Simplifying Contract Review with AI: Buyer's Guide

Understanding AI in Contract Review

AI contract review software is a specialized type of application that utilizes artificial intelligence (AI) and natural language processing (NLP) techniques to automate and enhance the process of reviewing legal contracts.

AI contract review software is specifically designed to assist lawyers, legal professionals, and businesses in analyzing, interpreting, and managing contracts more efficiently and accurately.

AI-powered tools intelligently automate many of the tedious, time-consuming tasks, unlike traditional contract review methods, which heavily rely on manual work.

Utilizing AI in contract review empowers businesses to rapidly process contracts, enabling quicker turnaround, less room for oversight, and more streamlined contract management.

Here's an overview of what AI contract review software typically offers:

• Streamlining Processes: AI-powered software automates tasks like identifying key clauses, extracting vital metadata (parties, dates, financial figures), and comparing contracts to approved templates or company playbooks. This dramatically shortens the review cycle, allowing resources to be focused on strategic decision-making.

• Reducing Errors: AI excels at pattern recognition and precise information extraction. These abilities can drastically minimize the margin for human error that comes with manual review (e.g., missed deadlines or overlooked non-standard terms).

• Increased Accuracy: AI consistently applies its analysis across a large set of contracts. This ensures a higher level of accuracy and catches discrepancies humans might miss, especially when dealing with a large volume of documents.

AI reviews contracts by analyzing text using natural language processing algorithms. It identifies key clauses, provisions, and risks, comparing them against templates and legal standards. It automates repetitive tasks, streamlines workflow, and enhances accuracy in contract review.

AI contract review software leverages a combination of advanced technologies to understand and evaluate agreements:

• Natural Language Processing (NLP): AI engines can "read" and comprehend the meaning behind the legal language of contracts. This includes dissecting complex sentence structures and understanding nuanced terminology. Over the past few years, Large Language Models (LLMs) powered by Generative AI have dramatically transformed the capabilities of Natural Language Processing (NLP). AI contract review tools now benefit from better language understanding, more relevant insights, and the ability to handle increasingly complex contractual scenarios.

• Machine Learning (ML): AI models are trained on large datasets of contracts. They learn to identify patterns, clauses, and anomalies. This knowledge helps the AI review tool to flag potential risks, non-compliant terms, or inconsistencies throughout the review process.

• Optical Character Recognition (OCR): AI can convert scanned contracts or images into machine-readable text, making them searchable and easier to analyze.

Benefits of AI Contract Review for Businesses

AI contract review offers a transformational shift in how businesses handle their contracts. By automating key processes, identifying risks, and providing valuable insights, AI brings unparalleled efficiency, cost savings, and improved risk management. This results in faster deal cycles, greater protection from legal liabilities, and the ability to confidently scale business operations.

Mitigating Contractual Risks

AI can meticulously scrutinize contracts, flagging potential risks, inconsistencies, and non-standard terms that might be missed by human reviewers. This proactive identification of risks enables businesses to make informed decisions, negotiate more favorable terms, and safeguard themselves from costly legal complications. It acts as a powerful safety net for the organization.

Efficiency and Productivity

AI contract review software streamlines workflows by automating repetitive tasks such as clause identification, data extraction, and comparison against standard templates. This frees legal teams from time-consuming, manual review, empowering them to focus their expertise on strategic analysis, negotiation, and decision-making. The result is a vastly improved throughput of contracts and increased responsiveness to business needs.

According to a study by Docusign, 68% of the contract professionals search for a completed contract at least once a week and spend over 2 hours per contract to locate it and find a specific clause. AI-powered contract platforms such as Pocketlaw transform this process, making contract retrieval and clause searches instantaneous by AI metadata tagging contracts and offering search in natural language through generative AI.

Cost and Time Savings

The reduced need for manual labor and faster contract turnaround times directly translate into significant cost and time savings for businesses. AI eliminates bottlenecks caused by tedious review tasks, ensuring contracts are finalized and deals closed in a timely manner. This translates to a more agile business operation and a reduction in lost revenue due to delayed agreements.

Enhanced Compliance

AI-powered contract review tools can be trained to identify legal obligations and compliance requirements for specific industries or regulatory frameworks. By continuously monitoring contracts for adherence to these standards, AI helps businesses uphold compliance, minimize legal exposure, and avoid costly penalties or reputational damage.

Data-Driven Insights

AI contract review generates rich data sets on contract performance, common clauses, and negotiation trends. These insights can be used to improve the drafting of future contracts, optimize negotiation strategies, and identify areas for cost savings or operational improvements. It enables businesses to make data-backed contract decisions that improve their bottom line.

Core Features of a Contract Review Software

When assessing contract review software, it's important to prioritize features such as clause extraction, playbook support, risk assessment, compliance checking, and user-friendliness. These capabilities are essential for ensuring an efficient and effective contract review process.

Here's what to look for:

• Contract Analysis and Risk Identification: The software should use AI to analyze contract language, identify potential risks, non-standard clauses, and deviations from your playbook. It's crucial that these insights are presented clearly, with explanations and the ability for users to accept or reject AI suggestions. The large language models is susceptible to hallucination, so it is also crucial that the user is in the driver seat and can follow-up on the issue together with the AI to get the results they want.

• Playbook Support:  Look for software that provides both off-the-shelf playbooks for common contract types and the flexibility to upload your own customized playbooks. This ensures consistency with your specific legal standards and practices.

• Pattern Recognition and Metadata Extraction AI should be able to extract key data points from contracts, such as dates, parties, financial figures, and obligations. This data should be automatically populated into searchable fields for better reporting and analysis.

• Document Management and Organization: A central, searchable repository for all your contracts is essential. The platform should allow easy upload, version control, metadata tagging, and secure access management to keep contracts organized and accessible.

• Workflow Automation: Look for customizable workflows that automate tasks like routing contracts for approval, setting reminders, and generating alerts for key dates or milestones. This should reduce manual intervention and enhance efficiency.

• Collaboration Tools: Real-time editing, suggestion mode, commenting, discussion threads, and version control are essential for teams to work together seamlessly on contract review. The software should facilitate clear communication and make it easy to track changes.

• User-Friendly Interface: An intuitive UX is critical, for legal or non-legal users who may interact with the system. The interface should guide users through the review process, providing clear instructions and easy-to-understand explanations of AI insights.

• Integrations: The ability to integrate with your existing document management systems, CRM, and e-signature tools is a major plus, reducing data silos and creating a more streamlined workflow.

Important Note: Remember, AI contract review should be treated as a collaborative process. The AI review tool will make suggestions, but it's vital for human legal experts to review, validate, and make final decisions based on the AI's recommendations. That’s why we at Pocketlaw built the AI Contract review as a co-pilot where you can chat with each AI-discovered issue and instruct the AI with further information to get the result you want.

Choosing the Right AI Contract Analysis & Management Software

Investing in the right AI contract review software requires careful consideration to ensure it aligns perfectly with your needs.

To choose the best AI contract review software, consider industry-specific needs, prioritize accuracy in AI models, ensure seamless integration with existing systems, prioritize user-friendliness and evaluate vendor support for smooth implementation and ongoing assistance.

Factor #1: Industry Use Cases

• Legal Departments: General purpose AI contract review tools are a good fit for in-house legal teams managing a variety of contract types. Focus on software with broad clause recognition, customizable playbooks, and workflow features to enhance the contract review process.

• Sales Teams: Sales teams often need solutions that prioritize speed and ease of use. Look for software that focuses on streamlining deal cycles, quickly identifying bottlenecks and risks in standard sales agreements (e.g., NDAs, MSAs), and integrates seamlessly with your CRM.

• Procurement/Supply Chain: Procurement teams handle large volumes of vendor contracts. AI tools specialized in identifying supply chain risks, monitoring contract performance, tracking obligations, and ensuring compliance with vendor policies will be crucial.

Factor #2: Accuracy

The accuracy of the AI model is paramount. Scrutinize the software provider's track record of identifying risks, extracting clauses correctly, and providing insights aligned with your legal standards. Inquire about the AI training datasets and how the models are continually updated to maintain quality.

Always be mindful that no AI system is 100% accurate, and generative AI models are prone to hallucinations. That's why it's crucial for your chosen software to place you in control of the review process. Look for features that allow you to easily verify the AI's findings, make adjustments, and maintain full oversight of your legal decision. A good contract review tool can explain its decision process, show you the relevant citations and references it used to arrive its decision.

Factor #3: Integration with Existing Systems

A seamless workflow means your chosen software should integrate easily with your existing workflows. Look for compatibility with your document management systems, e-signature platforms, and any CRM or ERP systems you use. This will save time and eliminate friction associated with data transfer.

If you don’t have existing solutions for e-signature, repository and other contract related workflows, you might want to look out for a platform that supports these workflows to easily complete the whole contract lifecycle management from drafting to negotiation to signature.

Factor #4: User-Friendliness

Usability is crucial, especially for adoption across teams with varying technical expertise. Prioritize a software with an intuitive interface, clear explanations of AI findings, and easy navigation throughout the platform. This minimizes the learning curve and encourages consistent use.

Factor #5: Support

Responsive vendor support is vital for a smooth implementation and ongoing success. Assess the level of support offered, including onboarding, training resources, troubleshooting, and the availability of a dedicated account manager for your needs.

While AI contract review software can function effectively as a standalone app, its integration into a comprehensive Contract Management platform offers significant advantages. A unified platform allows for seamless workflows, from contract creation and negotiation to review, approval, and storage. This connected workflow eliminates data silos, promotes collaboration, and provides a centralized repository for all contract-related information. Ultimately, an all-in-one Contract Management platform with integrated AI review maximizes efficiency and ensures a more streamlined and secure contract process.

PocketLaw AI Contract Management software stands out by excelling in all of these areas. Its industry-tailored solutions, accuracy, robust integrations, intuitive design, and dedicated support make it a compelling choice for businesses seeking to streamline and safeguard their contract workflows.

Our AI Contract Review feature does not only do a one time review and suggest redlines, but rather acts like a co-pilot that makes you feel you are sitting next to a lawyer and having a conversation with an expert. Once you are happy with the result, all suggestions goes into the contract with a click of a button.