Thread by @SellersCounsel

BREAKING: AI is still nowhere near top attorneys.

Here are ways I’ve already seen these 16 Claude prompts go wrong (Save for later)

1. The Contract Reviewer

Claude, GPT, Grok, and Gemini get this wrong more than any other prompt. Aside from just missing key terms, I frequently see them negotiate AGAINST the stated position. That’s right, if you rely on this, you might be including terms that harm you instead of help you.

In practice, aside from producing an agreement that’s worse than what you started with, becomes obvious to the other party you don’t know what you’re doing.

2. The IP Protector.

Not only can AI not file a patent on your behalf, AI tools frequently give incorrect advice on how to protect intellectual property. They also have proven incapable at conducting basic diligence to determine whether your mark or invention is in violation of other registered IP.

In practice, this means that you’re unlikely to get any meaningful IP protection from AI without hiring a lawyer to help you.

3. The Startup Incorporator

The prompt alone on this can hurt you. Just because you are located in a certain state doesn’t mean that is the state you should incorporate in. And AI incorporation documents are terrible. They frequently fail to include basic protections for founders, and often include contradictory governance terms.

In practice, you can end up with an unfavorable tax situation, in violation of law, exposure to avoidable liability risk, and unclear governance terms for your company.

4. The Employment Agreement Crafter

The form agreements that AI spits out are pitiful. I’ve rarely seen one that makes coherent sense, let alone contains the appropriate enforceable terms and protections. You’re most likely better off with a handshake deal than doing this.

5. The Dispute Resolver

This one sounds good in theory, but simply does not work in practice. First, it is difficult to craft a prompt with sufficient detail for the AI tool to actually understand everything at play. Second, it gives textbook advice. But negotiation is far from textbook. It is reactive and deeply personal. It will quickly become obvious to the other party that you are using AI, which will harm the negotiation.

6. The Compliance Checker

I would not use AI to assess compliance other than a high level overview and pointing you to key laws/regulations to understand. It simply gets the analysis wrong most of the time. Maybe that’s because there is a lot of misinformation out there regarding compliance. Maybe it’s because there is a lot of nuance hidden behind paywalls, administrative opinions, and practical guidance from regulators. But whatever the case may be, AI simply falls short in giving accurate compliance guidance.

7. The Lease Analyzer

See item 1. AI frequently gets terms wrong and negotiates against itself. I’ve seen it produce redlines that would cost the tenant thousands of dollars annually.

8. The Trademark Scout

AI struggles with trademark searches. I tried this with a recent trademark for a client, and it missed a clear conflict. Plus it gives inconsistent recommendations on jurisdictions to file in and type of mark to file.

9. The NDA Builder

See item 4. I have yet to see an AI generated NDA that was both sufficiently protective and enforceable.

10. Terms of Service Generator

See item 4 and 9. You’re likely to get something inapplicable to your business and/or unenforceable.

11. The Privacy Policy Generator

See item 4, 9, and 10.

12. The Investment Term Sheet Decoder

Investment terms can be hard to understand. People use similar words to describe different concepts. And there is often interplay between documents or the waterfall that is standard but isn’t captured entirely in the LOI. This is a good exercise to do, but relying on it entirely usually doesn’t give you the full picture.

13. Freelance Contract Maker

See items 4, 9, 10. I see a lot of these agreements in my practice. None are good.

14. The Partnership Agreement Outliner.

Please for the love of everything holy DO NOT DO THIS. A partnership agreement or operating agreement is one of the most commonly messed up documents by even experienced lawyers. AI partnership agreements almost never give the partnership what they are intending.

15. The Risk Assessor

This one made me lol. You might as well ask it to summarize all the laws for you.

16. The Exit Strategy Planner

This one hits close to home because it’s my area of expertise. Selling your business is one of the most complex and involved processes you will ever experience. And without adequate preparation, it can quite literally cost you hundreds of thousands of dollars.

I’ve seen the following real-life examples of AI errors in selling a business:

-AI-generated cleanup documents inadvertently removed control of the company from the selling partners
-AI incorrectly responded to a diligence request and caused enough concern that the feasibility of a deal came into question
-AI provided advice that incorrectly led a client to believe they qualified for QSBS tax treatment
-AI incorrectly documented the transfer of key assets of the business, so the buyer did not actually receive key equipment and intellectual property at the closing (luckily seller cooperated after the fact)
-A seller using AI submitted a redline that increased his liability under the indemnification provisions and added a broad representation that there were no omissions in the reps and warranties

I use AI as a tool every day in sell-side representation. But if I relied on it, I would be sued for malpractice. Don’t trust a still developing tool with the biggest transaction of your life.

In addition to all the above, it’s also important to remember that AI doesn’t provide attorney-client privilege protection or any malpractice liability in the event things go wrong. When you hire a lawyer, they are a trusted advisor who stands by their work with their license. With AI, you are essentially working on your own. Do so at your own (often significant) risk.