Why you Shouldn't Use ChatGPT or Perplexity for Contract Reviews

Are you using ChatGPT or Perplexity for your contract reviews? Then read the full blog, and you may never use them even for inspiration again.

Using general-purpose AI tools like ChatGPT or Perplexity for contract reviews poses significant risks that can result in legal malpractice, professional liability, and compromised client confidentiality. Despite their impressive language capabilities, these tools lack the specialized training, security measures, and legal accuracy required for critical contract analysis.

Let's discuss what are the solid reasons to prove general-purpose AI tools aren't efficient in reviewing contracts:

Professional Liability and Malpractice Risks

Professional Liability and Malpractice Risks

Most of the time these general-purpose AI tools provide hallucinations (incorrect results AI will generate). There are cases which demonstrate that even unintentional AI misuse leads to professional consequences, including court sanctions, monetary penalties, disciplinary referrals, and loss of professional credibility.

Example: The Utah court- Richard Bednar case

Inconsistent Contract Analysis

Contract review demands consistency and precision. General-purpose AI tools introduce dangerous variability. If five users analyze the same contract then they might receive five different analyses of the same contract.

This inconsistency creates Longer cycle times due to misalignment between reviewers, Increased risk exposure from missed clauses or misinterpreted terms, Operational disruption when contracts fail to protect business interests

Security and Confidentiality Violations

Attorney-Client Privilege at Risk

Using consumer AI platforms for contract review can destroy attorney-client privilege. When confidential client information is input into public AI tools, it constitutes voluntary disclosure to a third party, and sharing sensitive information with an external party can be seen by courts as a clear forfeiture of that secrecy.

Contract Confidentiality Breaches

Many contracts contain confidentiality clauses that explicitly restrict sharing contract terms. Uploading contracts to AI tools, even for routine analysis, can breach these agreements, which results in

• Claims for breach of contract
• Termination of business relationships
• Regulatory penalties or intellectual property disputes

Lack of Legal Specialization

No Contract-Specific Knowledge

General AI tools lack understanding of:

• Jurisdiction-specific legal requirements
• Industry-specific contract standards
• Cross-referencing between related documents
• Regulatory compliance obligations

For example, AI tools may miss restrictive exclusivity clauses that could cap a company's growth potential, or generate clauses mixing jurisdictions that render contracts unenforceable.

Inability to Handle Complex Legal Context

Contract review requires comprehensive document analysis that exceeds current AI context windows. Legal work demands simultaneous consideration of interconnected documents, understanding of defined terms that modify meaning throughout contracts, and analysis across vast document collections in litigation contexts. AI tools cannot provide the contextual understanding and interpretive skills that human lawyers possess, particularly for ambiguous language or unconventional contract structures.

Better alternatives exist

Many AI tools exist in the market. They provide complete assistance to contracts.

They have multiple features:

• Contract Creation and Drafting (Templates & AI-assisted drafting)
• Centralized Contract Repository and Data Management
• Workflow and Approval Automation
• E-Signature Integration
• Obligation and Renewal Management with Automated Alerts
• Analytics and Reporting for Risk and Performance Insights
• Version Control and Audit Trails for Compliance
• Security and Access Controls (Role-based & Data Protection)
• Seamless Integration with CRM, Productivity, and E-signature Tools
• AI-Powered Features for Contract Review, Risk Detection, and Summarization

And coincidentally, we also provide

• Offers automated legal analysis
• Automated Obligation Tracking
• Centralized Smart Repository
• E-Signature Integration
• Automated Workflows & Collaboration
• Analytics and Reporting for Risk and Performance Insights
• Security & Privacy

If you are in doubt of using general-purpose AI tools or specialized AI tools like ContractSPAN, then test it with our free trial now.

Conclusion

General-purpose AI tools like ChatGPT and Perplexity are fundamentally unsuitable for contract review. The combination of high error rates, security vulnerabilities, confidentiality risks, and lack of legal specialization creates an unacceptable risk profile for professional legal work.

As one federal judge stated, no lawyer should be using ChatGPT or any other generative AI product to perform research without verifying the results. The legal profession must prioritize client protection and professional competence over convenience, choosing specialized tools designed specifically for the unique demands of legal practice.

So do not use general-purpose AI tools for your contracts because they are your assets.