17/04/2026
AI can create contracts, letters, and policies in seconds, which can be tempting if you’re trying to save time or cut costs. But legal documents rely on accuracy, judgment, and confidentiality, and AI can get these wrong.
Before you rely on AI for something this important, it’s worth making sure your documents are done properly. Here are some things to watch out for:
🚨Accuracy and “Hallucination” Risks
AI-generated legal documents can look convincing, but they are not always accurate. These tools do not actually understand the law or the specific details of your situation, meaning it can confidently provide information that is false or unsupported – this is often referred to as a “hallucination”.
🚨Lack of Contextual Understanding
Lawyers typically analyse not only the law, but also your specific circumstances, commercial objectives, jurisdictional differences, and risk tolerance of the parties involved. AI systems, by contrast, generally rely on generic prompts and broad training data rather than a deep understanding of your situation. As a result, AI-generated documents may be overly generic or misaligned with your needs.
🚨Confidentiality and Data Security Concerns
Legal work frequently involves sensitive information, including trade secrets, financial details, and personal data. When inputting information into AI systems, there is a potential risk that the data could be stored, processed, or exposed in ways that compromise confidentiality. If you are not fully aware of how your data is handled, you may inadvertently expose confidential information.
🚨Liability and Accountability Challenges
It’s important to remember that you are the one bearing the risk. Many AI providers include disclaimers stating that their tools are not intended to provide legal advice and that users remain responsible for verifying outputs. This means that those who rely on AI-generated legal documents without professional review may have limited recourse if problems arise later.
🚨Bias and Training Data Limitations
AI systems are trained on large datasets that may contain biases, outdated legal interpretations, or incomplete information. As a result, the documents they generate may reflect those underlying limitations.
Despite these risks, AI can still be a valuable tool when used appropriately. The key is to treat AI-generated text as a starting point rather than a finished product.
We always recommend using a lawyer to carefully review, edit, and verify any AI-generated content before it is used in a legal context.
You can read more in detail on this topic on our website: https://www.pierlaw.co.nz/thinking-of-using-ai-to-write-a-contract/
