When Small Businesses Rely On AI-Generated Contracts: Legal Pitfalls For Ohio Employers

Artificial intelligence has made it easier than ever for small businesses to draft contracts, policies, and forms without hiring a real lawyer. With a few clicks, an AI system can produce employment agreements, vendor contracts, website policies, and more. For busy business owners, this can feel like a cost-effective shortcut, especially in the early stages of your business.

But while AI tools can create text that sounds legally polished, they cannot ensure that the agreement is accurate, enforceable, or compliant with Ohio law. In some cases, relying on AI-generated contracts can expose a business to lawsuits, unexpected liability, and regulatory penalties.

Below are the key risks to understand before using AI to draft your business contracts.

AI tools can’t understand Ohio’s legal requirements 

Contract law tends to be state-specific. What might be enforceable in one state could be invalid or even illegal in another. AI models are trained on broad language patterns. They are not trained on current, jurisdiction-specific statutes or case law.

For example:

• Non-compete agreements are treated differently across states. Ohio courts analyze them under a “reasonableness” test.
• Independent contractor vs. employee classifications must comply with federal and Ohio law.
• Consumer contract disclosures in Ohio must meet state-level requirements, particularly when dealing with warranties or refund terms.

If an AI system generates a contract with outdated or out-of-state examples, a business could end up with a contract that looks legitimate on paper but fails in court.

AI can introduce hidden contradictions or ambiguities 

Solid contracts should always be clear, consistent, and specific. When AI tools are used to draft these agreements, they often pull language from a mix of sources. Sometimes they do this without fully understanding the legal context. That can lead to serious issues, such as:

• Conflicting clauses that contradict each other
• Missing or vague definitions
• Unclear obligations
• Terms that unintentionally benefit the other party

This creates real risk. If there’s ever a dispute, courts typically interpret unclear language against the party who drafted the contract. More often than not, that’s the business owner.

AI can’t tailor agreements to your business’s needs 

Strong contracts aren’t just legal paperwork. They’re blueprints for how a business relationship actually works. For that reason, they should reflect real workflows. This includes elements like: how payments are made, who owns the intellectual property, how disputes will be handled, and what happens if the agreement ends early.

Here’s the catch: AI tools can’t talk to your team, align your business goals, or spot potential risks in your operations. They don’t ask the right questions because they don’t know what to ask.

As a result, protective provisions often get left out. Things like indemnity clauses, confidentiality agreements, or limitations on liability could be missing entirely.

Talk to a Columbus, OH, Contracts Lawyer Today 

Kohl & Cook Law Firm, LLC, represents the interests of Columbus businesses in drafting important legal contracts. Call our Columbus general counsel business lawyers today to schedule an appointment, and we can begin discussing your next steps right away.