By Madaline Zannes, principal lawyer and founder of Zannes Law Firm
Disclaimer: This article is for general information only and does not constitute legal advice. Every situation is unique; consult qualified counsel about your circumstances.
Since 2017, I have worked at the intersection of artificial intelligence and law, beginning as a legal tech consultant and publishing early commentary on how AI can support rather than replace lawyers. My 2017 article “Relax lawyers, A.I.’s not here to take our jobs” reflects that perspective and documents my long-running focus on practical, compliant uses of AI in legal work.
Now, AI is everywhere, and many business owners are wondering if they can rely on AI for legal documents instead of working with a lawyer. You may even see services advertising AI contract review, AI contracts, or automated tools for AI contract drafting and AI contract analysis. At first, it can look like a fast and affordable way to handle your paperwork.
But just because AI can generate text that looks like a legal contract does not mean it will protect you under Ontario law. These tools do not provide legal advice, and they often produce agreements that fail to meet enforceability standards here. Whether it’s a legal contract AI template or a service offering AI legal contract review, the risks are real if the agreement does not comply with Ontario statutes or case law.
Can AI Draft a Contract?
Yes, AI can create documents that look like contracts. You can type in a request such as “make me a consulting agreement” or “create a lease,” and you’ll likely get something that resembles a legal agreement. But there’s an important distinction: an AI contract writer is not a licensed lawyer.
AI tools generate text based on patterns, not legal training. They don’t confirm whether the contract complies with Ontario statutes like the Business Corporations Act, RSO 1990, the Employment Standards Act, or whether clauses meet enforceability requirements. In other words, AI might give you a template, but it does not give you legal advice.
And that distinction matters. The Law Society of Ontario regulates who can provide legal services in the province. AI programs are not licensed lawyers, and they cannot stand behind the work if something goes wrong.
The Risks of Letting AI Draft Your Contract
Using AI for contracts carries significant risks. Here are the main issues Ontario businesses should consider:
1. Wrong Jurisdiction
AI tools often pull content from U.S. websites or international templates. That means your contract could reference American laws or foreign concepts that don’t apply in Ontario. If you rely on that document, you may have unenforceable or irrelevant clauses. For example, an AI contract review might leave in references to “Delaware law” or “UCC provisions,” which have no place in an Ontario agreement.
2. Missing Protections
AI can produce something that looks polished but leaves out critical protections. Clauses about dispute resolution, governing law, intellectual property ownership, or termination rights are often incomplete or missing altogether. These are exactly the parts of a contract that protect you when a relationship goes wrong.
3. Overly Broad or Unenforceable Clauses
Ontario courts will strike down contract terms that are too broad or unreasonable. AI has no way to gauge enforceability. For example, a non-compete clause generated by AI contract drafting might last five years and cover the entire province. Courts here are unlikely to uphold that due to a 2021 amendment to the Employment Standards Act, leaving you with no real protection.
4. Privacy and Confidentiality Concerns
When you use AI systems, you may be uploading sensitive business information. Many platforms store or use that data to improve their systems. If you paste in confidential information about your business or clients, you may be unintentionally disclosing it. That could even put you in breach of Ontario’s Personal Information Protection and Electronic Documents Act (PIPEDA).
5. No Accountability
If your AI-generated contract fails, you have no one to hold accountable. There is no malpractice insurance, no regulator, and no professional duty of care. You are on your own.
Why You Still Need a Lawyer in Ontario
Having a lawyer draft or review your contract does more than put words on paper. It ensures the agreement reflects your intentions, complies with Ontario law, and stands up if tested. Here are some reasons why businesses still need a lawyer:
- Tailored to Your Situation
Every business is unique. An Ontario lawyer considers your specific circumstances: what kind of work you do, your risk tolerance, your goals, and your industry standards. AI cannot replace that kind of context. - Compliance With Ontario Law
Ontario has specific rules about contracts, employment, and consumer protection. A lawyer knows which statutes apply and how to draft language that is enforceable in this province. - Risk Management
A lawyer spots red flags you may not think about. For example, how payments are structured, what happens if there’s a dispute, or how intellectual property is handled. These details can prevent lawsuits down the line. - Enforceability in Court
A contract only has value if it holds up in court. Lawyers draft with that in mind, ensuring terms are reasonable, clear, and enforceable. AI does not. - Professional Accountability
Lawyers in Ontario are regulated by the Law Society of Ontario. That means we must meet professional standards, carry liability insurance, and act in your best interest. If something goes wrong, you have recourse. With AI legal contracts, you do not.
Situations That Can Arise From AI-Drafted Contracts
Here are some real-world examples of how relying solely on AI contracts can backfire:
- A contractor dispute: A business hires a freelancer with an AI-generated agreement. The contract forgets to include who owns the copyright. Months later, the freelancer claims ownership of the work, and the business has no clear protection.
- An employment agreement gone wrong: A startup uses AI contract drafting for an employment agreement that violates Ontario’s Employment Standards Act. The employee sues, and the company is ordered to pay damages because the contract was invalid.
- Commercial lease issues: A landlord uses AI contract analysis tools to generate a lease. The lease doesn’t meet Ontario’s landlord-tenant requirements and includes unenforceable terms. When the tenant refuses to pay, the landlord discovers the lease will not hold up in court.
- Confidentiality breach: A business pastes confidential client data into an AI legal contract review system. That information ends up stored on third-party servers without the business realizing.
Each of these situations could have been avoided with proper legal advice.
The Smart Way to Use AI in Business Contracts
AI is not going away. It can be a helpful tool for brainstorming ideas, creating checklists, or even providing a starting point for drafting. But it should never be the final step in preparing a contract.
The smarter approach is to use AI for background work if you wish, but always have a lawyer review and finalize the document. That way, you get the best of both worlds: efficiency from technology and legal protection from professional expertise.
Ontario businesses should think of AI as a supplement, not a substitute, for proper legal services. You wouldn’t perform surgery on yourself just because you found instructions online, and you shouldn’t rely on AI alone to handle your contracts.
Final Thoughts
AI is powerful, but it is not a lawyer. When it comes to something as important as your business contracts, cutting corners can cost you far more in the long run. In Ontario, having a lawyer draft or review your agreements is the safest way to make sure your business is protected.
At Zannes Law Firm, we combine practical business experience with legal expertise to create contracts that safeguard your interests and support your growth. If you are considering using AI tools in your business or already have an AI-generated contract, we recommend having it reviewed by a lawyer before you sign.
Madaline Zannes is a lawyer and local business owner operating Zannes Law Firm and Haven Workspace in Niagara-on-the-Lake. She specializes in helping entrepreneurs and small businesses navigate incorporation, business law, and regulatory compliance.
