How to Review and Draft Contracts with AI
What You Will Learn
By the end of this tutorial you will know how to use AI tools to review contracts for risks, draft common agreements, compare contract versions, and extract key terms. You will also learn what AI can and cannot do in a legal workflow.
Who This Is For
This tutorial is for business owners, operations teams, startup founders, freelancers, and legal professionals who want to speed up contract work without sacrificing accuracy. No legal or technical background is required to follow along.
Before You Start
You will need one of the following tools. Each one handles contracts differently, so pick the one that fits your situation.
- ChatGPT is a good free starting point. Paste a contract and ask questions about it. It works well for quick reviews and clause explanations.
- Ironclad is a full contract lifecycle platform. It handles drafting, clause suggestions, approvals, and storage. Best for teams that manage many contracts.
- Spellbook works inside Microsoft Word. It suggests clauses, flags risky language, and reviews contracts without leaving your editor.
- CoCounsel is built by Thomson Reuters. It handles research, document review, and contract analysis. Trusted by law firms.
- PandaDoc combines document automation with e-signatures and approval workflows. Good for sales contracts and proposals.
- DocuSign AI adds AI contract analysis and clause extraction to its signing workflow.
For a full comparison, see the Review and draft contracts task page.
Step 1: Prepare Your Contract for Review
Before you send a contract to any AI tool, take a few minutes to prepare.
Remove sensitive data if possible. If you are using a free tool like ChatGPT, consider replacing real names, dollar amounts, or confidential terms with placeholders like [Party A], [Amount], or [Confidential Term]. Enterprise tools like Ironclad and CoCounsel have built-in data protections, so this step is less critical there.
Know what you are looking for. AI works best when you give it a clear task. Decide in advance whether you want a general risk review, a check on specific clauses, or a comparison between two versions.
Keep the full document. Do not edit or trim the contract before review. AI tools need the full context to identify how clauses interact with each other.
Step 2: Run a General Risk Review
Start with a broad review to flag potential issues. Here is how to do this with different tools.
Using ChatGPT (free)
Paste the contract text into ChatGPT and use a prompt like this:
Review this contract and flag any clauses that pose risk for [your role, e.g., "the service provider"]. Highlight: indemnification, liability caps, termination terms, and IP ownership.
ChatGPT will return a summary of the key risk areas. Read through the response and note any clauses it flags.
Using Ironclad or CoCounsel
Upload the document directly. These tools have built-in risk review features that automatically flag problem areas, score risk levels, and highlight missing clauses. Follow the tool's review workflow.
Using Spellbook
Open the contract in Microsoft Word with Spellbook enabled. It will scan the document and highlight risky language in real time as you read through it.
Important: AI risk flagging is a starting point. It is not a substitute for legal advice. If a flagged clause could have a significant financial or legal impact, consult a lawyer.
Step 3: Review Specific Clauses
After the general review, dig into the clauses that matter most for your situation. Common ones to check include indemnification and liability, termination and renewal, IP ownership and assignment, confidentiality and non-compete, payment terms and penalties, and governing law and dispute resolution.
Use a targeted prompt for each clause you want to examine:
Explain the indemnification clause in this contract in plain language. What obligations does it create for [Party A]? Are there any common protections that are missing?
Or ask the tool to suggest changes:
Suggest alternative language for this clause to reduce our liability: [paste clause].
In Spellbook, you can highlight a clause and ask for suggestions directly in the Word sidebar. In Ironclad, use the clause library to compare your clause against standard language.
Step 4: Compare Contract Versions
When you are negotiating, you often end up with multiple versions of the same contract. AI can help you spot what changed.
Using ChatGPT
Compare these two contract versions and summarize the key differences: [paste version A] and [paste version B].
ChatGPT will list the changes between versions. This is useful for quick comparisons, but it may miss small wording changes in long documents.
Using Ironclad, Luminance, or Evisort
These platforms have built-in version comparison tools. Upload both versions and the tool will generate a detailed redline showing every change. This is more reliable for long or complex contracts.
Step 5: Draft a New Contract
AI can help you create a first draft of common agreements. This works well for NDAs, service agreements, SOWs, freelancer contracts, and simple licensing agreements.
Here is a prompt for drafting:
Draft a standard NDA for [type of relationship, e.g., "a freelance design engagement"]. Include mutual confidentiality, a 2-year term, return of materials, and carve-outs for public information.
For more complex contracts, use a platform like Ironclad or PandaDoc that offers templates and clause libraries. These tools let you start from a proven template and customize it, rather than generating everything from scratch.
Important: AI-generated contracts are first drafts. They are not ready to sign as-is. Always review the output carefully. For anything with significant financial or legal exposure, have a lawyer review the final version.
Step 6: Extract Key Terms and Dates
Once a contract is signed, you need to track obligations, renewal dates, and key terms. AI can help you build a structured summary.
Extract key dates, obligations, and renewal terms from this contract into a structured summary: [paste contract].
This gives you a quick reference sheet. Tools like Evisort and DocuSign AI do this automatically and can set reminders for upcoming deadlines.
Common Mistakes to Avoid
Trusting AI output without verification. AI tools can miss important details or misread ambiguous language. Always verify flagged issues against the actual contract text.
Pasting confidential contracts into free tools. Free-tier AI tools may use your inputs to train models. For sensitive agreements, use enterprise tools with data protections or redact confidential details before pasting.
Skipping the human review. AI speeds up the process. It does not replace judgment. A contract that "looks clean" to AI may still have problems that require legal expertise to catch.
Using AI-generated contracts without customization. Template language from AI is generic. Your contracts need to reflect your specific situation, jurisdiction, and risk tolerance.
What AI Cannot Do (Yet)
AI contract tools have real limitations. They cannot provide legal advice or predict how a court would interpret a clause. They cannot guarantee that a contract complies with the laws in your jurisdiction. They may not catch issues that depend on context outside the document, like prior agreements between the parties. They are less reliable with non-English contracts or contracts in specialized legal domains.
Use AI as a productivity tool, not as a replacement for legal counsel on important matters.
Next Steps
- Visit the Review and draft contracts task page to compare tools and find the best fit for your workflow.
- Try the prompts from this tutorial in ChatGPT or your preferred tool.
- Explore more legal tutorials on MintedBrain to build your AI skills for legal work.
- If you work in a team, consider Ironclad, Luminance, or Evisort for collaborative contract management with built-in AI review.
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