Even the most dedicated person won’t tell you they love poring over contracts and analyzing every word to make sure they haven’t overlooked something vitally important. Tedious as it is, reviewing contracts is a necessary part of running a business. However, it doesn’t have to be a laborious chore. Artificial intelligence (AI) programs can quickly review most contracts so you can focus on more rewarding and value-generating tasks.
What Is AI Contract Review?
Almost 80% of businesses are either currently using or exploring the possibility of using AI in their business operations. AI is an umbrella term for software programs that operate similarly to human thinking — though much more simplistic.
AI contract review uses artificial intelligence technologies to scan, analyze, and manage legal contracts more efficiently and accurately. It automatically reviews legal documents and highlights particular clauses, finds flaws, or flags risky terminology. It drastically reduces the amount of time you need to spend going over contracts. While manual review can take hours, AI contract review takes minutes.
AI systems are designed to understand and interpret the language of contracts. They can compare contracts against predefined standards or your previous contracts to make sure you don’t overlook anything significant. It doesn't replace legal expertise, but it makes your teams more efficient.
How AI Analyzes Contracts
AI software uses a combination of methodologies to sort through contracts and identify patterns. Though they can’t completely replace humans for reviewing contracts, they can make your job much easier.
Natural Language Processing (NLP) and Machine Learning
NLP is a subset of AI that allows computers to understand and generate human language. In AI document review, the software uses NLP to read and understand the contract’s text as a human would but with far greater speed and consistency. It interprets legal terms by recognizing patterns and structures typical in legal documents.
Machine learning works with NLP by allowing the program to learn from a huge dataset of contracts. Over time, the program can identify various contract elements, such as clauses, obligations, and rights, with even more accuracy. The program gets better the more you use it.
Data Extraction and Interpretation Techniques
Contracts are long and dense, and they’re often filled with irrelevant information. To effectively analyze contacts, AI programs use data extraction techniques to pull out specific, relevant information from contracts. You might need to know delivery dates, payment amounts, or the terms for a cancellation clause. The AI program uses data extraction to sort through entire contracts and find whatever specifics you need.
Once it extracts the data, AI can analyze it to understand what it means for you. These systems can evaluate how risky a clause is by comparing it against a database of standard practices and previous contracts. It uses contract analytics to point out non-standard clauses that you should look at more closely.
Key Features of AI Contract Review Tools
Al can perform almost any tedious contract review job you can imagine. While platforms may vary on the specifics, most contract review platforms offer the following features:
Clause recognition and analysis of contracts automatically identifies and analyzes standard and non-standard clauses to spot unusual provisions or deviations that could pose legal risks for procurement teams.
Risk assessment features evaluate the terms of the contract against compliance standards and prior agreements to mitigate risks.
Automating tedious tasks such as data entry and clause extraction speeds up reviews.
Version control and comparison tools track changes across multiple contract drafts to compare revisions.
Aggregation tools give contract managers insights into contract trends and negotiation outcomes that can drive data-based decisions.
Benefits of Using AI for Contract Review
Although the biggest benefit of AI contract analysis is the time savings, that’s not the only one. Other benefits of contract AI software include:
Increased efficiency: By dramatically speeding up the contract review process, AI lets you handle large volumes of documents in a fraction of the time it would take manually.
Cost reduction: Automating routine tasks and streamlining the review process reduces the manpower and hours you need to devote to contract analysis.
Improved accuracy: AI tools minimize human errors by detecting anomalies, errors, and inconsistencies that might be overlooked by human reviewers.
Scalability: AI tools are ideal for growing businesses because they can easily scale to handle thousands of contracts without requiring more resources.
Accessibility: With AI, all stakeholders can access and review contracts from any location, so everyone’s on the same page.
Steps to Integrate AI Contract Review in Your Operations
Switching over to an AI-powered contract review platform doesn’t have to be overwhelming. The following step-by-step guide will help:
Assess your needs and objectives: Start by outlining what you want to achieve with AI contract review. Review your current process and how AI can help you address challenges and bottlenecks.
Choose the right tool: Research and select an AI contract review tool that best fits your business needs, such as Terzo.
Launch a pilot program: Start with a pilot program to test your software on a small scale. This will identify potential issues and let you make necessary adjustments before a full-scale rollout.
Train and onboard: Train your legal teams on how to use the AI software. Make sure they understand its features, benefits, and how to incorporate it into their daily workflow.
Integrate: Set up your AI contract review software with existing legal and business systems, such as CLM and P2P software.
Migrate your data: Move your existing contracts and relevant data into the AI system.
Continuously monitor: Once your system is in place, monitor how it performs with different contract types and ask users for feedback to keep improving your contract lifecycle management.
Get Instant Access to Contract Data With the Perfect Tool
It's time to face it: Your manual contract review process may be slowing you down and leaving money on the table. Terzo’s AI-powered contract platform combines AI extraction with analytics to provide insights to legal professionals that will optimize operational expenses.
Reach out today to learn how you can combine AI with human expertise for amazing results.
