Can You Trust an AI-Drafted Contract? What to Check Before You Sign

Can You Trust an AI-Drafted Contract? What to Check Before You Sign

Ask a chatbot for a freelance services agreement and you get tidy headings, confident wording and a signature block within seconds. A document that looks finished can still name the wrong party, leave out how the deal ends or point to a state that has nothing to do with either side. What follows is general information, not legal advice.

Fluent text is not the same as accurate text

In January 2024, Stanford researchers reported that general-purpose chatbots hallucinated between 69% and 88% of the time on specific legal questions about court cases. The study tested case law queries, not contract drafting, so it does not tell you how often a drafted clause is wrong. It does show that the models often sounded sure whether or not they were right.

Tools have changed since then, and no single figure applies to every draft. The polish of a draft says nothing about whether it fits your situation, so each part needs checking against facts only you know.

A hypothetical freelance agreement, line by line

Take a made-up example. A freelance web designer in Ohio asks a chatbot for an agreement with a local bakery and receives a draft that opens "This Agreement is between Designer and Client." Six details in a draft like this deserve a pen.

• The parties. Replace "Client" with the legal name of the person or company that will actually pay. If the bakery is an LLC, its name should appear, and the signer should have authority to bind it.
• Scope and deliverables. "Designer will build a website" does not say how many pages, how many rounds of revisions or what files the bakery receives at the end.
• Acceptance. The draft should say what counts as done, for example written approval within a set number of days after delivery.
• Ownership and licenses. The draft should treat two things separately. For the work the designer creates, such as the layout, graphics and code, it should say whether copyright passes to the client, for example once the final invoice is paid, or stays with the designer while the client receives a license to use it. Stock images and fonts the designer licensed from others belong to their owners, so the draft should say whose name the license is in and whether its terms let the client keep using that material on the site after the project ends.
• The money and the exit. "Client will pay on completion" gives no amount and no due date, and a line letting either side end the deal "at any time" leaves out notice, payment for work already done and who keeps the files.
• Governing law and disputes. A draft might say Delaware law applies although both sides are in Ohio, and say "disputes will be resolved in court" without naming which one. A clause naming the court and its location is called a forum selection clause, and it is worth choosing deliberately.

Where state law changes the answer

Noncompete clauses show how much depends on the law that applies. The Federal Trade Commission's own page says its 2024 noncompete rule is not in effect and is not enforceable, and the same page notes the rule would not have displaced state law in general. That does not make your home state's rules the whole answer. A contract may name a different state's law, and where the work is actually done can matter too, so read the governing law clause and check the rules of each state involved, ideally with a licensed attorney, before relying on a restriction or agreeing to one.

Signatures, writing requirements and consideration

Under ESIGN, a signature or contract covered by the Act cannot be denied legal effect, validity or enforceability solely because it is in electronic form, but that does not make every typed name or click valid: the signature has to be executed or adopted with the intent to sign, and it has to be attributable to the person who is supposed to be bound. The Act also excludes some documents, such as wills, certain family law matters and parts of the Uniform Commercial Code.

A valid contract also needs consideration, which Cornell's Legal Information Institute defines as the mutual exchange of promises or obligations between the parties. Your draft should show what each side owes, not only what you will do.

Some agreements also have to be in writing and signed to be enforceable. Many states apply that rule to contracts for the sale of land, contracts that cannot be performed within one year and sales of goods at or above a dollar threshold, commonly $500. The details vary by state and come with exceptions. Ohio's goods rule, for example, has exceptions for specially manufactured goods, for a party who admits the contract in court and for goods where either payment has been made and accepted or the goods have been received and accepted. A chatbot may not tell you whether your state treats your deal as one of these.

Using a template as a checklist

It is hard to spot what is missing from a draft you did not outline yourself. A template can help with that. Laid out for one type of document, it shows the sections that kind of contract usually covers, so you can hold your own draft up against it and see what is absent.

A template knows nothing about your state, your parties or your numbers, and it is not a guarantee that a document fits your deal. Reading legal forms and plain-English explainers next to the chatbot's draft gives you something to compare against, but the blanks, the state rules and the final check are still yours. If the deal involves real estate, a large sum, an employee dispute or unusual terms, a licensed attorney in your state should look at it before you sign.

Before you paste anything in

Before giving a chatbot an existing contract to rewrite, consider the text you are handing over. Material entered into a public chatbot may be kept, reviewed or used to train models depending on the provider's terms and account type, as covered in this piece on AI tools and business data. If the contract carries a confidentiality clause, read it before the paste, not after.

Then print the final draft and read it with one question in mind: what happens if the other side stops answering emails? If it gives no clear answer on payment, ending the deal and where a dispute would be heard, send it back for another round before either of you signs.