Can you trust AI to create contracts? Separating fact from fiction

New tech always comes with a trade-off, and AI is no different. It makes creation faster and easier, but it has also raised fears around accuracy and data privacy.

So when it comes to AI contract tools, it’s no surprise that business owners are cautious.But the truth is, most of these fears are based on myths, not reality.

The real question is: can you trust AI to create contracts? And where does it fall short?

Let’s cut through the hype and separate fact from fiction.

Fear #1: “AI contracts aren’t legally valid”

Reality: A contract’s validity depends on its content and execution, not the tool that creates it.

It doesn’t matter if your contract is drafted by an AI tool, pulled from a template or scribbled on the back of a napkin with a pen. What matters is whether it meets the legal requirements of a valid contract:

• Offer and acceptance
• Consideration (something of value exchanged)
• Intention to create legal relations
• Capacity of the parties
• Proper execution (e.g., signatures, witnesses if required)

An AI contract generator can quickly create clauses and terms, but the responsibility for reviewing, adapting, and executing the contract correctly still lies with you.

For more detail on this, check out our piece on whether or not AI-generated contracts are legally binding, in which we speak to an expert on contract law in tech.

Fear #2: "AI doesn’t understand my industry's specific legal requirements"

Reality: AI excels at standard contract structures but requires human input for industry-specific terms and compliance.

AI is clever, sure. But when it comes to understanding nitty-gritty engineering specs or healthcare compliance, it still needs support.

AI can help you draft a foundational contract, but when it comes to industry-specific details, that’s where you will have to ensure everything is watertight.

So think of AI as your drafting assistant, not your technical advisor. It saves you hours on a more general contract so you can focus on the specialized clauses specific to your project.

Fear #3: "My sensitive business data will be used to train the AI"

Reality: Reputable AI contract tools don't use customer data for training and employ security measures.

It’s a common worry. Contracts are full of proprietary information, trade secrets and confidential clauses. The idea that an AI could “remember” or repurpose this data sounds alarming but that’s not how most professional AI contract tools work.

For example, when you create a contract with AgreementGen, none of your data is used to train the AI and all information is kept 100% private and secure. Every step is encrypted and follows rigorous security protocols to protect your sensitive business information.

In saying that, not all AI tools play by the same rules — stick with ones that spell out their privacy policies and prove they take security seriously.

Fear #4: "Who's liable if the AI makes a mistake in my contract?"

Reality: Liability remains with the person signing the contract. AI is a drafting tool, not a legal decision-maker.

Unfortunately, you can’t hand over your legal responsibilities to AI .

AI can write up contracts in a few moments, but it is your responsibility to make sure the clauses are correct and legally sound.

Consider it this way: if you download a free template online or ask a junior staff member to prepare a draft, any errors still fall on you once you sign. AI works the same way. It provides a solid foundation, but it requires human oversight to attest to the details.

Fear #5: "AI will replace the need for lawyers entirely"

Reality: AI handles routine drafting tasks, making legal review more efficient rather than eliminating it.

Until AI can shake your hand, read the room and calm your nerves, lawyers aren’t going anywhere.

AI is a powerful tool for handling simple tasks, but it doesn’t replace the expertise and judgment of a trained lawyer. Instead, it makes legal review faster and more efficient by taking care of repetitive work, like drafting standard clauses or formatting agreements.

In the future, the role of lawyers will become even more human-oriented: helping to navigate life situations and being an empathetic voice in a sticky situation.

Try AgreementGen for fast, secure contract generation

Like every new technology, AI brings both benefits and risks. It’s not designed to replace your lawyer, but it can save you hours when drafting contracts.

The key is choosing the right tool. Many cut corners on privacy or lack the safeguards you need.

That’s why we created AgreementGen: A secure, reliable and easy-to-use AI contract generator. Draft contracts fast, add custom clauses with built-in AI and be confident knowing your data is protected.