The legal industry is undergoing a significant transformation, driven by the rapid adoption of generative artificial intelligence contract review and drafting tools. AI-powered platforms can now generate, review, and redline contracts faster than any paralegal, saving law firms countless hours on repetitive tasks. However, while AI brings efficiency, it does not replace legal expertise—human oversight remains critical to ensuring contract accuracy, enforceability, and compliance.
From Harvey AI and Microsoft Copilot to contract review platforms like Kira Systems and LawGeex, AI is reshaping contract workflows. But with innovation comes risk. Can AI-generated contracts be trusted? Are they legally sound? What are the compliance and security concerns?
This article explores how AI is revolutionising contract law, the potential risks of AI-generated agreements, and the best tools available for AI-powered contract drafting and review.
If your firm is considering AI for contract automation, book a £100 consultation today to ensure you implement the right tools while safeguarding legal and ethical standards.
How AI is Transforming Contract Drafting
AI is redefining how legal professionals draft, review, and negotiate contracts. Traditionally, contract work has been time-intensive and repetitive, requiring lawyers to manually draft agreements and scrutinise lengthy legal documents for inconsistencies. AI now offers automation, efficiency, and accuracy, transforming how contracts are handled.
1. Automating Contract Drafting
AI can generate legally structured contracts in seconds based on predefined templates and prompts. Tools like Harvey AI and Microsoft Copilot allow lawyers to:
- Draft contracts automatically using standardised clauses.
- Generate tailored agreements by inputting key contract details.
- Reduce human error by suggesting legally sound provisions.
2. Enhancing Contract Review Efficiency
Contract review is one of the most labour-intensive legal processes. AI-powered tools can quickly analyse contract terms, flag risks, and recommend changes, cutting review time significantly. AI excels at:
- Identifying missing clauses that could expose businesses to liability.
- Highlighting non-compliant terms based on jurisdictional laws.
- Comparing contracts against previous agreements for consistency.
3. Improving Contract Negotiation & Redlining
AI is now being used to assist in contract negotiations by suggesting alternative wording, flagging potential negotiation points, and ensuring a balanced agreement. AI-powered contract tools can:
- Provide negotiation insights based on past contract data.
- Detect unfair clauses and recommend modifications.
- Track changes and ensure compliance with legal standards.
4. Supporting Compliance & Risk Management
AI-powered contract platforms can ensure regulatory compliance by cross-referencing agreements against:
- GDPR and data protection laws.
- Employment and corporate governance regulations.
- Industry-specific legal standards (e.g., financial services, healthcare).
By automating these processes, AI allows legal teams to focus on strategic legal matters rather than administrative contract work.
The Risks of AI-Generated Legal Agreements
Despite its advantages, AI-generated contracts present several risks that must be carefully managed. Law firms must ensure that AI is used as a tool to assist lawyers, rather than replacing essential human judgment.
1. Lack of Legal Context & Nuance
AI lacks human intuition and legal reasoning. While AI can draft a contract, it may not fully understand:
- The commercial intent behind contract clauses.
- Industry-specific nuances that require tailored legal wording.
- Client-specific needs that cannot be standardised.
2. Errors & Omissions in AI-Generated Contracts
AI can misinterpret contract terms, leading to incorrect or incomplete provisions. If a lawyer relies solely on AI without verification, they risk producing a contract that is:
- Legally unenforceable.
- Missing key protections for one or both parties.
- Incompatible with governing laws.
3. Data Security & Confidentiality Risks
Most AI models learn from user input, raising concerns over:
- Confidentiality breaches if sensitive contract data is fed into AI.
- Potential data leaks due to inadequate AI platform security.
- Uncertainty about how AI providers store and use contract data.
4. Regulatory & Ethical Considerations
The legal profession is highly regulated, and AI must be used in compliance with:
- Data protection laws (GDPR, UK Data Protection Act, US privacy laws).
- Ethical standards for AI in law (such as those being developed by regulators worldwide).
- Emerging AI laws, including the EU AI Act, which will impose stricter governance on AI-generated contracts.
The solution? AI should never work alone. Lawyers must always review, refine, and approve AI-generated contracts to ensure legal accuracy and compliance.
The Best AI Tools for Contract Review & Drafting
Several AI-powered tools are leading the way in contract automation, offering law firms efficient and scalable solutions.
1. Harvey AI
- Designed specifically for law firms.
- Automates contract drafting and legal research.
- Provides AI-assisted legal argumentation and risk analysis.
2. Microsoft Copilot for Contracts
- Integrated into Microsoft Word, Outlook, and Teams.
- Suggests contract modifications based on best practices.
- Helps automate redlining and clause suggestions.
3. Kira Systems
- Specialises in AI-powered contract analysis.
- Identifies high-risk clauses and compares agreements for consistency.
- Used widely in M&A transactions and due diligence.
4. LawGeex
- Focuses on AI contract review and approval workflows.
- Reduces time spent on routine contract reviews.
- Ensures compliance with company-specific legal policies.
Each of these tools enhances contract efficiency, but they must be used with careful legal oversight to prevent costly mistakes.
Conclusion: AI is a Powerful Legal Tool, But Human Oversight is Essential
Generative AI is revolutionising contract law, offering unparalleled speed, efficiency, and accuracy. However, while AI can draft and review contracts, it cannot replace human legal expertise. Lawyers must remain actively involved to ensure:
✔ AI-generated contracts are legally enforceable.
✔ Agreements comply with regulatory and jurisdictional requirements.
✔ Client interests are fully protected.
AI-powered contract drafting is best approached as a collaborative process between AI and legal professionals. Firms that integrate AI responsibly will gain a competitive advantage, reducing time spent on routine tasks and improving overall contract quality.
If your law firm is exploring AI for contract drafting and review, book a £100 consultation today to discuss the best AI solutions for your practice while ensuring compliance, security, and legal accuracy.
