Zana Tomich
Dalton & Tomich PLC
Dalton & Tomich PLC
I recently had a client send me a document relating to a partnership dispute. The agreement looked fine at first glance and purported to release the client from further liability to the business. It had professional formatting, familiar boilerplate, all the right headings. As I continued reading, the indemnification clause flatly contradicted the limitation of liability two pages later. The dispute resolution section listed mediation, arbitration, and litigation as concurrent remedies with no sequencing. No governing law provision anywhere. I asked where the contract came from. The answer: ChatGPT.
That story is not unique to my practice. I have been hearing versions of it from colleagues in every area of law. These AI-drafted agreements are showing up more often, and they are becoming a real source of business disputes. If contract work is not your focus, you may not catch every issue. But knowing what to look for and when to pick up the phone and refer the client, can save them a world of trouble down the road.
—————
Why AI-generated contracts fail
Here is the core problem: these tools predict what a contract should sound like based on patterns. They are not doing legal reasoning. The output reads well and mimics the tone and cadence of professional drafting, but there is no judgment behind it. The tool does not account for your client’s risk tolerance is, what regulations govern the transaction, or how a judge in Wayne County would read a particular clause.
Internal contradictions are the biggest failure I am seeing. The tool will generate competing payment terms or conflicting termination rights in different sections of the same agreement without catching the inconsistency. Missing provisions are just as common. I regularly see agreements with no governing law clause, no definition of material breach, nothing resembling a workable dispute resolution process. Then there is what I call jurisdiction blindness: the tool pulls language rooted in another state or country’s law and drops it into a Michigan contract where it means nothing. And finally, there is the problem of false precision. The language sounds dense and authoritative, but when you slow down and parse it, it does not actually say anything enforceable.
What makes this worse is that the finished product looks good. A business owner sees clean formatting, legal terminology, and section headings and assumes the document is solid. Nobody discovers the problems until the relationship goes sideways and one party tries to enforce the agreement, or the other tries to get out of it.
—————
What to watch for across practice areas
This is not just a business litigation problem, either. These contracts are turning up everywhere: in real estate deals, employment arrangements, vendor agreements, partnership formations.
A colleague in estate planning told me about an LLC operating agreement a client had generated to hold rental property. No buyout provisions. Nothing addressing member dissociation under Michigan’s LLC Act. The management structure described in the document bore no resemblance to how the parties actually ran the company. I have heard similar stories from real estate attorneys dealing with purchase agreements full of ambiguous contingency language, and from employment lawyers finding independent contractor agreements that describe what any court would recognize as an employment relationship. That is a misclassification lawsuit waiting to happen.
Every one of these situations has the same thing in common. The client asked a tool to do something that requires professional judgment, and the tool delivered a document that looks competent but is not. Worse, by the time you are seeing it, the contract has often been signed and performed on for months.
Getting Ahead of the Problem
If you spot one of these or even suspect you are looking at one, do your client a favor and get them in front of contract counsel before the document becomes a lawsuit. A review on the front end might run a client a few thousand dollars. Litigating an ambiguous or unenforceable agreement on the back end will cost multiples of that, plus the relationship it destroys along the way.
What to Look For
You do not need to be a contract specialist to spot the warning signs. Look for provisions that repeat or contradict each other in different sections of the same document. Check whether there is a governing law or venue clause, and if there is, whether the jurisdiction it names has any connection to the parties. Watch for indemnification language that is so broad it shifts all the risk onto one side without that party seeming to realize it. See if key terms like “material breach,” “confidential information,” or “work product” are actually defined, or just used and never explained. And pay attention to the dispute resolution clause. If it references mediation, arbitration, and litigation all at once without specifying an order or which one controls, that is a problem. Any one of these is a good reason to pick up the phone and connect your client with someone who does this work every day.
These tools are not going away and for certain tasks they can be useful. But drafting a contract that will hold up when things go wrong requires judgment, context, and years of watching deals fall apart. A piece of software does not have that. The best thing we can do is help our clients understand the difference before they learn it the hard way. And when the document is already on the table, making the right referral might be the most valuable ten minutes you spend on that client all year.
That story is not unique to my practice. I have been hearing versions of it from colleagues in every area of law. These AI-drafted agreements are showing up more often, and they are becoming a real source of business disputes. If contract work is not your focus, you may not catch every issue. But knowing what to look for and when to pick up the phone and refer the client, can save them a world of trouble down the road.
—————
Why AI-generated contracts fail
Here is the core problem: these tools predict what a contract should sound like based on patterns. They are not doing legal reasoning. The output reads well and mimics the tone and cadence of professional drafting, but there is no judgment behind it. The tool does not account for your client’s risk tolerance is, what regulations govern the transaction, or how a judge in Wayne County would read a particular clause.
Internal contradictions are the biggest failure I am seeing. The tool will generate competing payment terms or conflicting termination rights in different sections of the same agreement without catching the inconsistency. Missing provisions are just as common. I regularly see agreements with no governing law clause, no definition of material breach, nothing resembling a workable dispute resolution process. Then there is what I call jurisdiction blindness: the tool pulls language rooted in another state or country’s law and drops it into a Michigan contract where it means nothing. And finally, there is the problem of false precision. The language sounds dense and authoritative, but when you slow down and parse it, it does not actually say anything enforceable.
What makes this worse is that the finished product looks good. A business owner sees clean formatting, legal terminology, and section headings and assumes the document is solid. Nobody discovers the problems until the relationship goes sideways and one party tries to enforce the agreement, or the other tries to get out of it.
—————
What to watch for across practice areas
This is not just a business litigation problem, either. These contracts are turning up everywhere: in real estate deals, employment arrangements, vendor agreements, partnership formations.
A colleague in estate planning told me about an LLC operating agreement a client had generated to hold rental property. No buyout provisions. Nothing addressing member dissociation under Michigan’s LLC Act. The management structure described in the document bore no resemblance to how the parties actually ran the company. I have heard similar stories from real estate attorneys dealing with purchase agreements full of ambiguous contingency language, and from employment lawyers finding independent contractor agreements that describe what any court would recognize as an employment relationship. That is a misclassification lawsuit waiting to happen.
Every one of these situations has the same thing in common. The client asked a tool to do something that requires professional judgment, and the tool delivered a document that looks competent but is not. Worse, by the time you are seeing it, the contract has often been signed and performed on for months.
Getting Ahead of the Problem
If you spot one of these or even suspect you are looking at one, do your client a favor and get them in front of contract counsel before the document becomes a lawsuit. A review on the front end might run a client a few thousand dollars. Litigating an ambiguous or unenforceable agreement on the back end will cost multiples of that, plus the relationship it destroys along the way.
What to Look For
You do not need to be a contract specialist to spot the warning signs. Look for provisions that repeat or contradict each other in different sections of the same document. Check whether there is a governing law or venue clause, and if there is, whether the jurisdiction it names has any connection to the parties. Watch for indemnification language that is so broad it shifts all the risk onto one side without that party seeming to realize it. See if key terms like “material breach,” “confidential information,” or “work product” are actually defined, or just used and never explained. And pay attention to the dispute resolution clause. If it references mediation, arbitration, and litigation all at once without specifying an order or which one controls, that is a problem. Any one of these is a good reason to pick up the phone and connect your client with someone who does this work every day.
These tools are not going away and for certain tasks they can be useful. But drafting a contract that will hold up when things go wrong requires judgment, context, and years of watching deals fall apart. A piece of software does not have that. The best thing we can do is help our clients understand the difference before they learn it the hard way. And when the document is already on the table, making the right referral might be the most valuable ten minutes you spend on that client all year.
––––––––––––––––––––
Subscribe to the Legal News!
https://www.legalnews.com/Home/Subscription
Full access to public notices, articles, columns, archives, statistics, calendar and more
Day Pass Only $4.95!
One-County $80/year
Three-County & Full Pass also available
