Contracts hold weight in your financial position, legal standing, and business relationships. No matter how many contractual agreements businesses have in their portfolio, they can’t afford to overlook them. Legal teams must go through the content of each one of them to ensure only competent contracts make it to the finish line.
Manually reviewing contracts has always been a pain point for scaling businesses. Apart from the labor of handling hundreds of documents, traditional methods are also more prone to human errors. That is why most companies are looking at AI contract review software to handle their legal agreements.
What is contract review?
Contract review involves closely examining a contract to ensure all terms and conditions are fair and legal. It is an opportunity for businesses to guarantee the contractual agreement is in their best interest before signing on the dotted line.
This process entails examining the language used in the contract to determine whether it meets legal, industrial, or organizational standards. Contract review allows parties to identify potential risks or loopholes. Thus, they can address potential issues before the contract becomes enforceable. To prevent disagreements and violations, they can establish everyone is aware of their obligations and rights.
Why is it critical to review contracts?
Contracts are the cornerstone of any business relationship, whether it be with clients, employees, or suppliers. They specify the rules, responsibilities, and rights of each party. However, not all contracts are created equal. They can have unfair terms, unfit language, or illegal provisions. Therefore, you must evaluate them carefully before signing on the dotted line. That’s where contract review comes into play.
Legal protection: By conducting a thorough contract review, companies can identify any potential legal issues or loopholes that may leave them vulnerable to disputes or litigation in the future. It can help protect businesses from costly legal battles down the line.
Clarity and understanding: Contracts often include complex legal jargon that can be difficult to decipher. A contract review ensures that all parties understand the terms of the agreement and can negotiate any unfavorable clauses before signing.
Risk mitigation: Parties can discover and resolve any possible risks or liabilities as part of business agreements. It enables companies to remove hurdles and safeguard their commercial interests proactively.
Financial impact: Contracts can significantly impact a company’s bottom line, whether through pricing, payment terms, or penalties for breach of contract. A thorough review can help parties identify financial implications and negotiate more favorable terms.
Compliance: Contracts have to abide by all applicable laws and regulations. A contract review can ensure that the agreement complies with legal requirements, protecting businesses from non-compliance.
What are the challenges of manually reviewing contracts?
While reviews are crucial, most businesses don’t have the time or resources to go through individual contractual agreements. Reading through lengthy legal documents, identifying key terms, and ensuring compliance with regulations can be a time-intensive process that delays approval and signing. That is why manual contract reviews are a potential problem for organizations with expanding portfolios.
Moreover, humans are prone to errors, and contract review is no exception. Missing critical clauses, misinterpreting terms, or overlooking important details can lead to costly mistakes and legal disputes down the line.
Consistency is crucial in contract review to ensure that all agreements undergo the same review and interpretation. However, manual review processes can result in inconsistencies due to human subjectivity, leading to discrepancies in contract interpretation. Finally, traditional contract review processes don’t have the analytical capabilities to extract valuable insights from contracts. Thus, businesses may miss opportunities to optimize contract terms and mitigate risks.
What is an AI contract review?
AI contract review utilizes machine learning and natural language processing to analyze and review contracts quickly and accurately. In contrast to manual processes, these AI tools can sift through vast amounts of data in minutes. They can also identify relevant clauses, highlight potential risks, and suggest improvements.
By automating contract review, AI can significantly reduce the time and resources organizations spend on the process. It also improves the accuracy and consistency of the results. Most contract management solutions, such as Dock 365, offer AI contract reviews within their platform. Thus, businesses can create, review, approve, and sign contractual agreements through a single system.
How does AI contract review work?
In Dock CMS, the AI contract review process starts with transforming the existing contract into a machine-readable format. This process involves OCR technology to capture the content of the contracts accurately. After content migration, the AI system uses NLP algorithms to analyze the language, structure, and context. It enables the system to identify clauses, provisions, and key terms within the documents.
Clause extraction
Our advanced AI technology identifies and extracts relevant clauses from contractual agreements. Thus, Dock retrieves vital information from even lengthy and complex legal documents. It saves time and eliminates the risk of human error in the contract review process.
By automating clause extraction of payment terms, termination clauses, and indemnification provisions, organizations can quickly access the most critical information without having to sift through pages of text. Businesses can create reports of extracted clauses to streamline the contract review process.
Clause comparison
Another powerful feature of Dock’s AI contract review is clause comparison. It enables businesses to analyze and compare clauses in multiple contracts. Thus, legal professionals can quickly identify discrepancies, inconsistencies, or deviations from standard terms. It ensures contract compliance and helps mitigate risks associated with non-standard clauses.
Our AI-powered clause comparison tools use machine learning algorithms to detect similarities and differences between clauses, allowing users to make side-by-side comparisons effortlessly. Thus, even for third-party contracts, businesses can have the upper hand and make informed decisions. It enables parties to negotiate better terms and conditions based on historical data and benchmarks.
Contract summary
A contract summary is a concise and simplified version of a contract that highlights the key terms, obligations, and important details of the agreement. It is designed to provide an overview of the contract in a more user-friendly format, making it easier for parties to grasp the main points without having to sift through pages of complex language.
Contract summaries offer a more efficient and accurate way to review and extract relevant information from contractual agreements. By leveraging natural language processing and machine learning algorithms, Dock enables users to quickly identify and summarize key provisions, clauses, and obligations.
What are the advantages of AI contract review?
Gone are the days of manually sifting through lengthy contracts and searching for key terms and clauses. AI-powered contract review can quickly analyze and extract relevant information from contracts, saving valuable time and resources. This increased efficiency allows legal teams to focus on higher-value tasks, such as negotiating agreements and mitigating risks. Some other benefits of AI contract review include:
Improved accuracy and consistency
Human error is inevitable, especially when dealing with complex legal documents. AI contract review eliminates the risk of oversight or inconsistency by providing a thorough and precise analysis of contracts. For instance, Dock can quickly identify discrepancies, errors, or missing clauses. Thus, businesses can ensure that all contracts adhere to company standards and legal requirements. This level of accuracy reduces the likelihood of costly mistakes and enhances the overall quality of contract management.
Cost savings and time efficiency
In addition to improving accuracy and efficiency, AI contract review software offers significant cost savings for organizations. By automating the contract review process, businesses can reduce the need for manual labor and allocate resources more effectively. It saves money on labor costs and accelerates the contract review timeline, allowing organizations to close deals faster and capitalize on opportunities.
Risk mitigation and compliance
AI-powered contract review can identify potential risks and inconsistencies within contracts that may have otherwise gone unnoticed. This early detection enables organizations to mitigate risks and ensure compliance with regulatory requirements.
AI contract reviews automatically flag clauses that may pose compliance risks or conflict with regulatory standards. It helps organizations stay abreast of changing laws and regulations, ensuring contracts comply with the latest legal requirements.
Conclusion
As businesses grow and enter into more contracts, the manual review process becomes increasingly challenging to scale. The volume of contracts to review can quickly overwhelm manual reviewers, leading to bottlenecks and delays in contract management.
AI contract review tools can process contracts faster than human reviewers, saving valuable time and allowing businesses to close deals more efficiently. Legal teams can ensure higher accuracy in identifying critical clauses, potential risks, and compliance issues by eliminating the potential for human error.
By leveraging the AI capabilities offered by Dock contract management software, businesses save on labor costs and reduce the need for outsourcing legal review services. Built on Office 365, Dock provides the advanced data security and compliance features of Microsoft. So, there’s no risk of your sensitive contract information getting into the wrong hands.
Book a live demo today to learn all about Dock’s contract management tools.
.png?width=196&height=196&name=MicrosoftTeams-image%20(24).png)
