Contract Drafted by AI

Why you shouldn't blindly trust an AI-generated contract

A language model (ChatGPT, Claude, Copilot) generates text based on probability, not the current wording of the law. It won't check the other party in the Commercial or Insolvency Register, verify the Land Registry, and will happily combine provisions from an American template with a Czech contract without realizing they contradict each other.

This isn't about saving a few crowns on a lawyer. It's about the fact that a court can declare a contract worth tens of millions of crowns entirely invalid due to a single formal error – and the resulting dispute will end up costing you hundreds of thousands in legal representation. A review before signing is a negligible cost in comparison.

Where AI most often makes mistakes

Invalidity due to a formal defect

AI doesn't verify whether a given type of contract requires written form by law – typically for the transfer of a real property right (Section 560 of the Civil Code). If this form is missing or if both parties do not sign the same document where required by law, the contract is immediately invalid (Section 582 of the Civil Code). An entire multi-million transaction can thus fall apart due to a mistake that takes a lawyer a few minutes to uncover.

A contractual penalty the court can void

AI loves to write a penalty in a round, impressive amount without weighing it against the value of the contract. However, a court can reduce an unreasonably high penalty at the other party's request (Section 2051 of the Civil Code), and without an express agreement, the penalty does not cover damages exceeding its amount (Section 2050 of the Civil Code). Without assessing the market range for the given type of contract, you won't know if your penalty is real leverage or just a number on paper that won't hold up in court.

Cure period and notice period from a bad template

American templates often include a fixed period to remedy a breach (cure period) before the other party can withdraw or charge a penalty. Czech law handles this differently: for a material breach of contract, you can withdraw immediately (Section 2002 of the Civil Code), while for a less serious breach, you must first provide a reasonable additional period (Section 1978 of the Civil Code). A universal 30-day cure period pasted in by AI, regardless of the type of breach, can either prevent you from withdrawing where you could have done so immediately, or create the false impression that you can withdraw sooner than you actually can.

Similarly with termination: an indefinite-term contract with recurring performance can, without further agreement, only be terminated with a three-month notice period ending at the close of a calendar quarter (Section 1999 of the Civil Code). If AI writes "termination at any time with a one-month notice period" and doesn't clearly supersede the statutory provision, you don't know which period the court will respect – and for a contract you need to terminate quickly due to a change of supplier, this means a difference of several extra months.

Liability for damages without a cap

An unclear limitation of liability means you are fully liable for damages from a breach of contract, not just up to an agreed-upon cap (Section 2913 of the Civil Code). Ask yourself this simple question: is it worth saving a few thousand on a review for a contract worth tens of millions, and risking a dispute costing hundreds of thousands?

Frequently asked questions about reviewing AI-generated contracts:

1. Is it enough to just read and sign an AI-generated contract? No – even a formally smooth text can have a defective form or an unenforceable penalty that you won't recognize without experience.

2. What is a cure period and why does AI often set it up incorrectly? It is a period to remedy a breach of contract before withdrawal – but Czech law handles it differently depending on the severity of the breach, and a generic template won't distinguish this.

3. How long does a review by a lawyer take? Thanks to a combination of verified tools and an attorney, it is significantly faster than writing a contract from scratch – we can arrange a deadline at consultation@arws.cz.

Risk Table

How ARROWS reviews an AI-generated contract

Send the draft contract to consultation@arws.cz – it doesn't matter if it was written by ChatGPT, Claude, Copilot, or an internal template. After receiving the document, we will give you a fixed price for the review, not an hourly rate – you know in advance how much the check will cost, and it's a fraction of the value it protects.

The review is always done by an attorney, supported by our own secure and licensed tools that are configured for Czech law and do not hallucinate like public models. ARROWS was the first law firm in the Czech Republic to establish a specialized internal AI team, and for its work with artificial intelligence, it won the title of Innovative Law Firm of the Year 2024 in the Law Firm of the Year competition. We describe how we are specifically changing contract preparation and other agendas with AI in the AI implementation section and in the CEO's commentary ARROWS and AI: How we became a leader in legal technologies.

Thanks to this combination, the contract review is significantly faster than if a lawyer were writing it from scratch – but the final decision and signature on the review are always made by a licensed attorney.

Final summary

AI saves you time on the first draft, not risk. A defective form, a questionable contractual penalty, a poorly set cure period or notice period, and unlimited liability for damages – these are mistakes that can be corrected for a fraction of what a dispute over an invalid multi-million crown contract costs.

Before you sign an AI-generated contract, have it checked. The ARROWS law firm will perform the review quickly, for a fixed price, and with professional liability insurance up to CZK 350,000,000 – just write to consultation@arws.cz.