Gone are the days of laboring through pages of dense contractual agreements.
AI contract review has emerged as an exciting new way to supercharge human efficiency in the painstaking process of reviewing contracts.
But how does it fit into the intricate universe of contract management?
Is it a silver bullet or just another tool in the box?
In this guide, we’ll provide you with a comprehensive understanding of what AI contract review can truly offer, its limitations, and how to harness its full potential in the real world.
- AI streamlines the contract review process by swiftly scanning, analyzing, and highlighting key contract areas.
- AI can identify key contract components, analyze terms and conditions, ensure financial clarity, flag risks, and check for consistency.
- While transformative, it's essential to remember that AI is meant to supplement, not replace, human legal expertise.
What Is AI for Contract Review?
Contract review is the process of examining a document to ensure its accuracy and completeness. Now, imagine having a brilliant assistant who does that for you. And they’re much faster, make fewer mistakes, and can handle thousands of contracts without burning out. That’s AI contract review.
Instead of manually sifting through pages of legal jargon, AI swiftly scans, analyzes, and highlights key areas in contracts. It’s like a magnifying glass that can spot even the tiniest details in your contracts, and it learns from previous contracts, so every time it checks a new one, it becomes even smarter.The best part? It can help support review even within other stages of the contracting process:
- Drafting: helps craft a draft, ensuring the language is correct and parties are accounted for, and even suggests clauses to add based on your needs
- Analyzing: spots potential risks and opportunities within the contract
- Negotiating: offers insights to strengthen negotiation points and help you score more favorable terms
- Executing: speeds up the finalization with automated checks
- Reporting: provides an overview of the contract's lifecycle, key obligation dates, and even the contract’s performance
And it’s got a ton of benefits, including:
- Reduced manual labor: Gartner estimates that by next year, manual labor in the contract review process will be reduced by 50% with the help of AI.
- Increased efficiency: According to a survey, contract professionals spend as much as two hours finding specific language in a contract. AI can find it instantly.
- Greater accuracy: A study performed by LawGeex found that AI was 10% more accurate than trained lawyers.
- Faster reviews: Another study found that AI could complete a contract review in just 26 seconds, while an average lawyer took about 92 minutes.
Using AI for contract review is like turbocharging your process, making it faster, smarter, and simpler. But it’s still not perfect, so it needs some human oversight.
How Does AI Contract Review Work?
Contracts can be long. And they're dense. They're full of legal jargon that can make even the best lawyers do a double-take.
That’s why manual contract review can take hours. Reviewers have to go line-by-line, sometimes two or three times, just to check that dates and names match up, and all the terms and conditions are correct.
AI, on the other hand, scans those lengthy documents in the blink of an eye, spots issues, and points out what needs a closer look. Better yet, it doesn’t get tired.
Here’s a breakdown of how AI works during the review process:
- Identifies parties: Just as you'd begin by ensuring every party is correctly mentioned, AI scans the entire contract to verify names, titles, and associated entities. And, of course, it will also spot any blank placeholders, ensuring key details aren’t left out.
- Analyzes terms, conditions, and deliverables: Ambiguity in terms can lead to disputes. AI reviews each term, condition, and associated deliverable, flagging any uncertainties or unclear clauses to help you negotiate more favorable contract terms.
- Ensures financial clarity: AI works diligently to ensure payment terms, due dates, and penalties are clear and void of discrepancies, just as you would during a manual check.
- Identifies key dates and responsibilities: Much like manually marking calendars with critical dates and obligations, AI flags them, ensuring they stand out and aren't missed.
- Flags risks: AI quickly identifies and flags potential pitfalls, unfavorable conditions, or unbalanced terms that might necessitate hours of manual scrutiny.
- Checks for consistency: With its vast database, AI cross-references the contract against any provided reference documents in seconds, making sure every detail aligns and nothing important is overlooked.
Now, it’s worth noting that AI can still make mistakes, so before sending a contract on, a legal pro should always double-check it.
What Can AI Do for Contract Review?
Contract review is a thorough task. AI doesn't just mimic the usual review, but improves it in some surprising ways.
Automatic setup of new contracts: AI quickly extracts key details like clauses, dates, and involved parties. This makes managing and reviewing contracts faster, cutting down on manual work.
Efficiency and time savings: AI can quickly find and understand key parts of a contract. This means you can easily sort, create reports, and set reminders, saving time that you'd usually spend on manual reviews, helping preserve the value of the contract.
Enhanced accuracy and consistency: Humans can sometimes overlook details in contracts. AI, however, checks each contract thoroughly and in the same way every time, making sure things are uniform and reducing mistakes.
Automated clause identification and streamlined navigation: AI effortlessly identifies and categorizes specific clauses, whether it’s related to indemnification, termination, or confidentiality. This eases navigation and expedites the contract review process.
Risk assessment: AI checks contracts against past data to spot risks. It also makes sure contracts follow all the proper rules and guidelines, helping businesses avoid problems like contract breaches.
Customization and continuous learning: One size doesn't fit all. AI systems are designed to evolve, refining their approach with each contract, assimilating user feedback, and leveraging new data. This ensures a review experience that aligns increasingly with an organization's specific needs.
Scalability and volume management: Whether handling 10 or 10,000 contracts, AI's proficiency remains unwavering. This is especially vital for businesses with a ton of contracts.
Security, privacy, and compliance: AI helps organize and label contract data according to your preferences. This assures businesses that their contracts are not only checked thoroughly but also meet current standards.
Supercharge human efficiency: AI is here to bolster, not replace, legal professionals. By absorbing tedious tasks, AI allows human experts to concentrate on nuanced legal interpretations and strategic decisions, leveraging the best of both worlds.
AI has changed the game for contract review. But remember: It's a tool, not the whole toolbox. Lawyers and contract managers are still the top dogs in contract review. AI just gives them back some of their time, allowing them to focus on more important things like company strategy.
Best Practices for AI-Powered Contract Review
Using AI for contract review is no doubt a game-changer, but like any other tool, you have to know how to use it.
Here's how to get the most out of your AI-powered contract review tool:
- Give humans the final say: No matter how advanced, AI is just a machine, and its suggestions and analyses should always be reviewed and confirmed by a human, particularly in areas that might require some real-life experience.
- Train with past contracts: The true essence of AI, particularly the machine learning component, lies in its ability to learn and improve over time. As AI processes more contracts and receives user feedback, its accuracy and relevance should improve, making future reviews even more precise.
- Update the tool regularly: Laws and regulations change, and so do company policies. Regularly update the AI tool to ensure it's aligned with the latest legal standards and organizational preferences.
- Educate your team: AI can be intimidating, and using it without guidance and oversight can lead to problems like inaccurate information or worse. Ensure that your team understands its functionalities, benefits, and limitations. This will break down barriers and encourage its use.
- Safeguard your data: While using AI to review contracts, it's crucial to back up all data and ensure robust security measures are in place to prevent breaches or loss.
- Audit AI performance: Just as you would with any tool or process, periodically check the AI's accuracy and efficiency. Identify areas for improvement and ensure it's delivering as expected.
- Integrate with existing systems: The transition to AI-powered review is smoother when it’s integrated with familiar contract management and collaboration tools. This encourages adoption and consistent use.
- Uphold ethical AI standards: Ensure that your AI tool operates transparently, without biases, and respects data privacy at all times.
- Customize for industry nuances: Every industry has specific contractual requirements. Make sure your AI tool is tailored to recognize and understand the unique needs of your sector.
- Gather and implement feedback: Encourage your team to provide feedback on the AI's outputs and functionalities. Use this feedback for continuous tool refinement.
Following these steps ensures your AI-assisted contract review is both quick and trustworthy, blending the best of tech and human skills.
Ready To Turbocharge Your Contract Management Process?
The era of AI-enhanced contract management is truly upon us, bridging the gap between technological innovation and intricate legal processes.
Yet, the heart and soul of contract management still lies in the human touch, blending experience, intuition, and judgment.
When equipped with the right tools, like those offered by ContractSafe, legal professionals can elevate their contract management endeavors to unprecedented heights.
Interested in understanding how ContractSafe can turbocharge your contract management operations? Reach out for a free demo!