What is AI for Contract Management?

How prevalent do you think AI is in the legal world? Some adoption? A moderate amount of users?

Our State of AI in Legal Report 2024 found that 74% of legal professionals use AI for legal work. The 800 legal professionals we surveyed think that AI can make an impact across the entire contract lifecycle.

It would be nice to make contracting a seamless part of business flow, right? Enter—AI contract management software.

Artificial intelligence (AI) for contract management is the use of machine learning, natural language processing, and other AI technologies to automate and optimize contract-related processes.

What can AI contract management software do?

AI contract management software can create contracts, review clauses, analyze contracting processes, assess risk, track obligations, and monitor performance.

Key aspects of AI in contract management include:

• Automated document review and analysis
• Risk identification and assessment
• Contract drafting assistance
• Clause extraction and categorization
• Redlining assistance
• Obligation tracking and deadline management
• Contract performance analytics
• Predictive analytics
• Intelligent search and retrieval of contract information
• Contract summaries

Let’s consider a quick scenario to put AI contract management into perspective.

Imagine you have a growing backlog of third-party contracts to review. Instead of manually reading through every line until your eyes cross, you can use AI contract software to generate redlines based on your preferred terms, clauses, and policies. Now, instead of spending hours (or days) looking for a redline needle in a haystack, you can prioritize your attention on the details with the highest potential value or risk.

Do legal teams trust AI contract management software?

Do legal teams really trust AI to handle their work? Generally, yes, but opinions are divided between in-house teams and law firms.

71% of legal professionals trust AI, but you’re more likely to find an AI early adopter or enthusiast on an in-house team. Our State of AI in Legal research also found that most organizations that allow AI use have guidelines in place, which is an important step to intentionally adding a new tool. If you don’t have an AI policy in place, you can download a free AI policy template here.

Contracts have always been the bedrock of business relationships and operations. However, manual processes used to make legal a cost center, a place where sales deals went to fizzle, and a creative blocker.

Now, legal teams can use AI contract software to draft contracts in a completely automated, hands-off fashion. Handing all the nitty-gritty over to the AI lets you focus on the important stuff.

AI for contract management is changing the world of contracting in three major ways:

1. Changing the tech stack lawyers use for contracts. While contract management software has been part of the legal ecosystem for years, it’s usually extremely limited in the scope of its functions. AI-powered contract management takes it further, expanding your contract management capabilities. AI for contract management makes life easier by placing the management of thousands of contracts in a simple, accessible interface.
2. Changing the contracts themselves. AI is changing how contracts are handled by making it easy to perform previously unfeasible analysis, especially in companies with many contracts to process and manage. At the drop of a hat, you can use your AI system to assess risk in your contracts. The system can compare previous patterns and historical data to identify clauses which could be improved and tightened to benefit the client (and the firm), giving you greater control and precision than ever before.
3. Magnifying the evolution of industry standards. A major (if somewhat predictable) benefit of the proliferation of AI for contract management is the standardization of complicated contracts across the industry. AI contract management software uses algorithms to search vast databases for similar and templatized contracts over the past decades. This allows contracts to be standardized to a far greater degree than they have been in the past.

Will AI contract software put lawyers out of work?

AI contract management software offers an option that benefits everyone involved, creates value from nothing, reduces headaches, and eliminates a significant amount of inefficiency from the system – is there really a good reason not to use it?

Maybe you’re worried that AI will take your job. Our research found that 31% of legal pros worry about AI replacing them, and 26% believe that AI tools could lead to fewer job opportunities in the future. With that said, the majority of legal professionals aren’t concerned. 69% are either somewhat or very unworried about AI replacing them or feel indifferent.

The idea of a machine doing your job is never comfortable – especially when the machine is as powerful as artificial intelligence. But frankly, AI contract management is not so much a replacement for legal teams as tools to be used by them. The advent of AI doesn’t necessarily mean that companies will need fewer lawyers, it simply means that their roles will transform to be less mundane.

Future-proof your work by becoming an AI innovator

One sure way to quell any concerns about AI cutting down on legal job opportunities is to become an innovator. The winners of the inaugural Legal AI Innovators Award used AI contracting to:

• Synthesize over 200 million data points from the immigration process to instantly compile detailed legal histories and employment authorization eligibility for immigrants in court.
• Review approximately 1,500 active contracts for risk-related queries.
• Analyze state court data with a remarkable 99% accuracy rate while reducing analysis time from tens of hours to just a few, enabling large-scale evaluation of judicial decisions at a fraction of the cost.

Aside from relieving you of some of the most boring paperwork associated with your job, AI has benefits that can transform the look and feel of your contract management system.

Here are just some of the things they can allow you to do:

• Automate compliance. Contract regulations constantly evolve, making it difficult to manage everything manually. AI can streamline compliance tasks so you feel more confident in your risk management strategies.
• Shrink contract cycle times. AI contract management tools reduce time spent on the entire document lifecycle, from drafting to the review process.
• Save money. Sometimes, humans can miss small details in a sea of agreements. Automatic redlining and analysis can highlight areas where you’re missing out on money or paying more than you should.
• Manage large datasets. AI-based CLM tools can analyze big data to recognize patterns and identify anomalies.
• Eliminate the most repetitive tasks. Contract development is repetitive by nature, but AI contract tools can handle tasks like information retrieval, so you’re free to complete other work.
• Relieve administrative work while boosting organizational efficiency. Lawyers can spend an inordinate amount of time on administrative tasks like drafting and reviewing contracts. AI can remove some of those tasks from your roster.
• Optimize finances. AI-powered contracts streamline workflows to ensure your team is working on the most relevant contracts, effectively reducing payment turnaround.
• Retain and resurface institutional knowledge. AI contract software can maintain a record of past negotiations and agreements, so even if your team changes or grows, you can always make informed decisions.
• Improve collaboration. Integrations with sales or procurement tools, easier contract initiation, and automatic turn-tracking all make it easier to work between teams and stakeholders.
• Maintain consistency. Automatic contract drafting based on established templates and clauses means people don’t need to hunt for a (potentially outdated) contract or template to start the contract lifecycle.

Watch: How Smoothie King Uses AI to Draft & Review Contracts Faster

AI contract management in action: How the state of Oklahoma’s OMES improve procurement

Gartner predicts that 50% of organizations will use AI tools to support supplier contract negotiations by 2027. Oklahoma’s Office of Management and Enterprise Services (OMES) uses AI contract software to catch inconsistencies in contract language, clauses, and terms, ensuring consistent outcomes across all procurement documents.

Here’s how they use AI capabilities to save time and money:

Automated alerts and lifecycle management

• Alerts procurement officers about upcoming opt-out periods
• Notifies both teams about renewal options
• Tracks termination dates for procurement management
• Monitors other important contract management functions that previously required manual tracking by both departments
• Data tracking and analysis

Monitors any specified data point for both procurement and legal metrics

• Generates associated reports for management oversight
• Creates easy-to-read bar graphs showing supplier response times for procurement planning
• Tracks supplier non-responsiveness requiring workflow cancellation by procurement teams

Personnel transition management

When staff changes occur in either department, new team members can quickly get up to speed by reviewing the activity feed, eliminating the need to sort through countless emails to understand the contract’s history.

Contracts power every part of the business. But when contracting is slow and disconnected, business velocity stalls, supplier relationships suffer, and risk multiplies. Legal and procurement teams are left playing catch-up and dealing with costly blind spots instead of driving a strategic impact that supports business growth.

If you aren’t using legal AI yet, or you’re part of the 84% of in-house teams who plan to invest in AI this year, contract management is a great place to start using AI. Here’s why:

• Save time on high-volume but repetitive tasks. Would your time be better spent on long-term strategy and goal setting or reviewing your 10th NDA of the week? Repetitive contract management tasks like redlining and obligation tracking are essential but time-consuming.
• Find and mitigate risk. AI contract management surfaces compliance risks or non-standard clauses quickly, reducing risk without backing up your queue.
• Prove legal impact (to secure more investment). Setting up an AI contract management software can yield quick wins, such as shorter sales cycles and a measurable impact on the bottom line. The faster you can demonstrate the value of your team’s work, the easier it is to secure investments for more resources.
• Become an invaluable business partner. You’ll be a business hero if you can scale your work without adding headcount, find contract value leakage, or make daily work less frustrating for coworkers.
• Create a single source of truth. If a salesperson asked you about details from a few past agreements, how quickly could you find it? If leadership wanted to know how many vendor agreements were renewed in the past 12 months, where would you look? Routing contract management through an AI-supported contract lifecycle management (CLM) creates a consolidated record of every agreement, key term, obligation, and renewal date.

Getting leadership on board with tool investments—or convincing skeptics to let AI into contract management—is a matter of positioning. If you can present the opportunity and measure your work as a matter of outcomes instead of activities, it’ll be easier to get people on board.

Think about what’s top of mind for your organization this year. Is it reducing risk? Managing a greater workload with a leaner team? If you know what’s most pressing you can frame your impact through that lens.

Close more sales deals each quarter

Goal: Identify what causes sales deals to speed up or slow down to remove bottlenecks and let your sales team do their job.
Action: Standardize preferred clauses to cut down on time spent on back-and-forth negotiations and create an AI-supported self-service sales contracting process.
Outcome: Let sales teams work more independently without increasing risk, shorten sales contracting cycles to close more deals.

Read More: How Everlaw’s Legal and Sales Teams Close Deals Faster

Improve deal terms and profitability to maximize financial impact

Goal: Use data to identify patterns in successful negotiations to lead with better terms in the future.
Action: Deploy AI to analyze past contracts, benchmark clause positions, and suggest financially favorable language during negotiations.
Outcome: Increased win rates, more favorable terms secured, and higher overall contract value.

Reduce exposure to regulatory violations and legal disputes

Goal: Gain real-time visibility into contract risk and ensure consistent compliance across all agreements.
Action: Use AI to flag risky clauses, identify missing compliance terms, and track obligations across jurisdictions and departments.
Outcome: Fewer legal surprises, reduced audit findings, and stronger regulatory defensibility.

Read More: How Procurement at Gusto Went from Blockers to Business Enablers

Drive cost savings and improve vendor ROI

Goal: Uncover hidden risks and opportunities across your vendor and customer contracts.
Action: Use AI to scan contracts for unused entitlements, duplicate vendors, or missed escalation clauses and trigger alerts ahead of key renewals.
Outcome: Reduced vendor spend, recaptured lost revenue, and improved renewal outcomes.

Increase team productivity while controlling overhead

Goal: Eliminate manual, repetitive work so legal and procurement teams can focus on high-value initiatives.
Action: Automate tasks like clause extraction, contract review, and renewal tracking with AI to free up time for strategic thinking and planning.
Outcome: More strategic impact from lean teams, faster service delivery, and higher team satisfaction.

Demandbase’s legal team built an AI-Enabled NDA review process that reduced turnaround time from 2-3 days to just 1-2 hours. Watch this discussion to learn how they did it.

Make more accurate revenue forecasts and improve planning

Goal: Use historical contract performance to predict revenue timing and risk.
Action: Apply AI to past contract lifecycle data to model future contract closure rates, expected value, and risk-adjusted revenue timelines.
Outcome: More accurate forecasts, better budgeting decisions, and improved investor/stakeholder confidence.

Learn More: Download the Legal Operations Field Guide 2025 to learn more about measuring and reporting the impact of your work.

When evaluating AI software for legal applications, it’s crucial to ensure that the solution meets your needs and also complies with relevant legal and ethical standards.

Here’s a look at a few key considerations:

Data security

• Data encryption. Ensure the software uses strong encryption (e.g., AES-256) for data in transit and at rest. Look for end-to-end encryption for sensitive communications and personally identifiable information (PII).
• Access Controls. Seek granular access controls that allow role-based permissions and check for multi-factor authentication options to enhance security.
• Data residency. Understand where your data will be stored and processed, and ensure compliance with relevant regulations, such as GDPR or CCPA.
• Audit trail. The system should maintain detailed logs of all data access and changes. Look for immutable audit logs and ensure the ability to generate comprehensive audit reports.
• Data training, retention, and deletion. Check for configurable data retention policies and understand if and how the software will train on your data.
• Third-party audit. Check which third parties the software uses, and what their AI policies around retention and security are. Prioritize software that undergoes regular third-party security audits.
• Compliance certification. Look for certifications like ISO 27001, SOC 2, or GDPR compliance. Check if the vendor maintains a compliance program with regular assessments.
• Data flow diagram. Ensure the DFD clearly depicts data sources, processes, data flows, and storage, so you can easily trace and understand how your data flows through their product.
• Sub-processor usage. Most industries are subject to strict data protection laws (like GDPR or HIPAA), but investigate the sub-processors’ data handling practices, encryption standards, and breach notification procedure

AI Policy

• Ethical AI guidelines. The vendor should have clear, publicly available ethical guidelines for AI.
• Transparency. Seek vendors who provide detailed information about their AI models’ training data and methodologies.
• Bias mitigation. The vendor should have robust processes to detect and mitigate bias in their AI models. Look for regular bias audits and diverse teams involved in AI development.
• Human oversight. Understand how human expertise is incorporated into the AI system’s decision-making process.
• Continuous monitoring. The vendor should have systems in place to continuously monitor AI performance and address any issues that arise. Look for proactive alerting mechanisms for performance degradation or unexpected outputs.
• Update and maintenance policy. Understand the frequency and process of AI model updates and check how these updates are tested and validated before deployment.
• Data usage policy. Get clear information on how your data will be used, especially regarding AI model training. Ensure the vendor offers options to opt out of data sharing for model improvement.

Core capabilities

• Clause extraction and comparison. Identify and compare standard vs. non-standard language across contracts.
• AI-assisted review. Flag risky language, missing clauses, or compliance issues automatically
• Obligation tracking. Auto-extract deadlines, renewals, and deliverables, then generate proactive alerts.
• Natural language search. Enable users to query contracts using plain language (e.g., “Show me all NDAs with auto-renewal”)
• Contract summarization. Generate executive-level summaries or first-pass redlines to speed review.

Integrations

• CRM tools (e.g., Salesforce, HubSpot): Sync contract terms with deal stages to speed up sales cycles.
• ERP and procurement platforms (e.g., SAP, Coupa, Oracle): Automate purchasing and vendor workflows.
• eSignature tools (e.g., DocuSign, Adobe Sign): Seamless signing workflows from within the CLM system.
• Document storage (e.g., SharePoint, Google Drive): Keep all contracts searchable and accessible without duplicating effort.
• Ticketing or collaboration tools (e.g., Jira, Slack, Teams): Support workflows for contract requests, reviews, and approvals.

Scalability and performance

• Support for large and complex contract libraries without performance degradation.
• Multi-language and multi-jurisdiction capabilities to handle global contracting needs.
• Flexible architecture to support evolving AI models, expanding data volumes, and enterprise-scale collaboration.

Usability for legal and non-legal teams

• No-code interfaces or guided workflows for non-legal users to initiate, review, or request contracts.
• Configurable dashboards to track KPIs like cycle time, risk exposure, and renewal activity.
• Custom clause libraries and fallback language to speed negotiation and promote consistency.

Open APIs and customization options

• Evaluate how well the system can adapt to your current and future needs:
• Open APIs for building custom workflows or integrating with homegrown tools.
• Sandbox environments to test AI features, new templates, and integrations before full deployment.
• Custom models for proprietary contract types or internal review frameworks.

Imagine a technology that could review the clauses in an NDA for risks in a matter of seconds with nearly perfect accuracy. That’s what AI-powered contract management can do for your team. But it’s not enough to set it loose on all of your time-consuming tasks and hope for results. To fully benefit from AI for contract management, you’ll need a clearly defined implementation plan.
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Consider taking these steps before putting a new AI contract management system into effect:

• Assess. Review your current contract management systems, whether manual or automated, and identify areas for improvement.
• Develop an implementation proposal. An AI contract management system will impact everyone in your company, from lawyers to accountants. Create a proposal to get the senior leadership on board with implementation, and remember to include internal business associates.
• Build an implementation strategy. It’s crucial to define clear goals whenever your team is switching to a new technological system, including AI contract management. Having a clear plan will help everyone adopt the new systems with greater ease.
• Choose software. Find contract management software, like Ironclad, and stick with it. Your AI algorithms need time to learn, so resist the temptation to jump ship when the results aren’t as fast as you expected.
• Maintain your systems. Be sure to include a maintenance plan to ensure your AI-based contract management system operates at maximum efficiency.
• Provide training. Make sure every member of your team knows how to use AI-powered contracts within your new system. They should feel confident using the new contract execution processes. Your AI solution works best if everyone is on the same page.

AI contract management will continue to shape the legal industry, and it helps to have a partner.

Ironclad is an all-in-one AI-powered contract lifecycle management (CLM) platform that integrates deeply with security, sales, and compliance tools to mitigate risk, make the contract management process easier, and drive business growth.

Our customers have saved an estimated cumulative 29 years of effort across contract uploading, review, and redlining with our suite of AI tools including a drag-and-drop workflow designer, contract repository, and specialized legal AI assistant Jurist.

Hungry to learn more about Legal AI so you can improve your work, prove your impact, and stay innovative? Download The Legal AI Handbook to learn the ins and outs of AI and how to start using it.