AI Contract Management: An All-inclusive Legal Guide

Content

• How does AI Contract Management work?
• Generative AI For Contract Drafting
• Clause Comparison For Painless Negotiation 
• AI Summarizer To Simplify Contract Review 
• Clause & Entity Extraction For Post-contract Management
• How to make the most of AI Contract Management?
• Conclusion

According to consensus, it takes four to eight weeks for contract reviews. It can vary depending on the number of stakeholders involved and the complexity of the document. In any case, a company trying to onboard suppliers, customers, or staff still loses valuable time. But what if you could expedite the procedure without sacrificing accuracy? It’s just one area of contract management where AI can make the work easier. 

Artificial intelligence is transforming the way legal professionals handle contracts. Even so, businesses are reluctant to give machines complete control over their high-value tasks. They have second thoughts about its effectiveness, whether it will protect their private information, and whether the outcomes are reliable. Here is a thorough guide on AI contract management, covering its features, benefits, and applications to ease these legitimate worries.

How does AI Contract Management work?

What exactly does the contracting process entail? When a contract request is made, the legal team drafts a document based on the scope and specifications. All the stakeholders review and negotiate the terms till they find common ground. Once everyone is happy with the outcome, they sign on the dotted line, making it official. Sounds easy? Does it look like the whole process should be over in a few days? Afraid not! How well you manage the contracting process will determine how long it takes. It can go on forever if you continue to rely on antiquated systems or manual procedures to complete the task. Fortunately, we can count on AI to save the day! Here’s how: 

Generative AI For Contract Drafting

Everyone on the planet has been using generative AI to produce unique content for diverse purposes, from business proposals to email replies. The legal industry can also make use of the tool to accelerate contract authoring. Drafting legal agreements from scratch is one of the most challenging and time-consuming tasks. There is contract language, legal jargon, party details, and so much more to worry about. AI is capable of creating competent contracts that meet organizational and legal requirements when given the appropriate prompt.

So, in a matter of minutes, you will have an employment contract, SLA, or NDA that checks all the boxes. AI can accumulate all the relevant details into the agreement in a fraction of the amount of time it would take to do it manually. Additionally, this approach reduces the possibility of human error and non-compliance. Businesses can eventually train AI to produce documents that precisely adhere to corporate policies, legal requirements, and industry regulations. This holds for contract clauses and stipulations too.

Clause Comparison For Painless Negotiation 

A great deal of back and forth and revisions are made during negotiations before the parties reach an agreement. It entails carefully reading over the terms and conditions of the contract to make sure they are profitable, legitimate, and competent. It can take time, especially when the legal documents are complex and lengthy. 

AI-powered tools can streamline the process by facilitating clause extraction and comparison. Businesses can automatically extract all the relevant terms in a contractual agreement for easy analysis. The AI can compare the extracted clauses with standard ones to flag inconsistencies, risks, and liabilities. Thus, even without going through the whole document, businesses can identify high-value points requiring revision. Consequently, they’re better equipped to negotiate better terms and resolve matters faster.

AI Summarizer To Simplify Contract Review 

Stakeholders review contractual agreements at various points in the contract lifecycle to draw out risks, opportunities, deviations, and incompetencies. The process becomes paramount for high-risk and value contracts. Going through all the legal documents to pinpoint the main facts can be time-consuming. Companies with countless active agreements at a time may not have the resources to analyze each word. 

In such cases, AI enables businesses to generate contract summaries within minutes. These comprehensive reports highlight all the relevant details, including terms, prominent dates, obligations, scope, and objectives. It enables parties to quickly understand contracts without going through the complex and convoluted legalese. It also helps when businesses need to find quick information to support vendors, clients, partners, or employees in the future. 

Clause & Entity Extraction For Post-contract Management

Even beyond execution, businesses can utilize AI for contract management. Throughout the contractual relationship, parties must stay on top of performance, compliance, costs, and deadlines. Manually analyzing legal documents to derive insights and relevant data can take a long time. It leads to companies losing track of relevant dates, opportunities, and responsibilities.

AI-powered contract management allows users to extract relevant metadata from contractual agreements within minutes. They can extract party details, addresses, dates, and clauses. They can use these extracted clauses to track obligations and establish performance. It also helps businesses to efficiently handle third-party contracts. Moreover, stakeholders can extract and set up alerts for execution, renewal, and expiry dates. AI makes obligation and compliance management effortless for scaling organizations. 

Classify contracts: Efficiently sift through various contract types according to clause content.

Classify clauses: Scan the contract for clause types and classify or tag them accordingly.

Flag clauses: Alert contract managers of key contract information included in the clause.

Organize files: Categorize contracts containing similar information.

What are the benefits of AI Contract Management?

Quickly grasping the essence of a document is a necessity in the legal sector. It provides a competitive edge for organizations when dealing with clients, vendors, customers, and partners. They can make informed decisions and streamline their commercial operations. Some other benefits of using AI contract management include: 

Increased efficiency and productivity

AI tools can automate repetitive tasks such as document review, contract analysis, and due diligence, saving time and effort for legal professionals. By reducing manual labor, AI streamlines processes and allows legal teams to focus on higher-value tasks.

Enhanced accuracy and compliance

AI tools are designed to analyze vast amounts of data quickly and accurately, minimizing the risk of human error in legal document management. By leveraging AI algorithms, legal professionals can ensure compliance with regulations, identify potential risks, and make informed decisions based on accurate insights from the data.

Cost-effectiveness

By automating document review and analysis, AI tools help legal firms reduce operational costs associated with manual labor. Legal professionals can handle a larger volume of documents in less time, leading to cost savings for clients and improved profitability for the firm.

Improved decision-making

AI tools provide legal professionals with valuable insights and predictive analytics that can aid in decision-making processes. By extracting key information from legal documents, AI tools help identify patterns, trends, and potential risks, empowering legal teams to make informed decisions that align with their clients' goals.

How to make the most of AI Contract Management?

While AI, ML, and NLP are natural progressions in legal work, they do pose some concerns. Legal documents are notorious for their complex and intricate language. The use of technical terms, jargon, and specific terminology can pose a significant challenge for AI algorithms. That is why professionals must do their due diligence while adopting AI to streamline legal processes.

Ensure data privacy and security

One of the primary concerns when using AI for legal documents is data privacy and security. Legal documents often contain sensitive and confidential information that must be protected at all costs. AI systems require access to vast amounts of data to learn and improve their performance, raising potential risks of data breaches or unauthorized access. Legal firms must ensure that their AI tools comply with strict data protection regulations to safeguard client information.

Or they can make use of Dock 365’s advanced AI capabilities. It is an all-in-one contract management platform built within your existing Microsoft 365 environment. So all the processes and data stay within your SharePoint account. Businesses and lawyers don’t have to trust third-party sites with sensitive information even while using AI tools. Dock enables users to draft, review, and analyze contracts using OpenAI within Microsoft’s secure storage.

Integrate AI with existing systems

Another challenge of using AI for legal documents is the need to switch between different platforms and tools. Legal professionals may use multiple AI applications for various tasks, such as contract drafting, negotiations, and performance management. Switching between these platforms can be time-consuming and disruptive, leading to inefficiencies in workflow. Thus, AI tool integration capability with existing systems is a top priority for legal professionals.

Dock 365 offers a one-stop solution to streamline the contract lifecycle, from intake to negotiation to signing. Moreover, the platform comes with AI capabilities, enabling legal professionals to utilize it for document generation, review, and analysis. Thus, there’s no need for users to switch between multiple platforms to perform legal tasks. 

Legal oversight

AI systems are designed to assist legal professionals in analyzing and processing large volumes of documents quickly and accurately. However, the lack of human oversight of AI-generated results can result in non-compliance and litigation. Dock 365 contract management software comes with AI capabilities and ensures legal oversight throughout the process.

The automated review and approval workflows route AI results to relevant legal counsel. They can verify the accuracy of the results and make any necessary corrections or adjustments to ensure that the legal documents are error-free. Also, they can establish AI-generated results that meet all the necessary regulations and standards.

Conclusion

As AI continues to evolve and improve, legal professionals need to embrace this technology and incorporate it into their workflows. It can review, analyze, and summarize vast amounts of data quickly and accurately. This can significantly reduce the contract lifecycle, freeing up valuable resources for more strategic and high-level tasks. Moreover, AI can help to identify potential risks and inconsistencies in contracts. 

However, it's crucial to remember that while AI contract management can enhance the efficiency and accuracy of legal work, it is not a replacement for human expertise. That is why Dock 365 provides AI legal assistants with room for oversight. Schedule a demo today to see our contract management software in action.

You can read more about Dock’s AI capabilities here.