How to Draft a Business Contract With AI: Types, Clauses, Checklist

To draft a business contract with AI, choose the type of agreement, name both parties, write the terms you have agreed (goods or service, price and currency, payment, delivery or dates, territory), then let the generator turn them into numbered clauses. Review every clause, fill the gaps and have a lawyer check anything important before signing. The free AI Contract Generator does the drafting step and leaves anything you did not give as a [placeholder] instead of guessing.

Which business contract do you need?

Picking the right type matters more than any clause, because each one sets different duties for each side.

Agreement	Use it when
Sales contract	One sale of goods: quantity, price, Incoterm, delivery and payment
Supply agreement	Repeat orders over a period at agreed prices
Distribution agreement	A distributor buys and resells your products in a territory
Sales agency agreement	An agent finds buyers for a commission and does not buy the goods
Consignment agreement	Another party holds and sells your goods; you are paid when they sell
NDA	Before you share prices, designs or customer lists
Service agreement	Work or services for a fee
Rental agreement	Renting property or equipment

The classic confusion is distributor vs agent. A distributor buys the goods and carries the risk of reselling them; an agent never owns the goods and earns a commission. The tax, liability and termination rules are different, so choose deliberately.

How to draft a contract with the AI Contract Generator

1. Open the AI Contract Generator and choose the agreement type.
2. Fill Party A and Party B with company names, cities and countries. Add the role in brackets, for example "Blue Tiles Ltd, Morbi, India (seller)", so each side's duties land on the right party.
3. Write the agreed terms in plain words: what is sold or done, quantity, price and currency, payment terms, delivery terms and dates, the contract period and territory.
4. Add the governing law only if you have agreed one. The tool never picks one for you.
5. Press Draft agreement, read the numbered draft, fill every [placeholder], then download it as Word or print it.

Example: a supply agreement from five lines of terms

We tested the generator with a real style supply deal:

• Type: Supply agreement
• Party A: Acme Traders, Dubai, UAE
• Party B: Blue Tiles Ltd, Morbi, India
• Terms: monthly supply of 2 containers of porcelain tiles, USD 6 per square metre FOB Mundra, payment 30 days after the bill of lading date, 12 month term

The draft opened with the parties and the date as a [Date] placeholder, then set out supply, price, delivery, payment and term clauses from those facts. One lesson from the test: because the party fields did not say who sells, the draft named Party A as the supplier, while the terms meant the Indian company supplies. Writing the role next to each name, as in step 2 above, avoids exactly this.

What clauses should a business contract include?

A clear goods or services contract usually covers:

• Parties and purpose: who is agreeing and why.
• Obligations of each side: what is supplied, by when, to what standard.
• Price and payment: amount, currency, payment method and due dates.
• Delivery or term: delivery point and Incoterm for goods, or the start and end dates for services.
• Confidentiality where it fits.
• Liability: what each side is responsible for if something goes wrong, stated neutrally.
• Termination: how either side can end it and with how much notice.
• Notices, governing law and entire agreement.
• Signature block with names, titles and dates.

The generator drafts these sections and numbers them (1, 1.1, 2) so you can discuss changes line by line.

Trade terms every goods contract should spell out

This is where general contract guides fall short for importers and exporters:

• The Incoterm and named place, for example FOB Mundra or CIF Jebel Ali. It decides who pays freight and insurance and when risk passes. Our Incoterms guide explains each rule, and the Incoterms chooser picks one from your situation.
• Currency and bank charges: who pays the sending and intermediary fees.
• Payment trigger: advance, against documents, or a number of days after the bill of lading date.
• Quality and inspection: the standard the goods must meet and who inspects before shipment.
• Documents: which documents the seller must supply, such as the commercial invoice, packing list and certificate of origin.

For international sales of goods between businesses, many countries apply the UN Convention on Contracts for the International Sale of Goods unless the contract excludes it. Ask your lawyer whether you want it to apply.

Is an AI drafted contract legally binding?

A contract binds the parties when they agree to it and sign it, however it was drafted. AI only changes the speed of the first draft. That is why this tool gives you a draft, not legal advice: it never invents amounts, penalty figures or a governing law, and it marks missing terms as placeholders. Laws differ by country, so have a lawyer review any agreement that matters before signing.

Common mistakes in self drafted contracts

• Vague delivery terms. "Delivered to buyer" leaves freight, insurance and risk open. Name the Incoterm and the place.
• No currency. "6 per square metre" in which currency, and at which exchange rate if invoicing differs?
• Missing termination rules. Without notice periods, ending a supply or distribution deal becomes a dispute.
• One sided liability. A clause that only protects you is often refused, and some laws limit how far such clauses can go; balanced terms get signed faster.
• Old templates. A template from another deal carries terms that no longer apply. Start from the terms of this deal.

Checklist before anyone signs

1. Every [placeholder] is filled.
2. Each party's role (seller, buyer, distributor, agent) is correct throughout.
3. Numbers match your quote, proforma invoice and purchase order.
4. Dates are clear and realistic.
5. Both sides have read the termination clause.
6. A lawyer has reviewed it if the value or risk is significant.

Ready to start? Open the AI Contract Generator, choose your agreement and get a numbered draft in about a minute.

Frequently asked questions

Can AI write a business contract?

AI can draft a clear first version from your terms with the usual clauses for that agreement type. A person still has to check it and fill gaps, and a lawyer should review anything important before signing.

Is an AI generated contract legally binding?

Yes, if the parties agree to it and sign it; how it was drafted does not matter. What matters is that the terms are complete, correct and lawful where you trade.

What is the difference between a supply agreement and a sales contract?

A sales contract covers one sale. A supply agreement covers repeat orders over a period at agreed prices and terms, with each order placed under it.

Does the generator choose the governing law?

No. It writes the governing law clause only if you name one, because choosing it is a legal decision for the parties.

Is the AI Contract Generator free?

Yes. There is no sign up and no paid plan, with a fair use limit of a few drafts per hour. Your terms are used once and not saved.