Artificial Intelligence (AI) is perhaps the most exciting technology that has come out of the last few years. For better or worse, no industry has escaped the AI wave — and the legal industry is no different.
For decades, the most significant piece of tech for lawyers has been Microsoft Word. But with business going digital and the increasing pressure to keep up with dynamic markets, new technologies like CLMs emerged to enable lawyers streamline and speed up legal work. The latest in this slew of tech is AI-based contract management.
AI-assisted legal technology has been around for a while, but it’s only recently that it gained true awareness within the larger public. If you’re wondering where AI fits within your contract processes, then read on. We spoke to the legal tech experts at SpotDraft to identify trends and possibilities that AI opens up for the legal industry, and here are our predictions.
What is AI-based contract management?
To put it simply, AI-based contract management uses artificial intelligence tools and software to streamline and automate contract management processes, such as contract review, reporting, metadata extraction, etc.
Though there often exists some hesitancy among lawyers around the use of AI, the right AI-powered contract management software can become a competitive advantage for your legal team and your business. It can help you automate away the grunt work that’s traditionally been part and parcel of creating and managing contracts, and focus on higher leverage tasks and strategic projects.
“Some people are scared of AI but I honestly think it's just going to make everyone's life so much easier. You really can't substitute a lawyer. Take risk tolerance, for example. Maybe AI can give you data on which path you can take but, at the end of the day, you need context to be able to make a call. So, I personally don't think it’s scary. It’s actually really cool.”
— Katayoon Tayebi
Associate General Counsel, FIGS
Also read: 8 Top Contract Management Software Platforms
How AI is transforming every stage of contract management
Every lawyer’s talking about AI these days — but what can AI even do when it comes to contract management? Below, we’ve outlined use cases of AI for every stage of the contract lifecycle. Some of these already exist in the market, and some won’t take long to get here.
#1 Contract creation: Turn Word docs into coded contract templates within seconds
On average, SpotDraft users speed up contract creation and execution by 379%, and a large part of credit for that goes to the contract templates they set up on our platform.
Despite being such a critical aspect of the contract process, most CLMs don’t offer a quick and easy self-serve method to set up these contract templates — many of them remain low-code solutions that require training or hired technical expertise. This can be tedious and slightly intimidating for lawyers who aren’t used to this technology.
But AI can do away with all of the complications by taking your contracts on Microsoft Word and turning them into coded contract templates, with all necessary fields and inputs, on your CLM software.
#2 Contract review: Estimate review times and analyze contracts against playbooks and historical contracts
Review times are often an important KPI for in-house lawyers. Currently, lawyers largely have no way to know how long reviewing a contract will take them until they already look through it once. They also often end up having to do multiple passes on the same contract to compare clause versions against other contracts, flag errors and inconsistencies, and identify deviations from playbooks.
This can be a huge time drain and lead to duplicate efforts.
AI could help lawyers speed up review cycles by taking a first pass at the contract and:
- Estimating review times.
- Analyzing it against playbooks and the company’s historical contracts.
This will help you prioritize your time much more efficiently, reduce the risk of human error, and save time in the long run.
"If you can pull up an agreement very quickly or respond to something more decisively than your competitor, you're able to get into a new market quicker or build a product more rapidly. Furthermore, if you can give insight to the board or the CEO faster, the company will also move at an accelerated pace, which I think is what we all want to do."
— Doug Luftman
COO & CLO, ScaleWith
#3 Contract execution: Streamline e-signature and contract compliance
Executing contracts and digitally signing documents can be a hassle sometimes — even with CLMs and e-sign tools. Often, you have to manually drag and drop signature fields throughout the contract, which can be a tedious task for longer contracts.
Plus, keeping track of all tasks and obligations, both during approval and signing or after, can be time-consuming and often leaves a lot of room for human error.
Instead, you could automate these processes by letting AI:
- Identify sections that need signatures, then generate and place fields — saving several minutes for every contract that is sent out for signature.
- Automatically create and assign tasks to stakeholders based on contract status and key rights and obligations, so you don’t need to manually track everything.
#4 Contract management: Create custom reports and carry out due diligence through simple questions
Digging through archives to find specific contracts and information can be a painstaking process for lawyers. Currently, the best solution lawyers have in place for this is usually creating a well-tagged contract repository or database, with important metadata extracted and attached to each contract.
But AI can simplify this by leaps and bounds, enabling you to run complex search queries to locate contracts and create reports. For example:
“What are the circumstances in which there is a limitation on the liabilities of the parties?”
“HCC Ltd. has a good litigation database, and we want to leverage it better by implementing an AI-powered tool that would help us with relevant precedents from the cases we have previously settled and ultimately reduce the time we clock with external counsel.”
— Sandeep Chowdhury
Group GC, HCC Ltd.
#5 Contract storage: Extract critical contract data automatically when storing contracts
Speaking of extracting contract metadata, AI can make this process 10x easier by automatically pulling important data from your contracts.
Although most AI data extraction tech in the market today is still imperfect, it won't be long before AI can automatically and accurately extract all key information from your contracts into your repository for easy search and reference.
AI-enabled contract management and intelligence with SpotDraft
“What’s exciting is that now there's a lot of companies, such as SpotDraft and others, bringing in the next generation of technologies. And the people that are designing them actually know what Legal needs, both internally as well as for outside counsel, and are being very sophisticated with it.”
— Doug Luftman
COO & CLO, ScaleWith
The possibilities with AI are endless — and that’s especially true if you’re a SpotDraft user. Here’s what you can do with SpotDraft’s AI features:
#1 Create contract templates within minutes, without needing any technical expertise beyond Microsoft Word
SpotDraft’s DraftMate AI allows you to streamline the time-consuming process of creating templates — whether you used to do it in-house, through your CLM provider, or a third-party — through self-serve AI-powered contract template creation within MS Word.
Our AI automatically analyzes your Word documents for standard language, identifies variables that are likely to change across contracts, looks for bracketed text, and more.
It also recommends variables you can add and questions you can ask to ensure that the template is properly filled out.
#2 Run custom search queries for AI-powered contract diligence and report generation
Our AI features allow in-house lawyers to carry out contract diligence on their historical contracts stored on SpotDraft. After selecting or filtering out the contracts you want to analyze, you can simply ask questions from the AI to generate ad-hoc reports for tracking compliance and contract status, receiving detailed answers and context, searching for specific clauses and related text, and more.
This makes it incredibly easy to find contracts and information when you need it without having to go digging through your repository, helps you stay audit-ready, and ensures every stakeholder can understand the legal implications of their contracts.
#3 Automate the metadata extraction process for your contracts
Manual metadata extraction is a thing of the past. SpotDraft uses AI to help in-house legal teams automatically extract relevant metadata from their contracts and store them for easy access and tracking within their SpotDraft dashboard.
This brings down the time- and resource-consuming process of contract metadata extraction to mere minutes, making it quick and easy to review, summarize, and find contracts.
SpotDraft AI can also create detailed summaries of your contracts, so you can understand the gist of the document without having to read through it entirely.
#4 Match and compare clauses and standard language against versions on other contracts
Standardizing contract language can be difficult when you’re dealing with thousands of contracts, each with different negotiated terms. Often, lawyers doing a lot of back and forth between different contracts to perfect specific clauses while creating and redlining contracts.
SpotDraft’s AI review add-in makes it easy for you to search for different versions of specific clauses and phrases, all by highlighting a clause and running a search for similar text. This pulls up different versions of that clause and let’s you quickly understand which contracts they were used for.
The future of legal work: Benefits of using AI for contract management
AI is disrupting every industry, and the legal industry is no different. This is especially true because working within the in-house legal industry necessitates a drive to stay ahead of the curve. Here’s why it’s essential for the in-house legal counsel to adopt AI into their processes:
#1 Greater productivity
To the business, efficiency and speed is all that matters; and as a lawyer, mitigating risks and balancing legal advice with business advice is essential for you. AI can help you toe that line by enhancing efficiency and automating routine contract management tasks so you can focus on creating value for the business.
#2 Improved consistency and accuracy
AI can help you ensure consistency by standardizing contract templates and quickly analyzing contracts for deviations in language and formatting from your playbook. It also reduces the risk of human error by a significant degree and speeds up review.
#3 Data-driven decision-making
With the help of AI, you can analyze and take out insights from big datasets within minutes rather than hours and days. This enables faster and better informed decision-making, and becomes a competitive advantage for the business.
#4 Enhanced legal value within the business
By increasing efficiency and accuracy, and highlighting data-driven insights in front of business teams, legal teams can improve their brand within the organization and gain goodwill. This, in turn, leads to more resources, greater buy-in, and a seat at the table for legal.
#5 Optimized resources
As a cost center to the business, the legal function often has a limited budget. Through AI, you can save costs by automating administrative tasks, ensuring compliance, and allowing the legal team to prioritize things that lead to business growth instead of just putting out fires.
“I think the biggest impact comes from how AI is (or will be) used by in-house legal departments. This is true because the incentive for in-house legal departments to find the lowest cost way to do things is greater than the incentive for law firms to find ways to offer lower priced services (i.e., quantity of billable hours vs. quality of a billable hour).”
— Sterling Miller,
“Ten Things: Artificial Intelligence – What Every Legal Department Really Needs To Know”
Choose SpotDraft as your AI-based contract management software
AI has huge potential as a tool for enabling in-house lawyers to drive strategic projects and get back time spent on redundant tasks.
Want to know more about SpotDraft and our AI capabilities? Talk to us today.