The Hidden Risks of Using ChatGPT for Legal Documents




 

Artificial intelligence has become part of everyday business, and 2025 has brought an explosion of tools like ChatGPT being used to draft everything from emails to complex legal agreements. But while AI can be helpful, it's also creating a new wave of legal problems. As Commercial Lawyers on the Gold Coast, our team at QC Law is seeing more clients come to us with contracts, leases, and agreements drafted entirely by ChatGPT, only to discover, too late, that the documents are non-compliant with Australian law.

In our recent QC Law podcast, our commercial team spoke openly about the rise of AI-drafted documents, and the results are, at times, shocking. Despite AI's clever design, one thing remains very clear: ChatGPT is not a lawyer.

AI Looks Convincing, But It Gets Key Details Wrong

One of the biggest dangers of AI-generated documents is that they appear legitimate and professional. Clients assume that because the wording sounds formal, the document must be correct. In reality, AI:

  • References clauses that don't exist
  • Creates fictitious schedules
  • Uses principles from the wrong jurisdiction
  • Bases content on outdated or irrelevant information
  • Makes up answers when it doesn't know

In one example discussed in the podcast, a lawyer asked ChatGPT questions about a 72-page lease they had personally drafted. ChatGPT confidently answered questions about clauses that didn't exist, proving that AI can create information to fill gaps.

AI Doesn't Understand Australian Law

A significant issue is that ChatGPT often generates wording based on overseas legislation, typically from the US or UK. Even when prompted for Australian content, it can still use incorrect terminology, invalid clauses, or processes that do not apply here.

When clients later rely on these documents, the cost to fix the mistakes often exceeds what it would have cost to have a lawyer draft the agreement properly in the first place.

AI Can't Consider Your Unique Circumstances

Legal documents are not one-size-fits-all. The right contract depends on:

  • Your structure
  • Your risk exposure
  • Your state or territory
  • Your industry
  • Your regulatory obligations
  • What you are trying to protect

AI has no understanding of your personal financial circumstances, the entity structure behind the transaction, or the relevant legal risks. It can only generate text, not legal advice.

This is why QC Law is seeing clients charged higher fees after presenting AI-drafted documents. Lawyers cannot simply "review" a fundamentally flawed document. Most of the time, it must be redrafted from scratch.

AI in Legal Practice: Helpful Tool, Not a Legal Advisor

AI is increasingly integrated into legal CRMs such as LEAP and Actionstep to support administrative tasks, but these tools are not designed to create standalone legal advice. They help streamline processes, but the legal reasoning, review and professional judgment must come from a qualified lawyer.

The podcast highlighted numerous cases where clients prepared their own documents using AI, believing they were saving money. Instead, they ended up with disputes, unenforceable clauses and higher legal fees to unwind the mess.

What You Should Do Instead

Using AI for brainstorming or drafting straightforward content is fine, but never use it to create:

  • Leases
  • Shareholder agreements
  • Commercial contracts
  • Loan documents
  • Trust deeds
  • Partnership agreements
  • Construction agreements

These documents require precision, compliance and experience. The risks of getting it wrong are enormous.

Before signing or relying on any legal document, have it reviewed by a Commercial Lawyer on the Gold Coast who understands not just the wording, but the legal impacts behind every clause.

If you've drafted a document using AI or need a legally compliant contract created from scratch, speak with a Commercial Lawyer at QC Law before it becomes a costly issue.