The capabilities of artificial intelligence (AI) have grown by leaps and bounds in recent years, and the technology is taking nearly every industry by storm. The legal industry is no exception, using it for everything from researching previous contract disputes to navigating other tedious contract-related processes — an area in which AI is proving particularly useful.
Legal teams have learned to use AI for contracts at nearly every phase within the contract lifecycle. From creation and analysis to signing and storage, contract management software is adding value to legal teams’ operations as they handle these critical documents — and AI is powering it all.
In this article, we’ll take a deep dive into the role that AI plays in the contract lifecycle. We’ll list a few of its key functions as well as some of the benefits that it has to offer and then show you how Jsign can bring those benefits to your team.
How AI Technology Works in Contracts
AI has proven to be a highly versatile technology. That has allowed it to find a role in many different industries and also in many different ways. We’ll discuss the specific functions later, but the general role that AI plays is to leverage its large language models (LLM) to gain an understanding of legal operations throughout the contract process so that it can assist a legal team with its tasks.
To achieve this, AI employs machine learning (ML) to detect patterns from the massive datasets used to train it. In the case of AI for legal contracts, those datasets consist of thousands of legal documents, each containing a series of critical data points common to most contracts. These include:
- Contract types
- Standard clauses
- Risk assessment/mitigation data
- Client data
- Case-specific points of emphasis
- Signature collection, such as physical signatures, online signatures , and electronic signatures
- Much more
The algorithms that power AI detect patterns in these data points, enabling them to identify similar data points in future contracts that legal teams input into them. Effectively “learning” the necessary legal information to search for within a legal document, a contract management solution gains proficiency in the legal industry that takes professionals years to learn.
Key Functions of AI in Contracts
For all its potential, AI is far from being able to take over the tasks that a seasoned legal professional can perform. Its role is as an assistant, coming alongside legal teams to help them complete their workflows better. Here’s how a contract management solution can help.
Automated Contract Review and Analysis
Modern-day contracts are filled with many details, so they have to be reviewed very carefully. This process can take a great deal of time — time that legal teams don’t always have.
To expedite the process, you can use contract review software to help you identify and analyze essential data points more quickly. It used to take days, weeks, or even months to comb through all those extensive legal documents to pinpoint the essential data or clauses that you needed to conduct your contract analysis. If you use an AI contract review instead, you can complete one in a matter of minutes or hours.
Risk Assessment and Compliance Checks
Contracts often contain certain clauses that must comply with the regulatory standards of their industry. There’s also a certain degree of risk that goes into any legal agreement, so assessing your contracts for minimum risk and maximum compliance is a must.
Contract intelligence software can help you lessen your risk and keep you compliant. Regarding risk assessment, it can identify important legal details that can pose a risk to your client and help you accurately assess the impact it could have. It could also review your legal contract to ensure that it’s in compliance with the standard that you input into its algorithms, keeping you from unknowingly committing a violation.
Benefits of Using AI for Contracts
From rapidly drawing up new contracts to efficiently extracting the most important data for review, using AI for contracts can help you boost productivity, minimize risk, and negotiate for your client more effectively. The ultimate result is greater profitability for your firm, but these benefits follow as well.
Efficiency in Contract Creation and Review
The contract creation process can be very tedious. A good portion of it consists simply of writing standard clauses common to every contract, amounting to little more than repetitive, manual tasks. The result is that your legal team gets weighed down by redundancy, hampering its productivity, creativity, satisfaction, and the amount of value it can add to your firm.
Enter the AI contract generator. By drawing from the thousands of contract types it’s been fed, an AI-powered document generator can create a wide array of contract templates for legal professionals to choose from, all in a matter of moments. They can develop the frameworks needed for a general overview of the contract so that legal teams need only to fill in the specific details.
This cuts down on the number of repetitive tasks your team must complete for each contract, freeing it up to be more productive and letting you make the most of its expertise to bring maximum value to your client. Simply put, generative AI for contracts makes legal teams more efficient at their work.
Enhanced Accuracy and Risk Mitigation
In today’s high-stakes business world, some contracts contain highly lucrative proposals in which a single violation could lead to massive losses for your client — and potentially your firm. They also can contain some propositions that pose excessive risk to your client, making it essential that legal teams know how best to mitigate the chances of a loss.
Instead of leaving so much in the hands of a fallible human only, contract management solutions give you another set of digital eyes. When properly trained, contract review software can scour your documents and analyze them with greater care and attention to every necessary detail, enabling you to give a more accurate assessment of your clients’ risk. Simply put, AI for contracts can help you review your legal documents more carefully, reducing your risk of an oversight.