Should Your Business Be Using ChatGPT? Understanding The Legal Risks

ChatGPT has quickly become a common business tool. From drafting emails and creating marketing content to brainstorming ideas and summarising documents, businesses of all sizes are exploring how generative AI can improve productivity.

But while AI is changing the way businesses work, it doesn't change the legal obligations they operate under. Whether your business chooses to use ChatGPT regularly, only for certain tasks or not at all is a commercial decision. If AI forms part of your business, it's important to understand the legal risks that can come with it.

After all, there's a big difference between asking ChatGPT to suggest ideas for a social media campaign and relying on it to draft contracts, analyse confidential information or communicate directly with customers. Knowing where to draw that line is becoming increasingly important as AI becomes part of everyday business.

Can Businesses Legally Use ChatGPT?

In most cases, yes. There is generally no Australian law preventing businesses from using ChatGPT or other generative AI tools.

Rather than introducing an entirely new legal framework for AI, existing laws continue to apply. Privacy law, consumer protection law, intellectual property law, employment law, contractual obligations and industry-specific regulations still govern how businesses operate, regardless of whether work is completed by an employee or assisted by AI.

The Australian Government's National AI Centre has reinforced this approach, noting that existing Australian laws continue to apply when organisations adopt AI technologies. In other words, AI doesn't replace legal obligations - it simply changes how businesses carry out certain tasks.

The real question isn't whether your business can use AI. It's whether you're using it in a way that continues to meet your legal obligations.

Who's Responsible If ChatGPT Gets It Wrong?

One of the biggest misconceptions about AI is that responsibility somehow shifts to the technology itself. In practice, that's generally not how the law works.

If your business relies on AI-generated content or publishes it, your business will generally remain responsible for ensuring that content is accurate, appropriate and legally compliant. While ChatGPT can generate text, summarise information and draft documents, it doesn't understand your legal obligations, commercial objectives or the specific circumstances of your business.

Australian courts have already recognised this distinction. In 2026, the Federal Court of Australia introduced a Practice Note on the use of generative AI in court proceedings. While acknowledging AI's benefits, the Court also made it clear that users remain responsible for verifying AI-generated material before relying on it. The guidance specifically warns that AI can produce fictitious legal authorities, factual errors and incorrect legal analysis.

Privacy And Confidential Information

Sometimes, the biggest legal risks associated with AI isn't what it produces - it's what people put into it.

Employees often use AI to summarise emails, review contracts, draft responses or analyse documents. While these tasks can save time, they may also involve uploading confidential or personal information without considering the legal implications.

Businesses may have obligations under privacy law, confidentiality agreements, employment contracts or commercial agreements to protect that information. Uploading customer details, employee records, financial information, confidential contracts or commercially sensitive business strategies into AI tools without appropriate safeguards could therefore create unnecessary legal risk.

For example, imagine an employee copies a customer's complaint into ChatGPT to help draft a response. The complaint contains the customer's contact details, purchase history and internal notes about the dispute. Although the intention is simply to work more efficiently, the business should first consider whether sharing that information is consistent with its privacy obligations and any confidentiality commitments it owes to the customer.

This doesn't mean businesses should avoid AI altogether. It does, however, highlight the importance of having clear internal rules around what information can and can't be entered into AI tools. As AI becomes more common in the workplace, many businesses are introducing AI Policies to help employees use these tools consistently and responsibly.

Can ChatGPT Create Copyright Or Intellectual Property Issues?

Using AI can also raise intellectual property (IP) issues. While AI makes it easier to create content and solve problems, it can also create uncertainty around both the material businesses generate and the information they choose to share.

One common misconception is that anything generated by AI is automatically free from copyright concerns. In reality, this area of law is still developing. Depending on the prompts used and the nature of the output, AI-generated content may resemble existing works or incorporate protected material in ways that aren't immediately obvious.

For example, a business might ask ChatGPT to write website copy in the style of a well-known competitor or prepare training materials based on existing content. While the output may appear original, it's still worth reviewing before publication, particularly where originality or ownership is commercially important.

Businesses should also think carefully about what they're putting into AI systems. Uploading source code, product designs, trade secrets or confidential business processes may expose valuable intellectual property unnecessarily. Before sharing this type of information, it's worth understanding how the AI platform handles user data and whether doing so is consistent with your confidentiality obligations.

Can AI Content Breach Consumer Laws?

Many businesses use AI to help prepare marketing campaigns, website copy, customer emails and product descriptions. While AI can save time, businesses remain responsible for the claims they make to customers.

Under the Australian Consumer Law, businesses must not engage in misleading or deceptive conduct or make false or misleading representations about their products or services. Those obligations apply regardless of whether content is written by an employee, an agency or an AI tool.

Imagine asking ChatGPT to write a product description for an outdoor backpack. It describes the product as "100% waterproof" when it's actually only water resistant. The description is published without review and customers rely on it when making a purchase. If that claim is inaccurate, the business - not the AI - is responsible.

The same applies to exaggerated product claims, incorrect pricing or promises that can't be substantiated. AI-generated content should be treated as a first draft rather than a finished product, with customer-facing material reviewed before it's published.

Can ChatGPT Replace Legal Advice?

Generative AI has made legal information more accessible than ever. It can explain legal concepts in plain English, summarise legislation and help businesses understand unfamiliar terminology.

However, there's an important difference between explaining the law and providing legal advice.

Legal advice requires an understanding of a business's specific circumstances, commercial objectives and appetite for risk. Two businesses in the same industry may need very different contractual protections depending on how they operate. AI can provide useful information, but it can't apply legal judgement in the way a qualified lawyer can.

For that reason, businesses should be cautious about treating AI-generated information as a substitute for professional advice, particularly where significant legal or commercial decisions are involved.

Should You Let ChatGPT Draft Contracts?

Contracts are one area where AI can genuinely save time. It can help explain legal terminology, suggest clauses or prepare a first draft, making it a useful starting point for many businesses.

However, commercial contracts are rarely standard documents. They need to reflect the law, the relationship between the parties, how risks should be allocated and what each party is trying to achieve. They may also need to comply with industry-specific legislation or regulatory requirements.

The Federal Court's guidance on generative AI reinforces this broader principle. While AI can assist with drafting, users remain responsible for verifying the accuracy of the final document and ensuring it meets their legal obligations. Whether it's a customer agreement, supplier contract or employment agreement, the final contract should reflect your business's specific needs-not simply produce language that sounds legally correct.

Other Legal Risks Businesses Often Overlook

Privacy, intellectual property and consumer law are some of the most obvious legal considerations when using AI, but they're not the only ones.

If AI is used to assist with recruitment or performance management, employers still need to comply with workplace and anti-discrimination laws. AI may help identify patterns or rank candidates, but decisions about hiring, promotions and disciplinary action should still involve human judgement.

Businesses should also be careful when publishing AI-generated content about individuals or competitors. If AI produces false or misleading statements that are later published, the business may still be responsible for the consequences.

For businesses operating in regulated industries - such as financial services, healthcare or legal services - additional obligations may also apply. Industry-specific laws and professional standards don't change simply because AI forms part of a business's workflow.

Does Your Business Need An AI Policy?

One of the biggest challenges with AI is that employees often begin using it before any formal guidance exists.

Without clear expectations, different employees may use AI in very different ways. Some may use it simply to brainstorm ideas, while others may begin drafting customer communications, analysing contracts or uploading confidential documents without fully understanding the risks.

An AI Policy helps establish clear boundaries around how AI should be used within your business. It can cover which AI tools are approved, what information can be shared, when human review is required and who is responsible for approving AI-generated work before it's used externally.

As AI becomes more integrated into everyday business, having clear internal guidance is becoming just as important as choosing the right technology.

Key Takeaways

Generative AI has the potential to transform the way businesses work, helping teams save time, improve efficiency and support everyday tasks.

However, while the technology is new, the legal principles generally aren't. Existing laws relating to privacy, confidentiality, consumer protection, intellectual property, employment and contracts continue to apply, regardless of whether work is completed by a person or assisted by AI.

If you would like a consultation on the legal considerations of using AI in your business practices, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.