Is AI Ruining Contract Negotiations?
What founders should do when the other side runs their contract through ChatGPT
AI isn’t ruining negotiations, but AI used without context can slow them down. I’m seeing counterparties run contracts through ChatGPT or Claude and come back with twenty comments, only a few of which meaningfully affect the deal. For a founder trying to close a deal, that creates another job: deciding what to accept, what to push back on, and when to call a lawyer.
I’ve been negotiating contracts since the days when I slept under my desk waiting for my BlackBerry (yes) to buzz me awake when a markup came in.
I’ve negotiated billion-dollar financings at Simpson Thacher, served as Chief Corporate & Commercial Counsel at Ubiquiti, and now help founders navigate the contracts that keep their businesses running.
After enough deals, you learn something. A good lawyer isn’t the one who asks for the most changes. It’s the one who knows which changes protect the client and how to get the deal done.
Twenty comments, three that matter
Lately I keep seeing the same pattern.
I draft an agreement for a startup client. The other side drops it into ChatGPT or Claude. The AI, eager to be helpful, comes back with twenty comments. A few deserve a real conversation. The rest may add little beyond another round of edits.
Why does this happen? AI is very good at spotting what a contract could say. It can’t reliably assess what this deal needs without the right context. And that context is often missing.
Experienced lawyers weigh questions the contract alone can’t judge:
• What’s our leverage, and who’s on the other side?
• How likely is the scenario this clause protects against, and what would it actually cost?
• Who really carries the indemnification risk here?
Not everything in a contract is meant to be mutual. Asking a software vendor to cover claims that its product infringes someone else’s IP is reasonable. Asking the customer to make the identical promise may make little sense. A customer obligation tied to materials it supplies might be appropriate. The useful question is who creates and controls the risk.
A founder facing a long markup may accept changes simply to get the deal signed—or spend days debating points that barely affect the business. Either way, the cost of an unfiltered AI review can exceed the time it saved.
How should you respond to an AI-generated markup?
Should startups draft contracts that “survive” an AI review? To a point: clear drafting can reduce avoidable questions. But no agreement is immune to a request to “find the risks.” You don’t owe anyone a yes on twenty comments. Judge each change on its merits, not its source. AI sometimes catches a real gap. Sort them into three piles:
1. Accept what costs you nothing. Clarifications and typo fixes are easy yeses. Changes to notice periods may be reasonable too, but check that you can actually meet them. Saying yes where you can builds goodwill.
2. Decline what adds little, with a reason. “The existing notice provision already addresses this concern” may be enough—if it actually does. Explain why the change is unnecessary in this agreement. You don’t need a memo for every comment.
3. Negotiate what actually matters. Often IP ownership, liability caps, indemnification, payment terms and termination rights. These are the points worth your time, and your lawyer’s. Hold firm where you need to; find a workable compromise where you can.
A short, reasoned reply can move the conversation forward. If the other side insists on a change you think adds little, ask what business concern it addresses. The answer may reveal a risk—or a priority—you hadn’t considered.
The part AI still can’t do
The hardest part of a contract negotiation is rarely identifying every possible issue. It is knowing which issues matter in this deal, for this company, at this moment.
That judgment gets better with context. A lawyer who already understands how the company makes money, where it has leverage, what risks it can absorb and which relationships matter can look at the same clause very differently from a model—or from a lawyer seeing the business for the first time.
That is where I think AI changes contract negotiation without replacing it. It can surface issues, test arguments and generate options at extraordinary speed. But speed is not judgment.
The real skill in negotiation is knowing what deserves friction. Sometimes the right answer is to push hard. Sometimes it is to take the imperfect language and close the deal. And sometimes it is to recognize that a clause that looks harmless on paper is the one that changes the economics. AI can make us faster at finding the questions. Judgment is still what tells us which ones are worth asking.
Using AI to review contracts: practical questions
Separate from the negotiation strategy above, here are a few practical questions about using AI with contracts and legal materials.
How can I use AI to review a contract more effectively?
I use AI every day. It’s an incredible drafting tool. But it works best when you treat it like a smart junior associate. It needs a briefing before it starts.
First, give it context. Tell it what the deal is worth, what you’re providing or receiving, whether IP, confidential information or personal data is involved, who you’re dealing with, how much leverage you have, and what you most need to protect. Then tell it to prioritize commercial significance over theoretical perfection. Personally, I like to add, “Don’t try to prove your worth to me.”
Then ask better questions. A few examples:
· “This is a $200,000 annual deal, and I have less leverage. Which three terms create the biggest risks for my business? Explain what could realistically go wrong. Don’t stop at three if something else really matters.”
· “What am I promising to do, pay, or deliver—and by when? Flag commitments I should check my business can actually meet, and explain what happens if we can’t.”
· “What problem is the other side trying to solve with each requested change? Does the contract already address it? Point me to the language and suggest a short, constructive response.”
Check the output against the contract, including definitions and exceptions. Treat claims about what is “market” as claims to verify. Use the prompts to organize your review, not as a substitute for legal advice about your particular contract.
For a more structured starting point, my free AI Contract Review Prompt Sheet includes a context template, prompts for reviewing a contract and responding to a markup, a pre-signing check, and red flags that mean it’s time to involve counsel.
Are my conversations with AI protected by attorney-client privilege?
Asking ChatGPT or Claude for legal guidance does not create an attorney-client relationship or, by itself, make your conversation privileged—even if you tell it to “act as my lawyer.”
What should I check before uploading a contract or communications with my lawyer?
Before uploading a contract, check your confidentiality obligations and the tool’s terms for training, retention and access. A no-training setting alone is not enough. Do not upload communications with your lawyer, transcripts of legal-advice meetings or your lawyer’s work product without first discussing it with counsel; doing so can put existing protections at risk.
I wrote more about these issues in AI, Attorney-Client Privilege and the Future of Legal Services.
Can you stop the other side from putting your contract into AI?
A restriction in a proposed agreement does not, by itself, establish that the recipient has agreed to it. Check any existing confidentiality obligations. If you need specific limits on AI use during negotiations, agree to them before sharing sensitive material—for example, in an NDA that covers the draft and specifies permitted tools and uses.
The final agreement can also set limits on uploading confidential information or work product to AI tools. Those limits should address the actual concern, including training, retention and access.
About the author
Hayley Nivelle is the founder of Nivelle Law PLLC, a fractional general counsel firm just outside New York City serving founder-led and growth-stage companies. She began her career at Simpson Thacher & Bartlett LLP and served as Chief Corporate & Commercial Counsel at Ubiquiti Inc. (NYSE: UI). Learn more about Nivelle Law’s fractional general counsel services and about Hayley.
This post and the sample prompts are for general informational purposes only and are not legal advice or a substitute for advice from counsel about your specific circumstances. Reading this post or using the prompts does not create an attorney-client relationship with Nivelle Law PLLC. Attorney Advertising.