AI for Contract Review: Scale Faster and Easier than Ever
Tedious tasks are rarely the most fulfilling or the best use of your time. You know this if you’ve ever had to review contract after contract, line by line, against a checklist. A contract lifecycle management (CLM) solution with built-in AI cuts out the time-consuming tasks of manually reviewing contracts.
What is contract review AI?
Contract review by AI augments and automates your repetitive contract review tasks. Artificial intelligence takes on the role of a contract manager to find and tag important information in a contract.
The basic steps in the contract review AI process are:
- You upload the contract to the CLM solution, which converts your unstructured data to structured, searchable data
- The AI identifies clauses and compares with your pre-defined clauses to identify any risk or unknown clauses that need your attention
- You confirm, change, edit, or deny the suggestions that the AI offers
Contract review AI uses contextual analysis to go beyond a simple search function. The AI can find elements like dates and clauses but also understand them as they relate to the contract and the boundaries you establish.
What can contract review AI do?
You can use contract review AI on any contract type within any role, but the most common use cases are repetitive and routine contracts like NDAs, where the AI can identify elements like clauses.
Once the AI identifies contract data, you can use the information in multiple ways, including:
- Approving, modifying, swapping, or deleting clauses within the contract
- Quickly escalating a question or clause to another team member
5 ways contract review AI can transform your legal department
Automated contract review saves time, and such a small change has far-reaching benefits. Here are some ways your legal team and organization can change for the better.
Dedicate more time and attention to high-impact tasks
Your team has more talent and perspective to offer than manually reading repetitive contracts. With AI, you can upload, review, modify, and send a new contract version out for approval in five minutes.
If you compare that workflow to your current process and then multiply it by the number of contracts your team reviews in a year, you’re looking at considerable time-saving. What could you do with an extra one, five, or ten hours a week?
For starters, you can devote your time to just the high-impact contractual risk review tasks within each contract. The contract review AI also frees up time to work on analysis and more strategic work to become a trusted partner.
Simplify legal team onboarding and ensure consistency
A contract veteran that knows your review checklist like the back of their hand can make quick work. What if someone new needs to review contracts, though? Contract review AI eliminates a new hire’s learning curve as they learn your organization’s standard operating procedures. Handing the first pass of a contract review to AI also ensures consistent work across every contract stakeholder.
Work through your review queue faster to close more deals
The right tools take legal teams from cost centers to business partners.
The quicker your contract review is, the less of a bottleneck your team becomes. The less time contracts spend in your review queue, the faster sales and procurement teams can close deals or place orders.
Contract review AI features as part of a CLM solution also makes it easy to move contracts across stakeholders and ensure contract visibility. The result is better collaboration and a stronger bottom line for your organization.
Reduce contract review human error
You’re highly talented and knowledgeable, but you’re still a human. Any time you review large amounts of information, there’s a chance you’ll miss something.
Something as simple as a tight deadline, long queue, or a Slack message that breaks your focus can interrupt your contract review. With contract review AI on your team, you can trust that you’ll accurately review every clause and maintain compliance, even in high-pressure situations.
Leverage data from every contract
Each contract is an opportunity to learn and improve. For example, do you know how much time contract review adds to the sales cycle? What about how long a redline on a non-solicitation vs. an IP indemnity clause adds to your contract lifecycle? Are there clauses you need to set expectations about proactively?
AI-powered contract review gives you visibility into the usage of each clause and its correlation with the number of back-and-forth negotiations, so you and your team can further optimize your contracting process. Plus, you’ll be able to quickly search for and find past contract details to compare, answer questions, strategize, and handle contractual obligations.
Key Considerations About Using Contract AI Software
Using AI for contract review can be a powerful tool, but there are several key considerations that people should keep in mind:
AI Is a tool, not a replacement. AI can significantly streamline and enhance contract review processes, but it should be viewed as a tool to assist human professionals, not a complete replacement. Human expertise is still essential for interpreting nuanced legal language and making judgment calls.
Training and customization are required. AI contract review systems often require training to understand an organization’s specific requirements and language. They can be customized to align with the organization’s unique needs and preferences.
Data quality matters. The accuracy and effectiveness of AI in contract review depend on the quality of the data it is trained on. Ensure that your contract data is clean, consistent, and properly labeled.
Expect regular updates. AI models and algorithms need to be regularly updated to stay effective. Laws, regulations, and contract standards can change over time, and the AI needs to adapt accordingly.
Look for transparency. Understanding how the AI system arrived at a particular conclusion or recommendation is crucial, especially in legal contexts. Look for AI solutions that offer transparency and explainability features.
Legal and ethical considerations. Be aware of legal and ethical considerations when using AI for contract review. Ensure that the AI system complies with data privacy laws and regulations, and consider ethical implications related to bias and fairness.
Security and confidentiality are crucial. Contract data is often sensitive and confidential. Ensure that the AI solution has robust security measures in place to protect the data it processes.
Integrate with existing systems. Consider how the AI contract review tool integrates with your existing contract management, document storage, and workflow systems. A seamless integration can improve efficiency.
Think about scalability. Determine whether the AI solution can scale to handle your organization’s contract volume and complexity. Some solutions may be better suited for smaller or larger enterprises.
Do a cost-benefit analysis. Evaluate the cost of implementing AI for contract review against the expected benefits in terms of time savings, accuracy, and risk mitigation. Ensure that the investment aligns with your organization’s goals.
Get user training. Users, including legal professionals and contract managers, should receive adequate training on how to use the AI system effectively. This includes understanding its capabilities and limitations.
Ensure compliance and auditing. Ensure that the AI system allows for compliance auditing and record-keeping, which can be crucial for legal and regulatory purposes.
Have a vendor selection process. Choose a reputable vendor with a track record in contract AI solutions. Research the vendor’s customer references and consider their industry expertise.
Using AI for contract review has the potential to bring significant efficiency and accuracy gains to contract management processes. However, a thoughtful and well-planned approach, along with a clear understanding of its capabilities and limitations, is essential to maximize its benefits while maintaining legal and ethical standards.
Ironclad has best-in-class AI for contract review
Ironclad AI helps teams review contracts up to 60% faster. The AI is trained universally across hundreds of thousands of contract types, which means you can build parameters and add clause detection for any contract. Plus, Ironclad AI detects almost 200 contract properties you can approve, change, escalate, or delete within the Ironclad platform.
- What is contract review AI?
- What can contract review AI do?
- 5 ways contract review AI can transform your legal department
- Key Considerations About Using Contract AI Software
- Ironclad has best-in-class AI for contract review
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Ironclad is not a law firm, and this post does not constitute or contain legal advice. To evaluate the accuracy, sufficiency, or reliability of the ideas and guidance reflected here, or the applicability of these materials to your business, you should consult with a licensed attorney. Use of and access to any of the resources contained within Ironclad’s site do not create an attorney-client relationship between the user and Ironclad.