AI-drafted contracts in South Africa: check before you sign

AI-drafted contracts can be legally binding in South Africa. Using AI to write an agreement does not, by itself, make it valid or invalid. The real questions are whether it meets the legal requirements, records the deal accurately and protects your interests.

A draft can arrive in seconds, complete with numbered clauses and a confident conclusion. Yet the clause that matters most may be missing. Before you sign, ask: what happens if the relationship stops working?

Can you rely on an AI-drafted contract?

Have the parties agreed to the same deal? Can they legally enter into it, and do the people signing have authority? The obligations must be lawful, sufficiently clear and possible to perform. Any required formalities must also be met. However, enforceability is only part of the picture. A binding agreement can still expose you to avoidable commercial risk.

The Electronic Communications and Transactions Act recognises electronic agreements and signatures, subject to its rules and exceptions. It does not certify the quality of AI-generated wording.

Also, an AI-written agreement is different from a blockchain smart contract. Here, we are considering an ordinary business agreement drafted with AI for people to review and sign.

A polished draft can miss the actual deal

Consider this hypothetical example. A small business commissions a website. Its AI-generated agreement sets a price and completion date, but says nothing about source files, domain access or the handover when the relationship ends.

The website launches. Later, the business changes suppliers and discovers that access and ownership are disputed. The problem was present before anyone signed: the agreement did not address what the business would need to keep operating.

Review the transaction as well as the text. These six checks provide a useful starting point.

Six checks for AI-drafted contracts

1. Identify the parties and the promises

First, confirm the correct legal names and the signatories’ authority. Are you contracting with a company, a sole trader or someone using a trading name? The distinction matters when you need to enforce an obligation.

Next, describe the work, deadlines, deliverables and acceptance process. For example, “provide marketing services” says little about the number of campaigns, approval rights or who supplies the material. Include the agreed quotation or specification, and resolve any conflict between documents.

2. Make payment terms workable

In AI-drafted contracts, check what triggers payment, when it falls due and whether the price includes VAT where applicable. Then deal with deposits, milestones, disputed invoices and additional work.

For instance, a supplier may expect payment when it submits a deliverable, while the customer expects to pay only after approval. Unless the agreement resolves that difference, both may believe the other has broken the deal.

3. Read the risk clauses slowly

Check limitations of liability, warranties and indemnities. An indemnity can require you to cover specified losses or claims. Apparently standard wording may transfer substantial risk to your business.

Ask whose losses each clause covers, whether there is a financial limit, and what falls outside it. Also check ownership and permitted use of work product, intellectual property and business data. These clauses need to fit your role in the transaction.

4. Check how an AI-drafted contract ends

What happens if delivery is late, payment stops or the service no longer meets the agreed standard? Set out any notice, opportunity to remedy a breach and grounds for termination.

However, ending the relationship is only the first step. Address outstanding payments, refunds where appropriate, access credentials, records and handover duties. Check renewal dates and notice periods so that an automatic renewal does not catch you unprepared.

5. Check an AI-written agreement against South African law

Foreign terminology, overseas courts or an unsuitable arbitration clause can create cost and uncertainty. Instead of simply replacing a country name, check the governing law, dispute process and any mandatory rules that apply to your transaction.

Electronic signatures also require care. Sections 12 and 13 of the ECTA deal with writing and signature requirements. The correct approach depends on the transaction and the requirement being met; a typed name is not sufficient in every situation.

Land-sale agreements and wills, for example, have special formalities. ECTA does not itself confer validity on the transactions listed in its Schedule 2. Therefore, obtain advice before assuming that an electronically signed document meets those requirements.

6. Protect information before uploading it

Before uploading an AI-drafted contract for further work, check what you are sharing. Customer details, employee information and confidential commercial terms may require protection.

Where the Protection of Personal Information Act (POPIA) applies, processing needs a lawful basis and appropriate safeguards. Consent is one possible basis, not the only one. Overseas processing also needs attention.

Remove unnecessary identifying information. Check provider access, retention, reuse settings and contractual protections. Redaction may still leave someone identifiable, and a privacy setting alone does not establish compliance.

When should AI-drafted contracts get legal review?

Seek review before signing where the agreement affects significant money, a personal guarantee, ownership, confidential information or your ability to exit. The same applies if you cannot explain a clause or the other party says it is “just standard”.

A useful review should identify the risks that matter, explain their consequences and recommend practical changes. Our approach to responsible legal review of AI-assisted work centres on checking the substance and taking responsibility for the advice.

Already have a draft? Start with these documents

To make a review more focused, gather:

• The latest draft and any schedules, quotations or specifications.
• The emails or messages recording what you actually agreed.
• Your signing deadline and the commercial outcome you need.
• The obligations or risks you are unwilling to accept.

Before you sign, understand what you are accepting. SD Law’s contract drafting services can help you turn an initial draft into terms that fit the transaction. We can review AI-assisted wording, explain material risks and advise on changes.

Contact SD Law about a contract review. Tell us the type of agreement, your deadline and your main concern. We can then discuss the scope, fees and how to share your documents securely.

Simon Dippenaar

Founder & Managing Partner, SD Law

Attorney Simon Dippenaar has a BBusSc LLB degree and Professional Diploma in Legal Practice from the University of Cape Town, and is an admitted attorney of the High Court of South Africa. He is the founder and director of private legal practice, Simon Dippenaar & Associates, with offices in Cape Town and Gauteng representing South African and international clients.

Read articles