Are AI Generated Contracts Legit? Here’s What You Really Need to Know

May 28

One of the most common questions I’ve been getting lately:
“Can I use a contract form from ChatGPT or online?”

Short answer: Sort of, but proceed with caution.

While AI-generated contracts and downloadable templates have come a long way from the old-school fill in the blank LegalZoom days, they’re still just that: templates. They’re generic, and they don’t account for the unique dynamics of your industry, deal, business model, or specific risks.

Bottom line? I only recommend using them as a starting framework never as a final version. Always have a lawyer review (or better yet, draft) the agreement to ensure your actual needs are met and you’re properly protected if things go sideways.

But I get it, sometimes you’re moving fast, or your budget is tight, and legal review doesn’t happen. So, if you’re going to DIY it (again, not my recommendation), here are:

5 Key Contract Terms You Must Understand Before Signing

Think of this as your mini checklist for spotting red flags in any contract, whether it came from an AI model or a random website.

1. Term & Termination

What to check: How long does the agreement last? Can either party end it and how?
Red flag moments (Call me or another lawyer!):
- No clear end date
- Automatic renewals that never stop
- Only the other party can walk away

You should never be stuck in a contract you can’t exit reasonably.

2. Payment & Performance Obligations

What to check: What are you getting paid? What do you have to deliver in return and when?
Red flag moments:
- Vague or confusing payment language
- No tie between what you do and when you get paid
- Deliverables that feel one-sided or undefined

If you don’t know what’s expected of you or what happens if expectations aren’t met, that’s a problem.

3. Intellectual Property (IP) Ownership

What to check: Who owns what gets created during the project?
Red flag moments:
- You’re producing something valuable (design, copy, strategy, code)
- Ownership or usage rights are unclear or completely transferred away from you

If you want to reuse, repurpose, or protect your own work, this clause matters.

4. Damages & Indemnification

What to check: Who’s on the hook if something goes wrong? Can you be sued, and for how much?
Red flag moments:
- You’re liable for everything
- They’ve capped their own risk but not yours
- You’re indemnifying them for broad or vague scenarios

These clauses get overlooked until a real issue arises, then they can cost you big time.

5. Exclusivity

What to check: Are you restricted from working with others?
Red flag moments:
- You’re barred from working with other clients, markets, or industries
- You’re giving up competitive rights without clear benefits in return

Exclusivity should always be negotiated, not casually accepted.

Final Thoughts: Use Tools Wisely, But Don’t Skip Legal Review

AI and internet tools can be helpful, but for high beta documents they’re not a substitute for legal expertise. At best, they’re a head start. At worst, they leave you vulnerable in ways you won’t realize until it’s too late.

This list isn’t exhaustive, and every deal is different. But if you’re doing business, especially with higher stakes, long term commitments, or IP heavy projects, it’s worth a quick legal review.

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https://bradfordtobin.substack.com/

This post is for informational purposes only and does not constitute legal advice.

BRAD TOBIN