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Randy Bishop

What Is AI-based Contract Management?

You’ve probably heard of ChatGPT...

It’s an AI language model that can answer questions, create blog posts, and even write code. And now, it’s taking over contract management…kind of.

AI in contract management focuses on simplifying some of the more tedious and time-consuming tasks in the contract management process.

And that’s just scratching the surface. By the end of this post, you’ll know just about everything you need to know to make an informed decision about incorporating this new tech into your routine. 


  • AI-based tools could become a valuable addition to your contract management toolkit.
  • Many tasks in the contract management process are tedious and time-consuming, but AI tools can help.
  • AI will always need human oversight because it is still far from perfect. 

What Is AI-Based Contract Management? 

AI-based contract management is the use of artificial intelligence tools to streamline contract lifecycle management. It can help automate a lot of tasks that would traditionally be performed manually, like: 

  • Creating, editing, and  redlining contracts
  • Automating new contract setup
  • Organizing documents
  • Extracting key terms and clauses
  • Drafting and negotiating contract terms  
  • Flagging discrepancies
  • Assessing and mitigating contract risks
  • Tracking performance and reporting to stakeholders
  • Sending reminders ahead of key dates and deadlines
  • Reporting to stakeholders

So, how does it work? 

AI-based contract management tools work by using natural language processing (NLP). NLP is a field of artificial intelligence that helps computers understand and interpret human language. 

When applied to contract management, NLP algorithms can be trained to recognize specific legal terms and clauses, such as indemnification provisions, termination clauses, or payment terms, names, and dates. 

Then, when it spots key terms, it can perform a range of tasks like flagging potential legal issues, automatically redlining revisions, or even suggesting edits to make the contract more effective.

Many tools also include automatic alerts or email reminders to specific stakeholders using names and dates that it has identified within a document. 

illustration showing how AI is used in contract management

How AI Is Changing Contract Management

Imagine this: Your legal team has just wrapped up a monstrous contract for a crucial partnership with a key client. 

Everyone's on edge, knowing that this behemoth of a document will either make or break your company's future.

As the contract bounces around, team members toss in their two cents, tweaking clauses and sprinkling in provisions. 

Before long, the contract has morphed into a tangled web of legalese, and you're left wondering how you're ever going to spot any inconsistencies.

Enter: AI-based contract management. 

The superhero sidekick swoops in, saving your team from countless hours of squinting at fine print and wrestling with contradictory clauses. 

As your legal team dives back into the fray, they can rest easy knowing that their AI companion is on the lookout for any sneaky risks lurking in the shadows.

Is there a liability limitation clause playing tug-of-war with an indemnification provision? The AI will flag it. Did someone slip in an ambiguous term that could spark a feud down the line? The AI's got your back.

With AI as your trusty sidekick, your legal team can ditch the magnifying glass and focus on the big picture, confident that their AI helper will tackle any challenges that remain.

Give ContractSafe a Spin v2

Now that you've seen how AI can swoop in and save the day, let's uncover the secret sauce behind its powers. 

Here are nine transformative ways AI is reshaping the contract management landscape for the better.

1. Data Extraction

Artificial intelligence makes real-time data extraction across PDFs, image files, and word processor files as easy as pie. And it’s pretty sophisticated. Here are some of the things that can be extracted using AI’s NLP:

  • Expiration dates
  • Names of stakeholders
  • Clauses and legal jargon
  • Terms and conditions

This can help streamline new contract setups by populating key information from uploaded contracts. It can save countless hours by eliminating busy work, which will let your team focus on tasks that add value to your business. 

All you need to do is upload your contracts, and AI will pull important information for you and then organize everything accordingly. And the extracted information can be used to perform a variety of tasks, like sending notifications when deadlines are approaching, flagging ambiguous language for legal review or emailing reminders to that one team member who always forgets to sign the last page.

List of what data can be extracted from contracts using AI.

2. Intelligent Workflow Automation

AI isn’t limited to finding and extracting data, either. It can create workflows that automate contract reviews, approvals, and renewals. 

Wrangling stakeholders can be one of the hardest parts of managing contracts, but AI can help by:

  • Sending emails when signatures are needed
  • Automatically following up with anyone who missed the first email
  • Comparing different contract versions and identifying changes 
  • Ensuring everyone is working from the correct version

It’s kind of like having your own digital sheepdog that helps get everyone to where they need to be. 

3. Extract Insights From Contract Data

AI contract management tools can help transform your contract data into actionable insights. 

This will allow you to use your data to help you make more informed decisions, build reports for stakeholders, and create audit trails to make compliance easier than ever. 

AI does this by analyzing historical contract data to provide negotiation insights into pricing, potential discounts and business terms to help you close better deals faster. 

4. Clause and Metadata Analysis

No one likes dealing with GDPR or HIPAA enforcers, but AI can help! 

Using NLP, AI contract tools can read contracts quickly and accurately to help identify and extract clauses, organize metadata, and spot potential issues or areas of concern. This helps organizations:

  • Mitigate risks
  • Reduce potential for disputes
  • Ensure regulatory compliance

5. Bulk Document Organization

AI-powered contract management tools can organize large volumes of contracts quickly and easily, making it easier to find specific contracts or data. This can save time and reduce the risk of errors or oversights.

Simply upload a group of documents and AI will tag and organize them all with a click of a button, automatically grouping attachments so everything you need for a specific case, deal, or contract is all in one place. 

6. Smart Contract Review

Did you know that, on average, it takes about 92 minutes to review a contract

Now think about how many contracts your organization is juggling right at this moment. 100? 1,000? 10,000? 

AI can review contracts automatically, identifying potential issues or areas of concern based on the terms and conditions of the agreement. This can help organizations ensure that contracts are accurate, complete, and compliant with regulatory requirements.

Even better, AI can provide suggestions on how to negotiate based on pre-set guidelines. That opens up a world of potential cost-saving opportunities that may have been overlooked in the past. 

7. Contract Risk Analysis

AI-powered contract management tools can analyze contracts to identify potential risks, such as noncompliance or contract breaches. This can help organizations mitigate risk, reduce the likelihood of legal disputes, and protect business interests. 

It does this by spotting mistakes or incorrect information, highlighting unfavorable terms, suggesting edits to missing or ambiguous clauses, notifying specific teams when terms change, and even comparing clauses against standard contracts to provide a risk rating.

8. Contract Volume Mitigation

As a business scales, so does the number of contracts it handles on a regular basis. In fact, some enterprise-level businesses have up to 40,000 contracts under management at any given time. 

AI can help organizations manage large volumes of contracts more efficiently by:

  • Automating routine tasks
  • Identifying potential areas of concern
  • Organizing bulk uploads
  • Keeping related documents all in one place

This can help reduce the workload on contract managers, increase efficiency, and ensure contracts are managed effectively.

The Benefits of AI Contract Management

AI is kind of like having a personal assistant that never gets tired, is always available, and can analyze a ton of data in a heartbeat.

Here are some of the biggest benefits of AI contract management:

image listing the benefits of AI contract management

Streamlines repetitive tasks: AI automates a ton of repetitive tasks like data extraction, routine workflows, storing and finding documents, and organizing bulk uploads.

Improves pre-signature accountability: AI’s auto-redlining and version control can make sure every stakeholder is not just working from the same document, but is also held accountable for the part of the process for which they’re responsible. 

Assists with negotiation: AI can extract key insights and track past contracts to leverage data in order to highlight potential areas for improvement, helping your team get the most favorable terms possible. 

Minimizes risk: AI can be used to spot potentially risky verbiage in order to mitigate compliance risks, either with contract terms or regulators.

Increases efficiency and decreases costs: AI helps reduce human error and streamlines tedious tasks, leaving contract managers with more time to spend on adding value elsewhere.

Makes it easier to search and find what you need: Using OCR, AI can help find and retrieve documents in an instant

Improved job satisfaction and morale: AI streamlines some of the most boring and exhausting tasks in the contract management process.

Who actually enjoys scaling a mountain of paperwork just to find a contract for Ted in finance, after all?

The Limitations of AI Contract Management

If you’re familiar with or have at least read some of the downsides surrounding ChatGPT, you might already be aware of its limitations. But if you’re not, let’s take a look at what could go wrong by over-relying on AI:

AI can be kind of dumb (and problematic): AI has made some pretty big blunders, like Amazon’s problematic resume sorting tool, IBM’s “unsafe” healthcare platform, and Roomba’s “poopocalypse” incident. 

Expectations are too high: Some companies think AI is a silver bullet and will replace entire teams of people. While it can help reduce time spent on some tasks, it cannot do a contract manager’s job.

AI is only as good as the humans using it: AI uses prompts, inputs, and pre-set data in order to function. Incorrect data or a missing document could create an incorrect output that could result in missing risk considerations, missed revenue opportunities, or worse, a knock on the door from regulators if privileged data is accidentally shared with the wrong people.

AI can’t always understand context: While contracts can sometimes read as though a robot wrote them, there are a lot of intricacies and specific contexts a robot might overlook.

AI needs to be updated frequently: In order to stay relevant, AI needs access to the latest data available. You don’t want AI basing its decisions on regulatory information that may be out of date, after all.

Contracts are created by humans, for humans. So even though AI might be able to help simplify some processes, it will always need some human oversight.

AI Contract Management FAQ

Here are some frequently asked questions about AI in contract management:

How Can AI Help With Contact Management?

AI makes many of the most tedious and time-consuming aspects of the contract management process simpler by doing some of the heavy lifting. This can include things like data extraction, workflow automation, and risk analysis. 

How Do You Automate Contract Management?

While it’s not exactly possible — or advised — to automate the full contract lifecycle management process, there are parts that can be delegated to AI, like setting reminders, sending follow-ups, generating reports, or extracting data. 

What Is AI for Legal Contract Review?

AI for legal contract review refers to the use of artificial intelligence technologies to analyze and interpret legal contracts. This technology involves machine learning algorithms that can extract and analyze data from large volumes of legal documents, such as contracts and agreements.

What Is The Disadvantage of AI in Contract Management? 

While AI algorithms can be trained to identify certain types of clauses or language in contracts, they may not always be able to understand the context or nuances of the language. This can lead to errors or misinterpretations in contract analysis, which could result in legal or financial consequences for the parties involved.

Is AI Contract Management Right for Your Business? 

AI-based contract management tools bring a lot to the table — there’s no denying that. But remember, a tool is only as good as the person using it! Contract management will always require a human touch, but a human armed with the right contract management software is most certainly a force to be reckoned with. 

If you would like to see how AI can be used in your contract management process, schedule a demo today!

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