Even humans are prone to making errors when reviewing contracts, and that’s why instead of having a second set of eyes look over a contract, you can streamline the process with today’s ever-advancing technology.
In this article, we’ll go over some benefits of using AI for reviewing contracts and how it can save a ton of time for any lawyer or law firm that deals with contracts.
5 Benefits of Using AI for Reviewing Contracts
#1 – Saves Time
Contract review is a time-consuming task for legal teams. Studies show that legal teams typically spend 4.5 hours daily on manual contract reviews. This necessity for speed and accuracy in reviewing contracts, which can take several hours to a week depending on complexity, is emphasized by the fact that errors could lead to significant financial, legal, and reputational risks.
AI significantly decreases the time required for contract reviews. It swiftly identifies and addresses contractual risks and proposes intelligent redlines to speed up the review and negotiation stages. This overall acceleration of the contract cycle enables legal teams to save time and expedite deal-making for their business partners.
#2 – Enhanced Human Accuracy
AI tools can scan vast amounts of text, identify key clauses, and flag potential risks or deviations from standard practices. This level of scrutiny ensures a thorough review, reducing the likelihood of oversight or errors.
Moreover, AI applications in legal contexts are not limited to mere text analysis. They can learn and adapt to an organization’s specific legal standards and preferences. This means AI systems become more efficient and accurate over time, customizing their analysis to align with the unique legal framework of each organization. For instance, AI can be trained to recognize and adapt to changes in regulations, ensuring compliance and reducing the risk of legal penalties.
AI’s capability to handle large datasets efficiently also enables legal teams to perform comparative analysis across multiple contracts. This analysis can provide valuable insights into negotiation patterns, common contractual terms, and emerging industry trends. Such strategic information can guide decision-making, leading to more favourable contract terms and business outcomes.
#3 – Enables Higher Value Work
Artificial Intelligence (AI) is transforming the efficiency of legal teams by taking over routine tasks such as basic contract reviews. This shift reduces manual effort, freeing up legal professionals to concentrate on more complex, judgment-intensive activities. AI’s capability for rapid analysis and revisions significantly enhances the review process, allowing legal teams to focus on strategic initiatives.
The reallocation of mundane tasks to AI enables legal experts to devote more time to high-value work that requires their specialized skills and insight. Ultimately, AI not only streamlines basic tasks but also redefines the role of legal teams, empowering them to focus on strategic analysis, decision-making, and high-level legal counsel. This technological integration marks a significant shift in the legal field, enhancing the value and impact of legal teams in their organizations.
#4 – Better Compliance
Artificial Intelligence (AI) plays a pivotal role in enhancing compliance within organizations by proactively identifying legal, compliance, and financial risks in contracts. AI can help to refine the contract review process across an organization, ensuring that contracts are reviewed for consistent risks, negotiations are managed more uniformly, and revisions are made using standardized language. This uniformity not only streamlines the contract review process but also instils confidence in the organization about the contents and compliance of their contracts, effectively managing complexity.
#5 – Enables Scale
Whether you’re working with 5,000 or 50,000 contracts, AI can save you a ton of time.
As your business grows, you can expect to work with more contracts. With AI, you won’t need to scale your legal team alongside contract volume as the team can handle more contracts with fewer resources. Of course, AI contract review software has some upfront costs, but the long-term cost savings more than makes up for it.
AI Contract Review has Limitations
While AI contract review is a great addition to your business’ legal team, it does come with some downsides.
It will not be able to completely replace your legal team., Under-trained and unattended AI, can be prone to “AI hallucination” or misleading results that are the fault of insufficient training models.
Not all AI contract review software is ready to use out of the box. Some software and many custom contracts require users to train the AI to work better with the contracts your business needs to review. This means there is an investment to take the time to learn how to use AI contract review software.
Some leaders in the space are investing legal and technical resources to train AI to work seamlessly out of the box with pre-built AI playbooks, This helps users save time. Experts at LegalOnTech.com have made such an investment both to improve AI accuracy and performance on Day 1.
Finally, AI contract review is focused on the pre-signature process and has yet to build out features for the rest of the contract lifecycle.
Conclusion
While AI can not replace lawyers, AI contract review software can streamline and improve contract negotiations with customers, vendors, and clients. We’re excited about AI applications in the legal space and bullish about the use case of applying AI to contract reviews.