AI Is Making Contract Drafting Faster. So Why Are Negotiations Taking Longer?

AI contract drafting can create longer negotiations, unnecessary legal costs, and commercially unreasonable terms. Here's what companies should know before sending an AI-generated contract to the other side.

AI can produce a polished-looking contract in minutes. But if that first draft misses the commercial bargain or starts from an unnecessarily aggressive position, it can add weeks to the negotiation.

We are increasingly seeing AI-drafted and AI-revised contracts that are so focused on protecting the party using AI that they fail to reflect the commercial terms the parties actually agreed upon, include provisions that are far more one-sided than market practice, or create legal issues the business did not intend to create.

The problem is not necessarily that the language is legally incorrect. The problem is that AI does not understand the deal, the relationship between the parties, or what is commercially reasonable in the context of the transaction.

When AI Changes the Deal

One of the biggest problems is that AI often inadvertently changes the substance of a deal while producing language that looks sophisticated and complete.

For example, in a joint marketing agreement, the parties had agreed that one party would receive a marketing fee in exchange for performing marketing activities and sharing of its membership list with the other party.

The AI-generated agreement made the paid party’s marketing performance entirely discretionary. In other words, it required payment but did not require the marketing services that were supposed to justify that payment. That not only departed from the parties’ business deal; it also raised questions about whether the agreement contained enforceable mutual obligations.  The draft also would have allowed the paid party to earn fees on revenue received before the agreement was signed, including revenue from participants unconnected to its marketing efforts.

The result was a contract that failed to reflect the parties’ agreed commercial arrangement and introduced avoidable legal and negotiation issues.

AI Doesn't Know What Is Market for Commercial Contracts

AI-generated drafts may take unusually aggressive or one-sided positions on commonly negotiated issues, including limitation of liability, indemnification, termination rights, performance obligations, confidentiality, data security, and intellectual-property ownership. They may also make obligations that would ordinarily be mutual apply to only one party.

Those positions may be legally defensible in isolation, but they can be inconsistent with market expectations for the transaction. When that happens, the counterparty is likely to redline them, business teams may need to revisit terms they believed were settled, and the parties can spend time negotiating issues that could have been addressed more reasonably in the first draft.

As experienced counsel, we bring a different perspective. The question is not “How can we give our client the most protection?”  It is “What protection does the client actually need, what is market for this type of transaction, what will the other side reasonably accept, and which issues are worth negotiating?” That judgment can make a significant difference in how quickly a deal gets done.

The Cost of Starting with the Wrong Draft

Starting with a draft that does not reflect the deal or takes unnecessarily aggressive positions creates avoidable negotiation from the outset.  The parties may eventually end up with language much closer to what experienced counsel would have proposed from the beginning, but only after multiple rounds of negotiation, redlines, legal fees, and unnecessary frustration.

And there is often a less tangible cost – loss of goodwill between the parties. Sending a contract that disregards agreed-upon business terms, or asks for unusually aggressive protections that are not market standard, can affect how the other party views the relationship before it has even begun.

How to Use AI Without Slowing Down Your Deals

AI can be an excellent tool for preparing a first draft. The key is to have experienced counsel review that draft before it goes to the other party.  Experienced counsel will ask:

• Does the agreement accurately reflect what the business teams actually agreed upon?

• Do the parties' obligations create real, enforceable commitments?

• Are liability, indemnification, and termination provisions appropriately structured?

• Are terms that would ordinarily be mutual drafted as mutual obligations?

• Are the terms consistent with market practice for this type of transaction?

• Which provisions are important enough to negotiate, and which are likely to create unnecessary friction?

• Does the agreement allocate risk in a way that makes sense for the actual relationship?

AI and experienced legal counsel are not competing alternatives. Used together, AI can accelerate drafting while counsel helps ensure the agreement accurately reflects the deal, allocates risk appropriately, uses commercially reasonable terms, and focuses negotiation on the issues that actually matter. The most efficient contracting process is not necessarily the one that gets a document drafted fastest; it is the one that starts with a credible first draft and gets the parties to a workable agreement faster.

How ExecutiveGC Can Help

ExecutiveGC helps companies turn AI-generated drafts into commercially workable agreements. Before a draft goes to the other side, we assess whether it reflects the agreed business terms, allocates risk appropriately, and takes positions that are realistic for the transaction and relationship.

A focused pre-send review can prevent avoidable redlines, reduce negotiation cycles, and save substantially more time and expense than it costs. We identify what should be changed, what is consistent with market practice, which issues are worth negotiating, and which points can be left alone. The result is a more credible first draft and a faster path to a workable agreement.

If your company is using AI to draft or revise contracts, contact ExecutiveGC before sending the draft to the other party. We can help ensure that AI speeds up your contracting process rather than creating a longer and more expensive negotiation.

About the Author: Jacqueline Piscitello is a Founding Partner of ExecutiveGC, LLP, where she and her team provide practical, business-focused legal counsel to growing companies. Contact Jacqueline at jackie@executive-gc.com to discuss how ExecutiveGC, LLP can support your business.

This article is for general informational purposes and does not constitute legal advice.