Humans have long dreamed of making machines do what brains do. Technology has gone a fair distance in that direction with artificial intelligence (AI), which puts software to work in order to improve the contract review process in several important ways. By tapping into the time-saving powers of AI software, employees can focus on higher-value initiatives.
Contracting is a central activity in many businesses. Traditionally, it was very labor intensive: management or their attorneys had to draft, negotiate, review, and keep track of each contract. Due to human error, information regularly fell through the cracks, causing companies to lose some of the value of every deal.
Today, computers take on some of the load. Artificial intelligence (AI) technology helps companies overcome the biggest contract review challenges such as managing a large volume of contracts and dealing with inconsistent terms and clauses.
When AI technology is used for contract management, the software is set up to create repeatable contract templates, look for patterns in data, evaluate the data and provide analysis and results. This allows companies to create contracts quickly and track them efficiently, which means they can execute more contracts in the same amount of time that they could manually. It also increases uniformity and clarity, decreasing disputes and litigation.
AI-based contract management is the use of software to complement human contract management efforts. It adds machine-based efficiency to contract management and makes the process more effective and uniform.
The four core functions of AI-based contract management are storage, tracking, searching, and reporting.
- Storage: AI technology creates a centralized storage area for contract content that is accessible across an organization.
- Tracking: AI technology keeps track of contract data such as expiration dates, contract values, and key provisions.
- Searching: AI technology easily locates and extracts contract clauses and templates for uniform drafting and helps users quickly identify non-compliant language in contracts.
- Reporting: AI technology aggregates contract data in a variety of ways to review the state of the company’s contracts. This includes automated extraction and accurate compilation of information across contracts.
Many firms offer AI contract management review software products that aim to speed up the contract review process.
Traditionally, contract review has been accomplished by employees or outside law firms, but this hands-on process is both time consuming and—as we mentioned before—subject to human error. Typically, junior staff would complete the first run-through, looking for certain types of information, and then compile their findings into summaries. More senior staff would then review the summary information. In the long, drawn-out review process, pertinent information could fall through the cracks.
Think about a large tech company with hundreds or thousands of procurement contracts, each with its own renewal date and renegotiation terms. A team of contract managers would have to spend weeks reviewing and tracking the information to stay on top of renewals or other opportunities.
AI software puts algorithms to work in reviews of contract language. Contract review software accomplishes the procedure faster and more accurately than hands-on review. It also organizes the process more effectively and lays out results in a more useful way. For instance, most contract review software systems automatically locate specified information in contracts and compile it into summary charts or reports. To make sifting through this information more efficient, many systems include tools to help refine the results.
Traditionally, most contracts require legal review to make sure they comply with applicable laws and regulations. As described above, this is time-consuming, costly, and subject to error.
Computers using AI contract review software, on the other hand, can read and sort documents much faster than humans, and the summary results they provide can be statistically validated. They can assist legal professionals by selecting and forwarding questionable documents instead of requiring humans to review every single one.
Legal professionals also conduct due diligence for their clients in connection with corporate transactions. This includes verifying facts and figures as well as evaluating a company’s contracts with third parties. AI can now tackle the tedious, manual, and time-consuming task of contract review during due diligence. For example, experienced users of contract review software offered by Kira Systems can complete due diligence up to 90 percent faster, searching for, highlighting, and extracting relevant content for analysis.
AI-powered contracts are drafted, reviewed, stored and tracked by software programs. They are standardized throughout the contracting process. Stored clauses and contract templates provide users with boilerplate language, which speeds up the building of new contracts. This also facilitates contract language and metadata storage and management.
AI speeds up the tedious process of contract review and can quickly extract relevant data. This frees up attorneys to focus their time on analysis of critical contract language. Take, for example, Freshfields Bruckhaus Deringer LLP, a “Global Elite” law firm headquartered in London. Since September 2016, Freshfields has worked with Kira to tackle a variety of projects, ranging from due diligence to regulatory compliance. Kira allows Freshfields to tailor its offerings to every client thanks to its ability to customize the platform using existing knowledge — even when the software has not been pre-trained to extract the specific provisions or the language to be reviewed. With Kira, Freshfields experienced efficiency gains of 20 to 40 percent on a recent project and earned additional work from the same client.
AI software simplifies contract drafting. It helps the legal or management team drafting the contract to stay organized and find appropriate, legally approved words and clauses. AI contract drafting also saves, pins, and filters clauses and concepts the contract writer uses and inserts key clauses with a click of a button.
A company continues to grow its list of repeatable clauses drafted by legal experts as it uses contract drafting software. In time, this AI-powered software provides a library for contract drafters to use with confidence.
Contract review is a big part of the work law firms handle on behalf of business clients. Attorneys catch contract issues that could lead to detrimental results for clients and identify risks that may cost them money or force them into litigation. They edit contract language, negotiate for better terms and finally advise their clients whether or to sign.
AI contract review software allows law firm employees or in-house legal counsel to sort through contracts rapidly and accurately—far more efficiently than humans can without the software—and identify specific provisions and clauses, unusual phrasing or other language that might present legal risks.
The first step to finding the right AI contract software for a business is to define a company’s unique needs. The person in charge of selecting software should consult with employees and departments that would use it to fully understand where it could make the company’s operations more efficient.
After that, review the different features offered by different software products. Various websites compare and contrast available contracting software and identify the strengths and weaknesses of each.
- Capterra reviews contracting software, compares it to other options, and provides ratings for each.
- Emerj provides extensive reviews of new technology.
- PC Magazine offers specs and test results on 10 contract management software solutions with complete control, collaboration, and auditability built into the entire contract life cycle.
- Infotech offers its members reviews and information on different AI contracting software.
Each company that provides AI contract software was likely designed with particular businesses in mind. For example, Kira Systems’ products best align with law firms, corporate legal departments, consulting firms, audit departments, financial services and real estate.
Test out AI contract software before signing on the dotted line. Ask the same types of questions and perform the same tests as the experts who review the software use to rate it. These can include:
- How does the system store contract data?
- Can this be customized?
- Does the system feature automatic alerts to tell the manager about contract mileposts, such as renewal and expiration?
- Can the user search data fields?
- How many provisions and clauses can be searched?
- What is the underlying technology that is powering the search and analytics?
- Can the system be customized/trained to find fields that are not out-of-the-box?
- Can the search be narrowed by the user?
- Can the search be saved?
- Can the results be exported?
- Can the system generate readable reports, or simply data?
- Does the software allow for search of the actual contract?