The Honest Answer
AI contract review tools — including Claused — are not replacements for lawyers. Anyone who tells you otherwise is selling you something. But lawyers are also not always necessary for every contract you'll ever sign. The honest framework is about risk, stakes, and what each tool is actually good for.
What AI Contract Review Is Good At
AI excels at:
- Speed: A human lawyer reviewing a 20-page contract takes 2–4 hours. AI does it in seconds.
- Pattern recognition: AI can instantly flag known-problematic clause patterns that appear across thousands of contracts.
- Plain English translation: Turning "indemnify, defend, and hold harmless" into "you're agreeing to pay their legal costs if anything goes wrong" — accurately and instantly.
- Completeness checks: Flagging missing protections — no kill fee clause, no IP carve-out, no payment terms — that you might not think to look for.
- Confidence before escalation: Understanding a contract well enough to know whether it warrants a lawyer's time.
What AI Contract Review Is Not Good At
- Jurisdiction-specific enforceability: A non-compete that's unenforceable in California might be fully enforceable in Texas. AI can flag the clause but cannot give you reliable jurisdiction-specific legal opinion.
- Complex negotiation strategy: Knowing not just what's in the contract but what's market-standard for your specific industry, company stage, and deal type.
- Defending you in a dispute: If something goes wrong, you need a human lawyer.
- Reading between the lines: An experienced attorney may recognize that a clause is technically legal but signals a company culture that will be adversarial to work with.
A Decision Framework by Contract Type
Use AI review only:
- Standard freelance agreements under $5,000
- Simple service agreements with established clients
- Routine NDAs before initial business discussions
- Short-term consulting agreements with clear scope
Use AI first, then decide if you need a lawyer:
- Freelance agreements over $10,000
- Employment contracts (especially those with equity)
- NDAs that cover ongoing work or include non-competes
- Vendor agreements with significant ongoing obligations
Go straight to a lawyer:
- Any equity agreement or cap table documentation
- Real estate leases, especially commercial
- Partnership agreements
- Business acquisition or sale agreements
- Any contract where a dispute would be financially catastrophic
The Cost Math
A business lawyer reviewing a contract typically charges $300–600/hour. A thorough contract review takes 2–4 hours. So $600–2,400 per contract. For a $3,000 freelance project, that math doesn't work.
For a $150,000 employment package with equity, spending $800 on a one-hour lawyer review is a 0.5% insurance premium on a major financial decision. That math absolutely works.
AI tools like Claused fill the gap — giving you understanding and flagging serious issues on lower-stakes contracts, while helping you arrive at a lawyer's meeting with a shortlist of specific questions rather than starting from zero.
The Right Mental Model
Think of AI contract review the way you think about WebMD for health concerns. It helps you understand what you're dealing with and whether it's serious enough to call a doctor. It doesn't replace the doctor — but it makes your conversation with the doctor more productive, and it helps you avoid going to the ER for a cold.