#237 Stop using Chat GPT for this
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AI is everywhere right now. It is in your inbox, your apps, your content workflow, and probably your group chats too. And I am not anti AI. I use it myself for note taking, summaries, creative idea generation and making parts of my work more efficient. It is a brilliant tool when you use it for what it is good at.
But there is one place I really want business owners to stop using it like a shortcut, and that is strategic legal advice.
This is not me doing the usual “do not use ChatGPT to draft your contracts” speech, although yes, that is still true. What I am talking about today is the bigger issue I am seeing more and more. Business owners are asking AI what they should do legally, then acting on it like it is advice. And that is where things get messy fast.
Here is why I care so much about this. I have a litigation background, which means I have seen what happens when things go wrong. I have seen the disputes, the expensive clean ups, and the “how did we end up here?” moments that start with one small decision made without proper guidance. These days, my work is about setting business owners up for success and helping them avoid becoming tomorrow’s legal drama. That is why I am so firm on this.
AI can sound confident even when it is wrong. It can fill in gaps. It can make assumptions. And in law, assumptions are expensive.
I have seen a creative business owner use ChatGPT to put together a client agreement that looked polished. It read well. It sounded professional. But it was missing key protections, including intellectual property clauses and a proper dispute resolution process. That gap turned into a $60,000 conflict over deliverables and rights, and by the time it landed on my desk, it was no longer a simple fix. It was a rescue mission.
I have also seen business owners rely on AI to help them decide whether someone was a contractor or an employee. They thought they had it sorted, only to end up dealing with a superannuation claim they were not prepared for. Thousands owed in back pay, stress they did not need, and a problem that could have been avoided with proper advice upfront.
And it is not just small disputes. There was a recent situation in New South Wales where two directors relied on ChatGPT to guide them on the legal steps to remove a third director. They followed an AI generated strategy and treated that director like an employee, which was not legally appropriate. It ended with a court decision that brought an administrator into the company. That is not a minor consequence. That is a business altering outcome.
The point is not that AI is useless. The point is that it is not accountable. It does not know your full context. It does not carry the risk. You do.
So here is the takeaway. Use AI for brainstorming, drafting rough notes, improving clarity, and speeding up admin. But when you are making legal decisions, especially decisions that affect your contracts, your team, your structure, your intellectual property, or your disputes, get proper advice. The cost of getting it wrong is rarely just financial. It is time, energy, reputation, and peace of mind.
If you know a business owner who is treating AI like their lawyer, share this with them. It could save them a very expensive lesson.
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[00:00:52] Tracey: Conversations about AI and ChatGPT in business are not new, and those conversations are not going to stop anytime soon. There is no [00:01:00] doubt AI is here to stay, and as business owners, we ought to embrace it. I am all for that. However, there are limitations to what you should be using AI for in your business and what you should not.
[00:01:12] And in today's episode, I am going to share with you one thing that I really wish business owners would stop using ChatGPT for, and that is strategic legal advice. I bet you thought I was going to say, "Don't use ChatGPT to draft your contracts." And yes, I say that a lot, but that is not what I want to focus today's episode on.
[00:01:36] I really think me saying that is obvious and I think the time has passed where people are using ChatGPT to draft legal documents. I really do. There may be some people that still do it. I hope that they eventually learn that that is not a great or suitable use of AI or ChatGPT.
[00:01:55] I have seen so many business owners end up in a really tricky situation [00:02:00] because they have documents that do not work. That goes to the cornerstone of what I do in this business. I draft contracts and agreements for clients to help set them up for success. My background is litigation and disputes, so I want to see business owners set up for success and I want to see them avoid becoming somebody else's litigation client.
[00:02:20] So, it is no secret that I do not support ChatGPT or any AI for drafting your legal documents, but it is so obvious. It is so obvious that I want to talk about something that is less obvious but so incredibly important, and that is when business owners use ChatGPT to take their legal advice. I do not know how you use ChatGPT in your business, but I do not use ChatGPT.
[00:02:45] I use Claude, and I use Claude for brainstorming, for summaries, and I have a note-taker. I find that it can be beneficial for efficiencies in the business, and it is nice to be able to brainstorm creative ideas when it comes to my content [00:03:00] with a platform like Claude, whom I have trained so it knows my business and my brand, so that it helps just crystallise my thinking sometimes when I am thinking about content and podcast topics and things like that.
[00:03:13] That, I think, is an excellent use of AI, and there is no business owner that I know that does not use some form of AI for something like that. That is where it ends though, in my view. Well, certainly that is where it ends in my business; that is where it ends for a lot of my clients. And I am hoping after listening to this episode that your use of ChatGPT or AI does not extend to taking your legal advice.
[00:03:39] ChatGPT and AI (when I say ChatGPT, it does extend to the others) is not designed to be current, up-to-date, or accurate on the law. Many of the AI tools, as I am sure all of my listeners are aware, are designed to hallucinate. That means if they do not know the answer to a question, [00:04:00] they make it up. They are creative.
[00:04:02] They are not designed to give factual information or details when it comes to the law, current legislation, the application of that legislation, or even a list of current judgements that have been delivered by the courts. It is not designed for that. Further, the output we get is only as good as the input that we give.
[00:04:24] We know this. So, unless you know exactly what it is that you need to ask specific to a piece of legislation, a section, or a principle of law, you cannot rely on the output because the output is only as good as the input, and you were not quite sure about the input, which is why you went there in the first place.
[00:04:43] I am going to share with you a recent Supreme Court of New South Wales court case where business owners found themselves in hot water because they had used ChatGPT for their legal advice. I kid you not, it ended up in court. Before I do, though, I just want to give you a couple of examples of [00:05:00] real-life scenarios that I have seen business owners reach out to me for, seeking help because they have used AI for their legal advice and it got it wrong, leaving them in a worse situation than when they started.
[00:05:11] One relates to a client agreement for a creative business owner. They used ChatGPT to develop their client agreement. It looked excellent, professional, and stellar, and it was formatted well. It looked really great, but it was missing IP protection clauses, a dispute resolution clause, and the right to cease services if they were not paid.
[00:05:34] The business owner, when they were asking ChatGPT to draft their agreement, did not know what they needed. So, they did not give a list of clauses, and they did not know what to look for. Of course they did not; they are not lawyers, they are creatives. So, they ended up in a situation with a client and a fairly chunky contract to the tune of $60,000.
[00:05:52] There was a dispute over the deliverables and who owned the intellectual property. There was a dispute over unpaid invoices, and [00:06:00] because there was no dispute resolution clause, there was no framework to guide the discussion. So, the client just refused to pay about $28,000 worth of those invoices, and they were using the intellectual property in a way that the creative was not happy with. The creative stopped work but had no right to do so under the agreement because it did not say you have the right to stop work.
[00:06:20] Not everybody wants that right. Some people do; some people do not. It is individual. But this creative did not have the right, which meant the client had to terminate and engage somebody else, and then sought to recover additional costs from the creative business owner because they said they were in breach of the contract, as they did not have the right to terminate in the first place.
[00:06:41] You can see how messy that was and how it was so much worse by the time it got to me because of the inadequacies of the agreement. If that agreement had been drafted properly to suit the creative business right from the very beginning, all of that could have been avoided. That is what I am about in my business.
[00:06:58] Prevention is better than [00:07:00] cure. There is so much that I saw in the litigation era of my career that could have been avoided with the right advice and the right documents. I see these examples all the time, and that is one. The other live example I want to share with you from business owners I have spoken to is in relation to contractors.
[00:07:17] A business owner had taken advice from ChatGPT and had satisfied themselves that the contractor they were engaging was a genuine contractor, and that they were not at risk of the law deeming that contractor later to be an employee. They did not know to ask, though, specifically about deeming provisions in relation to superannuation.
[00:07:36] What it meant was they got it wrong, and there was a significant claim for back pay of superannuation by the contractor after they had left. Things did sour; after they left, they became aware that they were actually entitled to superannuation under that arrangement.
[00:07:52] Because that business owner had used ChatGPT, the advice they relied on was wrong and the documentation was inadequate, which meant the [00:08:00] business was liable to pay a significant amount of back pay for superannuation to that contractor. These are two live examples. There are so many more that I could share with you, but I will not for the sake of this brief episode.
[00:08:13] You get the point. ChatGPT is great for some things, not others, and taking legal advice is not something that you should be using ChatGPT or any AI tool for. Now, do not just take my word for it. Recently, this year, the New South Wales Supreme Court handed down a decision ordering an administrator to be appointed to a company because two directors pushed out a third director.
[00:08:38] The two directors used ChatGPT for their strategic advice, and they input questions and details around treating the director like an employee and the steps they needed to take to remove him. However, that was the wrong law because the director was not an employee, he was a director, and the correct law related to [00:09:00] oppression, not employment.
[00:09:01] So, the legislation for which ChatGPT developed the framework for the strategy was wrong. The two directors relied on it. That was wrong. They acted in breach of the law because they were acting in a way that was oppressive, and you are not allowed to do that under certain laws. I will not go into too much detail to illustrate my point, but what ended up happening was an administrator has now been appointed to the company by order of the court, and the two directors that did the wrong thing are suffering significant harm, loss, and damage.
[00:09:34] That case, in case you want to look it up, is called In the Matter of Lanmar Pty Ltd (No. 2). That is brackets number two, and Lanmar is L-A-N-M-A-R. It is a 2026 case in the New South Wales Supreme Court. That is a classic example of where we are headed when it comes to business owners, individuals, or companies using AI for [00:10:00] legal advice and getting it wrong, because it is not designed to get it right.
[00:10:05] In this particular case, the cost to the two directors is so significant because they made the judgement call to use ChatGPT to save on lawyers' fees; now it is going to cost them significantly more than what competent, proper legal advice at the beginning would have cost.
[00:10:26] Similarly, with the client scenarios that I shared with you, it was about saving money. I am going to save money and time and just use AI to develop these so I do not need to engage a lawyer. But the consequence was so significant that it cost them way more in the end than what it would have ever cost by getting these things done properly by a lawyer in the first place.
[00:10:52] There is documentation, but there is also strategic advice. You need to know that the advice you are getting is correct and you can rely on it, thereby providing [00:11:00] peace of mind. You do not get that from ChatGPT. You do not get that from any AI tool when it comes to the legal landscape, and you were never supposed to.
[00:11:09] It is not designed for that. So, I wanted to demystify that today so that when you are thinking about the way you use AI and ChatGPT in your business, you are really clear that my view is that, yes, it has a place, but we need to be really discerning as business owners because that is our responsibility, and we need to apply it where appropriate.
[00:11:28] And the key, as you can see from the Supreme Court case that I have shared with you, is do not apply it and do not use it where it is not appropriate because you can end up in hot water. The judge was very critical of the directors and the fact that they used ChatGPT, and she made a point to say that ChatGPT is not legal advice.
[00:11:46] So, there we go. I suspect we are going to see many more cases along a similar vein where businesses, individuals, or entities end up in an untenable situation because they have done the wrong thing by relying on the [00:12:00] advice they got from AI. Do not let that be you. I hope you have enjoyed this very short and sharp episode.
[00:12:06] It is really topical, and I suspect I will be talking about this a lot more on socials and here on the podcast. If you know a business owner who you think would benefit from this insight, please, I would be so grateful if you would share the episode, as that is how we get the podcast into the ears of even more business owners.
[00:12:23] As always, thank you so much for joining me. I will catch you next time.
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