Can You Trust AI with Legal Advice? What Business Owners Need to Know

Recently, OpenAI reaffirmed its long-standing rule to ban AI from giving any advice that requires a professional license—including legal, financial, or medical guidance. This means tools like ChatGPT can no longer provide customized legal advice or interpret contracts for your specific situation. The update reflects an important truth: AI isn’t a lawyer, and when it tries to act like one, the risks fall on you—not the platform.

One common error, known as an AI hallucination, could mean citing fake laws, suggesting incorrect contract terms, or giving you advice that doesn’t apply in your state. And if you act on it—signing a bad contract, skipping a required disclosure, or relying on the wrong legal clause—you could find yourself in trouble. In fact, there have been recent cases where lawyers used AI-generated legal citations in court without checking, only to discover the cases were completely made up.

Here’s how to use AI responsibly for legal tasks—and when to slow down and get a second opinion.

What Are AI Hallucinations and Why They’re Risky

An AI hallucination happens when a generative AI model produces text that’s false, misleading, or fabricated, even though it reads like fact. These hallucinations are especially common in:

• Legal citations (made-up case law or statutes).
• State-specific rules (confusing laws across jurisdictions).
• Contract clauses (boilerplate language that misses key legal protections).

AI isn’t a lawyer. Most AI tools, including ChatGPT, Gemini and Perplexity, don’t guarantee legal accuracy and often include disclaimers telling users to consult a professional. That’s because the legal risk falls on you—not the tool—if you rely on incorrect information.

For freelancers and solopreneurs who may not have legal departments or counsel on speed dial, the consequences can include:

• Agreeing to payment terms you can’t enforce.
• Violating intellectual property rules without realizing it.
• Missing required clauses for your industry or state.

How to Use AI Safely for Legal Tasks

AI can still be useful as long as you treat it like a research assistant, not a licensed attorney. It can help you:

• Help you find general information about a subject.
• Summarize long contracts.
• Suggest questions to ask a Legal Pro.
• Spot terms you may want to double-check.

But you’ll still need a human Legal Pro to:

• Review anything before you sign.
• Customize contracts to your specific situation.
• Catch red flags the AI may miss.
• Confirm that your rights and obligations are enforceable.
• Provide legal advice. 

If an AI legal advice or AI-generated clause looks great, ask: “Would this hold up in court?” If you’re not sure, don’t risk it.

Questions SMBs Should Be Asking Before Relying on AI for Legal Advice

Before you copy-paste anything from an AI tool into a contract, email, or agreement, take a moment to ask:

• Could AI be making this up? Is there a source or reference you can verify?
• What’s the risk if this is wrong? Could this affect your income, IP rights, or legal responsibilities?
• Do I understand what this clause actually means? If not, who can I ask for clarification?
• Should I get a second opinion before I hit send or sign? When was the last time a legal professional reviewed my standard templates?

What to Do Next

To protect your business while still getting the most out of AI tools:

• Fact-check anything AI tells you about laws, deadlines, or regulations.

• Use Rocket Copilot, an AI built specifically for legal tasks, trained on reliable legal information—not generic web data. It can help you understand contract terms, flag issues that need human review, and even connect you directly with a Legal Pro when your question crosses into advice AI can’t give.

• Ask a (human) Legal Pro for fast, affordable contract reviews or compliance guidance.

AI can save you time, but it can’t replace professional judgment. With Rocket Copilot, you can use AI confidently—knowing it’s backed by real legal expertise when you need it most.