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Generative AI and How it Improves Contract Management

illustration symbolizing contract management with generative ai

Generative AI is a type of artificial intelligence that can create new content, such as text, images, or audio, that is similar to real-world data. It does this by learning patterns from existing data, then using this knowledge to generate new and unique outputs. Generative AI is capable of producing highly realistic and complex content that mimics human creativity, making it a valuable tool for many industries such as gaming, entertainment, and product design.

Generative AI is a rapidly developing field, with new breakthroughs being made all the time. Some of the most well-known generative AI models include GPT-3 and -4, DALL-E 2, and Imagen. These models have been used to generate everything from realistic images of animals that don’t exist to poems that are indistinguishable from human-written work.

Potential Benefits of Generative AI

Generative AI has the potential to revolutionize many industries. In the gaming industry, it can be used to create more realistic and immersive games. In the entertainment industry, it can be used to create new forms of art and media. And in the product design industry, it can be used to create new and innovative products. Further uses include:

  • Improving the quality of existing products and services
  • Personalizing content for individual users
  • Generating new ideas and insights

Potential Risks of Generative AI

Unfortunately, generative AI also has the potential to be used for malicious purposes. For example, it could be used to create fake news or to spread propaganda. It is important to be aware of the potential risks of generative AI and to use it responsibly. It can be used to:

  • Create fake news and propaganda
  • Spread misinformation and disinformation
  • Create deepfakes, which are videos or audio recordings that have been manipulated to make it appear as if someone is saying or doing something they did not actually say or do
  • Create harmful content, such as child pornography or violent images

It is important to be aware of the potential risks of generative AI and to use it responsibly.

Quiz: test your own contract management process!

Using Generative AI for Managing Contracts

Here are some of the ways generative AI can be used for contract management.

Drafting Contracts

Generative AI can be used to draft contracts based on a company’s standard terms and conditions. This can save time and money, as it eliminates the need to have lawyers draft each contract from scratch.

Negotiating Contracts

Generative AI can be used to negotiate contracts with potential partners. This can help to ensure that both parties are getting a fair deal, as the AI will be able to identify potential areas of contention and suggest solutions.

Reviewing Contracts

Generative AI can be used to review contracts for potential risks and issues. This can help to prevent costly mistakes, as the AI will be able to identify potential problems that a human reviewer might miss.

Managing Contracts

Generative AI can be used to manage contracts throughout their lifecycle. This includes tasks such as tracking contract deadlines, ensuring compliance with contract terms, and managing contract renewals.

Contract Compliance Is a Cinch

Generative AI can ensure contract compliance by:

  • Identifying potential risks and issues: It can be used to review contracts for potential risks and issues. This can help to prevent costly mistakes, as the AI will be able to identify potential problems that a human reviewer might miss.
  • Tracking contract deadlines: It can be used to track contract deadlines. This can help to ensure that contracts are not breached, as the AI will be able to notify the relevant parties of any upcoming deadlines.
  • Managing contract renewals: It can be used to manage contract renewals. This includes tasks such as identifying when contracts are due to expire, negotiating renewal terms, and executing renewal agreements.
  • Providing insights into contract performance: It can be used to provide insights into contract performance. This can help businesses to identify areas where contracts are not being met, and to take steps to improve performance.

On the whole, generative AI can be a valuable tool for ensuring contract compliance. It can help to save time and money, improve efficiency, and reduce risk.

Tips for Managing Contracts with Generative AI

First and foremost, make sure you’re using an AI-based contract management tool that’s intuitive and user-friendly. Look for contract lifecycle management (CLM) software like Ironclad that incorporates natural language processing (NLP) and machine learning capabilities into its platform. The software you choose should make your job easier, not more complex. Aside from that, here are a few things to keep in mind.

  • Understand the capabilities. It can be used to create a variety of contract-related documents, such as templates, clauses, and redlines. However, it is important to understand the limitations of generative AI. For example, generative AI cannot create documents that are legally binding.
  • Use it to augment, not replace, human lawyers. It can be a valuable tool for lawyers, but it is important to remember that it is not a substitute for human judgment and expertise. Lawyers should use generative AI to automate tasks, such as document review and drafting, so that they can focus on more complex work.
  • Be aware of the risks. It is a new technology, and there are still some risks associated with its use. For example, generative AI can be used to create documents that are inaccurate or misleading. It is important to be aware of these risks and to take steps to mitigate them.
  • Monitor the performance. As you use it, it’s important to monitor its performance and to make adjustments as needed. For example, you may need to provide generative AI with more data or to train it on different types of contracts.
  • Keep up with the latest developments. It’s a rapidly evolving field, and it is important to keep up with the latest developments. This will help you ensure that you are using the most up-to-date and effective generative AI tools.

By following these tips, you can use generative AI to manage contracts more effectively.

How Else Can AI Benefit Legal?

There are other ways generative AI can benefit in-house legal teams. Here are a few examples:

Legal Research

Generative AI can be used to research legal precedent and identify relevant case law. This can help lawyers to find the information they need more quickly and easily.

Legal Writing

Generative AI can be used to draft legal documents, such as contracts, memoranda, and briefs. This can help lawyers to save time and improve the quality of their work. They can lean on CLM software that ingests free text prompts like “add confidentiality clause” or “make this language mutual” to draft new contracts and clauses.

Legal Analysis

Generative AI can be used to analyze legal data and identify trends. This can help lawyers to make better decisions and develop more effective strategies. Leverage CLMs with strong analytics functionalities  that can automatically detect contract properties, create customized reporting dashboards, and glean insights.

Legal Education

Generative AI can be used to create educational materials, such as e-learning courses and online tutorials. This can help lawyers to stay up-to-date on the latest legal developments.

Ultimately, generative AI has the potential to revolutionize the legal industry. It can help lawyers to save time, improve efficiency, and make better decisions.

What Other Types of AI are There?

Generative AI is only one type of artificial intelligence. Some other types in use today include the following.

Reinforcement Learning

Reinforcement learning is a type of AI that learns how to take actions in an environment in order to maximize a reward. It does this by trial and error, trying different actions and observing the results. Reinforcement learning is used in a variety of applications, such as playing games, controlling robots, and optimizing industrial processes.

Supervised Learning

Supervised learning is a type of AI that learns from labeled data. It is given a set of inputs and outputs, and then learns to map the inputs to the outputs. Supervised learning is used in a variety of applications, such as image classification, natural language processing, and fraud detection.

Unsupervised Learning

Unsupervised learning is a type of AI that learns from unlabeled data. It is given a set of inputs, and then tries to find patterns in the data. Unsupervised learning is used in a variety of applications, such as clustering, dimensionality reduction, and anomaly detection.

Generative AI is different from other types of AI in that it is not limited to simply recognizing patterns or making predictions. It can also create new content that is similar to real-world data. This makes generative AI a powerful tool for a variety of applications. However, it is important to be aware of its limitations and to use it responsibly.

Why Generative AI is Best for Contract Management

There are several reasons why generative AI is better for contract management than other types of AI.

  1. It’s able to learn from large amounts of data. This is important for contract management, as contracts can be very complex and contain a lot of information. Generative AI can learn from data it ingests like use case or industry specific clause language and use it to generate new contracts that are tailored to the specific needs of the business.
  2. It’s able to generate new content that is similar to real-world data. This is important for contract management, as contracts need to be legally compliant. Generative AI can generate contracts that are compliant with the latest regulations and laws.
  3. It’s able to work with unstructured data. This is important for contract management, as contracts can contain a lot of unstructured data, such as notes, comments, and signatures. Generative AI can work with this data and use it to generate new contracts that are accurate and complete.
  4. It’s able to be customized to the specific needs of the business. This is important for contract management, as businesses have different needs and requirements when it comes to contracts. Generative AI can be customized to meet the specific needs of the business, ensuring that the generated contracts are accurate, complete, and compliant.

Overall, generative AI is a powerful tool that can be used to improve contract management. It is able to learn from large amounts of data, generate new content that is similar to real-world data, work with unstructured data, and be customized to the specific needs of the business. These features make generative AI indispensable for overloaded legal teams and contract managers, so they’re critical to look for when evaluating the functionalities of CLM software.

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