You ask your AI to draft a contract. Twenty minutes later, you have something that looks complete, reads clearly, and passes a basic grammar check. Then your lawyer reviews it and flags seven problems—each one capable of costing your company six figures or more if it goes live unsigned. The issue isn't that AI can't write contracts. It can. The issue is that AI optimizes for plausibility and flow, not legal resilience. It will write an indemnity clause that sounds balanced but shifts all risk to you. It will omit a single sentence that turns a option into a legal ambiguity. It will miss the jurisdiction trap that forces you to litigate in a place you never agreed to. We've reviewed contracts AI generated for 40+ companies across e-commerce, SaaS, and service businesses. Seven clauses appear in nearly every draft with critical gaps. This guide maps those seven, shows you why AI misses each one, and gives you a template to catch them before your signature. 1. Indemnity Scope: The One-Way Trap An indemnity clause says "if you get sued for X, I'll cover your legal fees and damages." It's standard. It's also where AI most consistently writes one-sided language that reads passably but legally binds you to protect the other party in cases where they themselves are negligent. What AI typically writes: "Vendor shall indemnify, defend, and hold harmless Client from any claims, damages, or losses arising out of Vendor's performance of this Agreement." This looks reasonable. But "arising out of" is catastrophically broad. It means if the Client sues you alleging you breached—even if they themselves caused the harm through their own negligence—you must defend them and pay their legal bills. You're indemnifying them against their own negligence. What it should say: "Vendor shall indemnify, defend, and hold harmless Client from any claims, damages, or losses arising solely out of (a) Vendor's material breach of this Agreement, or (b) Vendor's negligence or willful misconduct in performing Services, but excluding any claims to the extent arising from Client's own negligence, breach, or misuse." The phrase "arising solely out of" narrows the trigger. The parenthetical list makes the scope explicit. The exclusion protects you from paying for Client's own failures. AI almost never writes this second version unprompted because it requires understanding risk allocation, not just contract assembly. Red flag: Any indemnity clause without explicit carve-outs for the indemnified party's own negligence or breach is asymmetric. Rewrite it. 2. Option Exercise: The Silent Ambiguity Options—renewal, expansion, termination for convenience—are among the most litigated clauses in commercial contracts. AI routinely writes them without specifying how exercise works: no deadline, no notice method, no confirmation ritual. What AI typically writes: "Client may renew this Agreement for an additional 12-month term by notifying Vendor prior to expiration." This is already a problem. "Prior to expiration" is vague. Is it one day before? Thirty days? And what does "notifying" mean? Email? Postal mail? Does a text message count? If Vendor claims it never received the notice, who bears the burden of proof? Six months after the contract expires, Client thinks they renewed. Vendor thinks they didn't. Client has been using the software for free. Vendor is now claiming unauthorized use. You're in litigation over a six-word clause. What it should say: "Client may renew this Agreement for an additional 12-month term by delivering written notice via email to notices@vendor.com no later than thirty (30) days before the expiration date. Vendor shall confirm receipt within two (2) business days. If Vendor does not confirm receipt within two (2) business days, Client may send the notice again. Failure by Client to exercise this option by the deadline shall terminate this Agreement at expiration without further obligation on either party." This specifies the window (30 days), the method (email to a specific address), the confirmation protocol (Vendor responds within 2 days), the fallback (Client can resend), and the consequence (Agreement terminates). No ambiguity. No litigation risk. Red flag: Any option clause without a specific deadline ("X days before"), a specific notice method ("email to [address]"), and a confirmation protocol is incomplete. Rewrite it. 3. Forum Selection and Jurisdiction: The Trap Clause A forum selection clause says where disputes will be resolved: courts in London, Singapore, New York, or wherever. AI routinely either omits it or writes it in a way that exposes you to litigation in a jurisdiction you didn't anticipate, under laws you don't know. What AI typically writes: "This Agreement shall be governed by the laws of the jurisdiction in which the Client is located and disputes shall be resolved in the courts of that jurisdiction." If Client is in Lagos, you're now litigating Nigerian law. If Client moves, does the jurisdiction change?