OpenAI has introduced its artificial intelligence (AI) language model, ChatGPT, to the world. ChatGPT interacts with users in a conversational manner to create human-like text in response to prompts. The use cases of this potentially disruptive technology appear to be limitless as it has the ability to generate text on a wide variety of topics, including contract drafting. Naturally, lawyers and nonlawyers alike are considering whether ChatGPT is useful as a contract drafting tool.

While ChatGPT can certainly generate contracts, its ability to do so effectively and accurately, at this stage, is limited.

First, when using ChatGPT for drafting contracts, it is important to remember the age-old maxim, “you get out what you put in.” The importance of the prompt entered by the user of this service cannot be overstated. Contract drafting always requires a deep understanding of legal concepts and language. While ChatGPT has been trained through machine learning algorithms that analyze vast amounts of text, including legal documents, it lacks the nuanced understanding of legal concepts that lawyers possess. This can lead to errors and inconsistencies in the contracts it generates.

Additionally, contract drafting requires an understanding of the specific context in which the contract will be used. A contract that is appropriate for one situation may not be appropriate for another, even if the underlying legal concepts are the same. At this time, ChatGPT does not have the ability, on its own, to understand the specific context of a given contract, which may lead to contracts that are poorly suited to the situation at hand.

Another issue with using ChatGPT for contract drafting is that contracts often require negotiation and collaboration between parties. ChatGPT does not have the ability to negotiate or collaborate in the same way that humans can, which can make it difficult to generate contracts that are acceptable to all parties involved.

Despite these limitations, there are situations where ChatGPT may be a useful tool for contract drafting, at least as a starting point. If a party needs to generate a simple contract quickly and does not have access to a lawyer, ChatGPT may be able to generate a basic contract that is sufficient for their needs, although this is not an ideal solution by any means. For example, we tested ChatGPT’s ability to generate a simple rental property lease agreement and ChatGPT quickly generated a one-page, 12-paragraph, template agreement that covered the generic key terms that one typically finds in a landlord/tenant lease agreement, such as terms related to late payments, security deposits, maintenance, and subletting, among others. As expected, however, the sample agreement lacked the nuance or detailed terms that would make this a suitable contract.

Overall, while ChatGPT has the ability to generate contracts, its effectiveness is limited by its lack of legal expertise, understanding of context, and ability to negotiate and collaborate. AI, generally, can have exponential growth in its capabilities, so it will be interesting to track ChatGPT’s progress to address its current shortcomings as improvements occur. For important contracts, it is always advisable to consult with an actual lawyer who can provide the necessary legal skill and context-specific knowledge.