Best for | Learning, summarizing, preparing | Drafting and signing things that matter |
So what should you actually do?
Here's how I'd think about it:
- Low stakes, and you understand the terms? A well-used AI tool can help you get through it. Just read what it gives you.
- Something you'll rely on for months or years, involves real money, or touches your equity or IP? Have a lawyer draft or review it. That includes founder agreements, stock issuances, contractor and employee IP assignments, and investor documents.
- Not sure which bucket you're in? That's usually a sign to ask.
The cost of fixing a bad contract is almost always higher than the cost of getting it right the first time. Equity is a good example: the co-founder issues I covered in Incorporating With a Co-Founder: What to Decide Before You File are cheap at the start and expensive later, and a polished-looking AI draft can hide them just as easily as a handwritten one.
If you're forming a company, or you've already got documents you're not sure about, tell me what you're building and I'll tell you honestly whether you need help.
This post is for general informational purposes only and is not legal advice. Reading it does not create an attorney-client relationship. Every situation is different, so talk to a licensed attorney about your specific facts.
