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How can AI accelerate the legal contract analysis process?

September 8, 2022 - Team EdgeVerve

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Advanced technologies such as Artificial Intelligence (AI) and Natural Language Processing (NLP) are transforming how companies operate. In fact, AI firms are exploring ways to develop solutions that can oversee labor-intensive tasks such as manual contract analysis – a keystone for modern-day business transactions – across industries for more accuracy and better speed.

With industries going the AI way, legal businesses are also embracing this automation technology adoption to resolve the challenges of managing over-loaded legal contractual agreements through AI-powered contract analysis.

According to a survey of in-house professionals within Fortune 1000 companies by Corporate Counsel Custom Solutions conducted on behalf of EdgeVerve, 69% of respondents have witnessed a rise in their contract review assignments. And 56% of respondents expect spending for contract reviewers to increase over the next year. Hence, firms have generated a growing interest in employing AI in legal contracts, gradually changing the domain dynamics and minimizing the effort of legal researchers, paralegals, and litigators.

However, with the legal departments increasing the implementation of AI to enhance efficiency, it will be very apt to acknowledge that AI can play the finishing role in automated contract analysis.

The difficulty of managing a large volume of legal and contractual agreements with the organizations is overloaded with enormous contract data points to juggle. Unfortunately, this leads to an inefficient contract analysis process.

This is where artificial intelligence (AI) plays the role of a redeemer by modifying how contract analysis functions are carried out. Thus, AI-based contract management can aid the best legal teams by relieving them of relentless manual work and freeing them from repetitive tasks to invest quality time evaluating and nullifying the risk, finding opportunities, and providing critical insights to their organizations.

Should legal experts leverage AI for contract analysis, and if so, why?

Artificial Intelligence can be of immense use to law firms. EdgeVerve survey suggests that only 33% actively apply AI or automation technology in contract analysis, while 24% have not even considered using the solution yet. Automating legal requirements like due diligence through AI can significantly enhance the efficiency and productivity of legal teams. Hence, this is a very significant step as lawyers depend on these due diligence reports to unlock the material challenges of contract analysis.

Thus, AI-based contract analysis can be applied throughout the contract lifecycle management to assess and track the required information by integrating AI technology into the business processes.

Automated contract analysis enables legal and business users to create, store, review, index, retrieve, analyze, negotiate, and approve agreements. It speeds up the contract assembly activity for sell-side contracts, accelerates the buy-side contract reviews, and delivers profound insights into the business performances across the company.

AI significantly impacts the practice of law with the technology used to review contracts, identify the needed data through the discovery process and conduct legal research. Additionally, it is being implemented for drafting agreements, forecasting legal outcomes, and recommending judicial decisions regarding bail or sentencing. AI-powered contract management can significantly improve legal teams’ productivity and eliminate the possibility of error.

Enhancing legal process performance with AI

Legal experts can effortlessly pitch in unique AI technology along with deep learning competencies to automate contract indexing, streamline, and simplify their tasks to resolve vital pain points in a contract management lifecycle.

What AI application will eventually do is it will allow the legal departments to:

Is AI helpful in efficiently managing contract cycle time?

Below are the two core areas where AI makes a company’s contract analysis lifecycle more efficient.

Building contracts: Businesses employ attorneys to accomplish contractual tasks. However, the human workforce will not be able to create volumes of contractual drafts quickly. This is where AI-powered contract analysis comes into the picture, as it helps to set up contracts from clauses and templates.

Simplifying legal processes: Managing contractual obligations efficiently is perhaps one of the most challenging tasks. Sometimes, it is difficult to determine whether the business is operating according to the set contractual terms or if there is any breach of contract. In such a scenario, companies can incur heavy losses due to the inaccessibility of contracts. Thus AI-powered contract management provides access to information and analytics solutions, allowing the parties involved to work on an economy of scale for enhanced cooperation and operational business management.

Other key benefits include:

With the legal units embracing technology adoption, it is possible that Artificial Intelligence will augment law practice in the future. AI is shifting traditional legal workflows by facilitating specialists to better realize the contract language and obligations during negotiations. Therefore, sensing the countless advantages, legal firms have been applying AI-powered contract analysis to identify and extract terms and clauses such as limitation of liability, SLA penalties, termination policies, and many more.  These data will enable the companies to track the risks involved accurately and thus find ways to eliminate such vulnerabilities.

Hence, it will be fair to conclude that organizations investing resources into AI contracts will be able to accomplish the benefit of AI in contract analysis in the times ahead.

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