Please Use ChatGPT for Your Next Agreement (Because I Have Kids in College and I Could Use the Money)

There were two working titles for this article.?The first, favored by my associates, was “AI-Created Agreements Will Kill Your Company.” Ho-hum. The second was the one that I actually used because I do have kids in college and college is expensive, and if you use ChatGPT for your agreements then you'll likely be donating to their education fund. Lucky you. And lucky me.

You see where this is going, right?

It seems like everyone is fascinated with ChatGPT and its uncanny ability to sometimes provide highly relevant and substantive responses to all kinds of questions.?Admittedly, the tech is interesting and makes us feel like Skynet (think: Terminator) or HAL (think: 2001: A Space Odyssey) or Ava (think: Ex Machina) is about to replace us all—and lawyers seem to be first on the chopping block.

To test ChatGPT’s legal prowess, a few people in MSP-centric user groups asked ChatGPT to create a master services agreement to see if the technology was up to snuff.?Interesting??Sure. But what came next was both predictable and surprising—in that order. ?

The predictable part: The agreement written by ChatGPT stunk. (More on that in a moment.)

The surprising part: There were quite a few people who read the ChatGPT agreement and responded, “It looks good,” or “I gave it to my customers and they signed it,” or “You could add a few things to that and use it as a template.”?Wow.?

For those of you who have used a ChatGPT agreement already, please DM me and get my contact information since you’ll need it when things go south with your agreement.

For those of you who haven’t used an AI-created MSA, let’s dive into the one posted online. I’ll analyze it using the Socratic Method (i.e., lots of questions that should/will scare the hell out of you) so you can see for yourselves the parade of horrible things that will happen if you use that agreement.

Quick disclaimer: This isn't legal advice.

Second quick disclaimer: There is so much wrong with the ChatGPT agreement that I can’t, and don’t, go into all of its weaknesses—but I’m confident you’ll get the point.

Ok, let's play.

Purpose of Agreement

The purpose of this Agreement is to set forth the terms and conditions under which the MSP will provide managed IT services (“Services”) to the Client as described in Exhibit A attached hereto.

[BJG] As an MSP do you “provide” managed IT services to customers or, perhaps, do you facilitate and/or resell such services? Do you think there's a difference between saying that you provide a service as opposed to facilitate a third party service? Do you think that by saying you provide the service that you’re assuming all responsibility for that service? Also, do you think it’s wise to attach the services as an exhibit? By attaching services as an exhibit, aren’t you changing your agreement??If this is truly a “Master Agreement,” should it ever change? Should services be attached?

Term of Agreement

This Agreement shall commence on [insert start date] and shall continue until [insert end date or “terminated by either party upon written notice”].

[BJG] When should a Master Agreement end??Should a customer be able to cancel your Master Agreement if services are in progress? Should a customer ever be able to simply terminate “upon written notice?” Do you think your customers will be comfortable with your company knowing you can terminate your services at any time for any reason leaving them without backup, security, or IT support? ?What if your customer terminated the agreement in month 4 of a 36 month term? Who would pay the Microsoft NCE license fees (or any other similar per-seat licensing fees) for the next 32 months?

Services

The MSP shall provide the Services described in Exhibit A in a professional and timely manner, in accordance with industry standards. The MSP shall have the right to sub-contract any of the Services to a third party, provided that the MSP remains responsible for the performance of the Services.

[BJG] What are “industry standards?” Do you think that by using terms like “industry standard” you are encouraging scope creep? Do you think you might be mismanaging your customer’s expectations? Did you know that most litigation between MSPs and their customers is due to mismanaged expectations? Also, are your upstream providers (e.g., the vendors in your security stack, your BDR stack, etc.) considered to be your subcontractors? If so, do you understand that you are responsible for all failures, mistakes, and omissions of your subcontractors??Is that really what you want?

Fees

The Client shall pay the fees set forth in Exhibit A for the Services provided under this Agreement. The fees shall be payable [insert payment terms].

[BJG] What happens if they don’t pay your fees? Can you suspend your services? What happens if you suspend your services and you get an attorney’s letter saying something like, “My client is a medical facility, and if you suspend services due to nonpayment, people will die.” (That comes from a real case I handled years ago.) What about third party service increases—how should those be handled??What about minimum monthly fees??Do you think those should be in a “exhibit” or, perhaps, should they be more firmly solidified in your master agreement?

Confidentiality

The MSP shall maintain the confidentiality of all confidential information of the Client, and shall not use such information for any purpose other than to perform the Services. The MSP shall not disclose such confidential information to any third party, except as required by law.

[BJG] This is so awful that, as my kids used to say, “I just can’t.”?I’ll leave you with just two questions to ponder: Do you think that you will be required to disclose some of your customers’ confidential information to upstream/third party providers? Do you think that such disclosure, if required to facilitate/re-sell the services, is “required by law?”

Intellectual Property

The MSP shall retain all right, title, and interest in and to all its existing and future patents, trademarks, trade secrets, copyrights, and other proprietary rights related to its products, technology, and services. The Client shall have no right, title, or interest in or to such Intellectual Property except as set forth in this Agreement.

[BJG] This section is so sufficiently vanilla that we will leave it alone.

Limitation of Liability

The MSP shall not be liable for any indirect, incidental, special, or consequential damages arising from the provision of the Services, including but not limited to loss of profits, loss of business, or loss of data.

[BJG] Do you think that you are protected from damages occurring when you facilitate/re-sell a service (as opposed to provide a service which, as I hinted above, you almost never do)? Do you think this single sentence protects your company from negligence claims? ?Do you think that you’re protected even if a plaintiff's attorney warns you of the potential for such damages? Do you think that there are other types of damages which are NOT excluded in this section? Have you heard about actual damages? Did you know that actual damages (which are not excluded here) can be millions of dollars? Do you think that you should trust artificial intelligence to set the outer limits of your insurance coverage?

Termination

Either party may terminate this Agreement upon written notice to the other party if the other party breaches any material term or condition of this Agreement. Upon termination, the Client shall pay all fees due and owing for the Services provided through the date of termination.

[BJG] Didn’t we cover this above?

Dispute Resolution

Any disputes arising out of or relating to this Agreement shall be resolved through arbitration in accordance with the rules of the American Arbitration Association.

[BJG] One arbitrator or three? What qualifications/experience do you think an arbitrator should have? Are those qualifications/experience required by this section? Where will the arbitration take place? Who pays for it? If you win, do you get your attorneys’ fees repaid? What about small matters—do those also have to be arbitrated? Have we eliminated the possibility of sending clients to collections and, instead, put ourselves in a position where everything must be arbitrated?

Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the State of [insert state].

[BJG] And….so what?

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

[insert MSP name]

[insert Client name]

[BJG] Are your customers still signing your MSA??Don’t you think there’s a better way to make it easy for your customers to accept your MSA while still ensuring that it protects your company??

The bottom line: If you think it's wise to use AI to draft your customer-facing, bet-the-company-type agreement to save a few dollars, then you need to increase your insurance coverage and, perhaps, consider moving to a different field altogether. Don't worry about AI--it's a lot of hype that can lead you to a very bad place--and I call that place "the courthouse."