Can ChatGPT Review Contracts? (2026 Update)

ChatGPT can help lawyers review contracts at a surface level, but it is not designed to deliver reliable, defensible legal contract analysis on its own.

In this article, we explore exactly what contract reviews using GPT can (and can’t) do. We’ll also walk through its core capabilities, highlight its advantages, and break down where it falls short—especially when legal nuance, compliance, and confidentiality are on the line.

Whether you’re wondering how to use ChatGPT to review contracts, or comparing tools for a more scalable contract review workflow, we’ll also show you how legal-specific platforms like Spellbook fill in the gaps—and why they're often the better choice for real legal work.

Let’s compare general-purpose AI like ChatGPT with specialized legal AI tools so you can decide which contract review approach best suits your legal practice.

Key Takeaways

• General AI limitations – ChatGPT can assist with contract review but struggles with legal nuance, accuracy, and data privacy concerns.
• Legal-specific advantage – Spellbook offers deeper legal understanding, custom clause libraries, benchmarking, and built-in compliance tools.
• Workflow efficiency – Spellbook integrates directly into Microsoft Word, enabling faster reviews, redlines, and collaboration without context switching.‍
• Practical guidance included – This guide provides ready-to-use ChatGPT prompts, contract preparation checklists, and step-by-step workflows for safe AI-assisted review

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When to Use ChatGPT for Contract Review (And When to Avoid It)

ChatGPT can be useful during certain stages of contract review. But it is not designed to replace legal judgment or handle every type of agreement. 

Ideal Use Cases for ChatGPT

ChatGPT works best when the goal is speed, clarity, or early insight rather than final legal conclusions. Here are some of the best use cases where it can save time without introducing unnecessary risk.

• First-pass reviews of standard NDAs, MSAs, SLAs, or DPAs to surface obvious issues before deeper legal analysis
• Summarizing lengthy contracts so lawyers can quickly understand key obligations and deal structure
• Extracting specific information such as payment terms, notice periods, deadlines, and renewal dates
• Flagging potentially missing boilerplate clauses based on common contract patterns
• Comparing contract versions to identify changes between drafts during negotiation
• Generating plain-language explanations of complex legal terms for internal stakeholders

When to Avoid ChatGPT

There are also clear situations where using ChatGPT for contract review can create more problems than it solves. In these cases, limitations around context, accuracy, and data handling become material risks.

• Bespoke commercial agreements that reflect extensive negotiation history or custom risk allocation
• High-stakes strategic agreements, including M&A transactions, major partnerships, or enterprise deals
• Contracts with significant litigation risk or regulatory exposure, where accuracy and context are critical
• Agreements requiring jurisdiction-specific interpretation of laws, regulations, or enforceability
• Any contract where confidentiality is critical and sensitive terms cannot be safely redacted

How to Prepare Contracts for ChatGPT Review

Because ChatGPT does not understand legal risk in context the way a lawyer does, the quality and structure of the input matter as much as the questions you ask. Proper preparation helps reduce security exposure while improving the usefulness of the output you receive.

Contract Preparation Checklist

1. Convert to Clean Text Format

Convert scanned PDFs into machine-readable text using OCR before uploading. Remove headers, footers, page numbers, signature blocks, and formatting artifacts so ChatGPT processes only the contract language itself

2. Redact Sensitive Information

Remove personal data, contact details, IP addresses, and any proprietary business information that should not be shared. 

• Replace dates with [Effective Date], [Term Start], [Expiration Date]
• Replace financial amounts with [Fee],[Fee], [Fee],[Amount]
• Replace identifiable party names with neutral placeholders such as [Company A] and [Company B].

3. Note the Limitation of Redaction

Redaction protects confidentiality but also removes critical legal context. For example, a £100,000 liability cap becomes [Fee], stripping away the detail needed to assess whether it is commercially reasonable. ChatGPT cannot evaluate if this cap is reasonable without the actual amount.

4. Maintain Contract Structure

Keep section headings, clause numbering, and the overall organization intact. Preserving structure allows ChatGPT to reference specific provisions accurately and reduces the risk of misinterpreting obligations.

5. Create a Separate Summary Document

Before uploading the contract, prepare your own internal summary containing confidential terms. That will be the reference point so you can manually cross-check ChatGPT’s feedback against the full, unredacted agreement.

How to Use ChatGPT to Review Contracts

If you’re just exploring how to use ChatGPT in a legal setting, start with low-risk tasks, such as flagging potential risks early or clarifying legal jargon and technical terms. In this section, we outline how to use AI responsibly while keeping full control over the final review.

1. Know When to Use AI for Contract Review

AI is helpful only for triage but not for final legal interpretation. ChatGPT works best when used to interpret complex legal language into simpler explanations or summarize lengthy contracts into brief overviews. You may also use it to scan contracts for common errors or areas that may need legal review or correction.

For instance, it can support an initial review of standard NDAs where terms are predictable. But it should be avoided for complex commercial agreements with jurisdiction-specific regulatory requirements.

2. Ask for Structured Outputs

Prompt the model to organize information in predictable formats such as bullet points, clause lists, or comparison tables. Structured responses help you quickly identify critical sections of a contract, such as payment terms, termination clauses, and confidentiality.

Not sure how to phrase your AI request? Spellbook’s built-in prompt library gives you vetted, lawyer-tested options in one click.

3. Extract Obligations and Risks

General-purpose AI help manage contract review workflows by summarizing key points and organizing them for further action. Ask the model to outline each party’s responsibilities, deadlines, and key financial terms, so you can see the deal structure at a glance.

4. Compare Versions or Clauses

When reviewing multiple drafts, ask ChatGPT to compare contract versions to identify changes or discrepancies over time. This can flag potential legal issues or risks that could affect the terms of the agreement.

5. Always Confirm with a Human Review

Always verify the accuracy of any AI output to ensure interpretations and recommendations are legally sound. Keep this in mind, especially when the model suggests edits or improvements to contract language, or attempts to explain specific clauses such as indemnity, warranties, or liabilities.

As always, any output generated by ChatGPT should be treated as a starting point, not a conclusion. Cross-reference its findings against the original contract, verify that clause citations are accurate, and confirm that interpretations align with current law in the relevant jurisdiction. 

6. Keep Sensitive Details Secure

Never upload confidential details to unsecured public AI tools. For example, when reviewing employment contracts, only use AI in environments your organization has vetted to ensure data privacy and contractual information remain protected.

Ready-to-Use ChatGPT Prompts for Contract Review

ChatGPT is only as useful as the instructions you give it. A vague prompt usually leads to vague results, while a clear one can save real time during early-stage review. The examples below show how different prompt types can guide ChatGPT’s output.

Prompt 1: Review Type Example: "First-Pass Risk Assessment"

Use this when you want a high-level sense of potential risk areas in a fairly standard agreement before doing a full legal review.

[Insert exact prompt text from lead magnet here, with specific instructions to ChatGPT]

Expected Output: ChatGPT should return a structured list of potential risk areas, organized by clause type or section. Output should be concise and clearly labeled. Each item should explain why the clause may require attention, without suggesting final legal conclusions.

Prompt 2: Review Type Example: "Missing Clause Detection"

This prompt is useful when reviewing contracts that follow common templates, where missing boilerplate can easily be overlooked.

[Insert exact prompt text from lead magnet here, with specific instructions to ChatGPT]

Expected Output: ChatGPT should return a checklist-style output identifying potentially missing clauses, grouped by category. The output should note that confirmation requires human review and must remain neutral and non-prescriptive.

Prompt 3: Review Type Example: "Key Terms Extraction"

Use this prompt when you need a fast overview of the most important deal terms, especially for internal review or stakeholder updates.

[Insert exact prompt text from lead magnet here, with specific instructions to ChatGPT]

Expected Output: ChatGPT should return a clean, easy-to-scan summary, ideally in a table or bullet format. Each term should be listed alongside its clause reference so it can be quickly verified in the contract.

Tips for Better Prompt Results

Well-designed prompts can make ChatGPT a lot more predictable during contract review.

• Be explicit about what you want ChatGPT to focus on, such as risks, obligations, deadlines, or commercial terms
• Request structured outputs like tables, bullet points, or numbered sections to make results easier to review
• Ask ChatGPT to cite specific clause numbers or section headings to reduce ambiguity
• Specify the review perspective, such as reviewing from the buyer’s perspective versus the vendor’s perspective

Advantages of Using ChatGPT for Contract Review

As a general-purpose AI, ChatGPT brings speed and convenience to contract review tasks, particularly when teams need quick orientation before deeper analysis.

• Speed: Pulls key clauses and sections like payment terms, termination rights in seconds 
• Workflow Efficiency: Helps triage contracts before deeper legal review
• Cost-effectiveness: Reduces time spent on routine agreements
• Accessibility: Brings AI-assisted review to firms of any size

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What ChatGPT Commonly Misses: Specific Legal Risks

Understanding ChatGPT's blind spots is just as important as knowing where it helps. Below are some of the legal risks ChatGPT is most likely to overlook or misread.

Hidden or Unusual Fee Structures

ChatGPT often struggles to catch pricing mechanics that are buried in dense language or spread across multiple sections. Tiered fees, automatic price escalations, or loosely defined charges can easily slip through. 

Example: A clause allowing “reasonable administrative fees” without defining “reasonable” can quietly create unlimited cost exposure that ChatGPT may not flag as a risk.

Automatic Renewal and Termination Traps

Evergreen clauses and auto-renewal provisions are another common miss, especially when notice requirements are highly specific. ChatGPT may recognize that termination is allowed, but it fails to capture details such as strict timing windows or delivery methods. 

Example: A clause requiring “written notice via certified mail 120 days prior to the anniversary date” contains four separate conditions that are easy for general AI to misinterpret or gloss over.

Liability Limitations and Indemnification Nuances

Complex liability structures are particularly difficult for ChatGPT to analyze accurately. Asymmetric liability caps, carve-outs for certain claims, or layered indemnification obligations often require contextual legal judgment. 

Research from Stanford University shows that ChatGPT deviates from legal facts 69–88% of the time, with liability analysis among the most error-prone areas.

Arbitration and Dispute Resolution Specifics

ChatGPT may correctly note that arbitration applies but may miss critical details, such as the arbitration forum, governing rules (e.g., AAA or JAMS), discovery limits, or class action waivers. Missing these details can change the practical impact of the clause entirely.

Jurisdiction-Specific Legal Requirements

General-purpose AI lacks reliable awareness of state-specific laws, industry regulations, and recent case developments.

Example: A California employment agreement may require specific wage statement or notice provisions that ChatGPT will not flag if they are missing. This limitation makes jurisdictional review especially risky without human oversight.

Consequential Damages Exclusions

Subtle distinctions between direct, indirect, consequential, and incidental damages are frequently conflated or overlooked. ChatGPT may summarize a damages exclusion without recognizing whether it is narrowly or broadly drafted.

Limitations of Using ChatGPT for Contract Review

ChatGPT abilities have shown to be ineffective for reviewing contracts with subtle legal nuances. For example, cases that involve indemnity clauses and jurisdiction-specific terms may need a deeper legal understanding, which ChatGPT lacks. Additional challenges in relying on ChatGPT for contract review include:

• The potential for incorrect responses
• Incomplete reviews due to ChatGPT’s inability to understand the contract completely
• Data handling and storage concerns
• Data input reliability and accuracy
• Lack of transparency into how ChatGPT works and accountability for its output

Accuracy Issues

When assessing the accuracy of ChatGPT-assisted reviews, the complexity of legal language stands out as a major issue.

If ChatGPT cannot understand all the potential issues in a contract’s terms and conditions, the rights and responsibilities of the parties, and other clauses in a legal context, its reviews will be incomplete. AI may overlook issues that need further attention, clarification, deletion, or modification.

ChatGPT sometimes generates text that seems legally valid but may contain inaccuracies because it lacks a deep understanding of legal concepts and may use outdated information. This limitation significantly hampers ChatGPT's ability to evaluate compliance with the latest legal standards across various jurisdictions.

Lack of Contextual Understanding

ChatGPT's foundation consists of various texts, including books, codes, articles, and a wide range of publicly available sources. This diversity helps it understand broad inputs, but it does not cover all legal terms. It understands general legal information, but ChatGPT can misinterpret or overlook the nuances of legal language in various contexts and contracts.

In contrast, Spellbook is trained on billions of lines of legal text to grasp various jurisdictions, standards, legal implications, contractual terms, regulations, laws, and historical contexts. The developers of Spellbook incorporate multiple legal sources to enhance Spellbook’s understanding of legal language across various contracts and agreements. And prompting behind the scenes ensures legal focus and relevance. 

Data Privacy Concerns

ChatGPT retains the right to share the information you provide with its human trainers, who monitor and improve the tool. While ChatGPT's data handling can improve its responses, it may compromise client confidentiality, which is critical for legal professionals.

In contrast, Spellbook does not use your documents for training and maintains Zero Data Retention agreements with its partners, ensuring your information always remains private.

Dependence on Quality Input

ChatGPT may struggle to grasp the context and nuances of a contract that contains errors, ambiguities, or inconsistencies. This can result in less accurate or valuable interpretations, making generated recommendations of limited use. To obtain more reliable outputs, providing clear and well-structured input is essential.

Spellbook is specifically trained to produce high-quality outputs that comply with legal standards. Even with flawed inputs, Spellbook is able to understand the context of a contract and produce usable, meaningful output.

Regulatory and Ethical Constraints

Liability and legal responsibility for ChatGPT's contract reviews are significant ethical considerations. Although regulations governing AI are still developing, more states are adopting general principles that emphasize compliance with lawyers’ professional conduct rules and ethical codes. 

Spellbook keeps updated on the latest rulings and ethical factors, ensuring that any use of Spellbook complies with legal and ethical standards in any jurisdiction.

Integration with Microsoft Word

ChatGPT is a separate tool that isn’t directly integrated with MS Word or Google Docs. This means you need to switch between different windows to apply ChatGPT's contract suggestions, slowing the review process. This multiple-window workflow may lead to more mistakes than when using a user-friendly, straightforward application. 

Legal-focused AI, like Spellbook, will typically live where lawyers already work, such as the familiar MS Word environment, providing easy-to-use contract review features on the same screen as the contract they’re working on.

How Spellbook Overcomes ChatGPT’s Issues to Avoid Legal Implications

Spellbook outperforms ChatGPT in evaluating all elements of contracts, including clauses, implications of contract terms, and negotiation points from the perspective of the chosen contracting parties during a review. The tool offers several strengths in contract reviews that make it more reliable than ChatGPT:

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Final Thoughts

ChatGPT can be a beneficial tool for the contract review process, but its limitations should be kept in mind. While it cut one real estate firm’s time for initial contract reviews by up to 50%, there are still many questions about its accuracy, responsibility, and data handling. Plus, to effectively use ChatGPT for contract analysis, it must first be extensively trained.

The effectiveness and usability of ChatGPT depend on its training algorithms and data, the contract's quality, and the language's complexity. For more reliable contract reviews that are ready to use without training, consider tools designed specifically for legal professionals, such as Spellbook, which expands benefits and addresses limitations.

Frequently Asked Questions

How Secure Are Data ChatGPT Processes?

AI systems like ChatGPT implement various security measures to protect data. These measures include encryption during transmission and storage, user access controls, security audits, and vulnerability management. However, ChatGPT’s free version provides less transparency in data handling than the premium version. Additionally, ChatGPT may use your data for training and improvements.

Are There Any Regulatory Restrictions on Using AI for Contract Review?

Regulatory restrictions on AI-assisted contract reviews include data privacy laws such as GDPR and CCPA, which ensure confidentiality and proper handling of sensitive information. Lawyers and legal professionals must also follow professional and ethical conduct rules when using AI tools. Furthermore, industry-specific regulations require contracts to comply with laws governing particular sectors, including AI integration and dispute resolution provisions.

Can ChatGPT Identify All Key Clauses in a Contract?

ChatGPT can extract key clauses from contracts. It recognizes patterns but may struggle with ambiguous language, complex terms, and unconventional clauses, which can lead to missed provisions.

Should Law Firms Use ChatGPT for Client Contracts?

Law firms can use ChatGPT for early triage on low-risk, standard agreements like NDAs or basic MSAs, as long as contracts are properly redacted first. It should not be used for high-stakes matters, bespoke agreements, or anything with real litigation or regulatory exposure. For client work, many firms ultimately look to legal-specific tools that offer stronger data protection and purpose-built safeguards.

What's the Difference Between ChatGPT and Legal-Specific AI, such as Spellbook?

ChatGPT is trained on general internet content, while Spellbook is trained on billions of lines of legal text, which makes a meaningful difference in legal accuracy and context. ChatGPT relies on manual copy-and-paste workflows, whereas Spellbook works directly inside Microsoft Word, where lawyers already draft and review contracts. 

ChatGPT cannot apply firm playbooks or benchmark clauses against market standards, while Spellbook is designed to do both. There are also important data considerations: ChatGPT may use inputs for training, while Spellbook operates under a Zero Data Retention policy.