The Role of AI in Contract Negotiation

The negotiation phase remains the pressure point of the contract lifecycle, often susceptible to delays, disputes, and disruptions. 

This stems from the presence of manual, repetitive, and time-consuming processes along with conflicting interests, priorities, and expectations of parties on both sides of the contract.

However, the advancement of Artificial Intelligence (AI) in contract management has unlocked new possibilities for businesses of all sizes, helping them expedite negotiation processes and close deals ten times faster.

In this guide, we will explore the various roles of AI in contract negotiation and how it revolutionizes contracting processes.

Also read: Contract Negotiation with AI: Proven Strategies for Seamless Implementation

How is AI set to transform contract negotiation?

“To me, AI is the next internet. If you're not using it, you're falling behind. AI is going to move rapidly in a direction where it will help a lot of us make processes more efficient. I don't think the GC goes away. AI is a tool but it doesn't replace decision making.” 

~ Celaena Powder, VP of Legal, Seismic
‍From Security to Sales: Building Cross-functional Bridges

The traditional contract negotiation process is laden with back-and-forths, conflicts of interest, delays, and oversight errors. 

However, the birth of AI in the contract management industry has turned the tide around, helping legal counsel and business teams experience speed and efficiency at unprecedented levels once confined to their imaginations.

But what specific roles has AI played in expediting negotiation processes?

#1 Automated review

The contract review process is a critical and integral part of the contract negotiation process. It plays a significant role in ensuring that the interests and intentions of all parties involved in the contract are accurately reflected in the final agreement.

But this is an inherently lengthy process where it is easy to miss important details, especially when surfing through large documents. 

Reviewers have to painstakingly scan every page, line by line, to understand every clause and how it could impact their organization from the standpoints of revenue, ethics, and law.

“If you try to read a complex contract carefully, from front to back, and expect to understand it on just the first read-through, that’s wishful thinking (and potentially very messy).”‍

‍~ Sterling Miller, CEO and Senior Counsel, Hilgers Graben PLLC
‍Ten Things: How to Read a Contract

While this is cumbersome for humans, it is a cakewalk for AI.

AI is capable of scanning dozens of contract documents in minutes, identifying patterns, extracting key information, and calling your attention to potential issues.

This is where VerifAI by SpotDraft excels. Launched as a Microsoft Word plugin, VerifAI utilizes advanced Large Language Model (LLM) algorithms to analyze contracts against specified guidelines. 

Upon highlighting problematic clauses, VerifAI provides a detailed explanation as to why such clauses were flagged and offer actionable recommendations. Apart from using user-defined guidelines and industry-vetted playbooks, the AI tool also allows users to ask specific questions in natural language and get accurate answers in minutes.

This allows you to get a 360-degree understanding of your contracts, arming you with the right insights to make productive negotiations faster than ever.

Also read: How AI Contract Review Tools are Transforming Legal Workflows

#2 Predictive analytics

AI’s predictive analytics capabilities empower business teams with a strategic advantage by harnessing the collective wisdom of past negotiations and enhancing their ability to navigate the complexities of contract negotiation effectively.

AI tools are trained using a vast collection of historical contracts and associated materials. 

Thanks to its access to these resources, it is capable of predicting outcomes by analyzing dozens of similar contracts from the past.

It can inform business teams about how specific clauses or terms have been contested or modified in similar contracts, allowing them to anticipate sticking points, optimize their negotiation strategy, and make more informed decisions.

Also read: 5 Most Negotiated Terms and Clauses in a Contract

#3 Redlining and editing

Redlining is a common procedure in contract negotiation. If the terms of a contract don’t align with your expectations, redlining allows you to highlight changes, additions, or deletions that need to be discussed and potentially agreed upon by all parties involved.

While this process is critical, it is time-consuming, stressful, and prone to errors when done manually.

However, AI streamlines this entire process by automatically scanning your contracts, suggesting revisions, highlighting changes, and providing feedback on wording, clauses, or legal terminology, helping business teams improve the clarity and fairness of their contracts.

This is also a feature accessible in VerifAI. Apart from helping you analyze your contracts and flag clauses, VerifAI also suggests redlines you can implement to make every clause align with your organization’s goals and best interests.

#4 Risk assessment

AI also plays a crucial role in risk assessment. It can analyze contracts to identify potential risks and provide risk ratings based on the language, clauses, and terms used in the agreement. This allows legal and business teams to quickly understand the level of risk associated with a particular contract and take appropriate measures to mitigate those risks.

AI can assess risks related to compliance, financial implications, legal liabilities, and more. It can even compare the risk profiles of different contracts, enabling organizations to prioritize their negotiation efforts and resources.

#5 Legal research

During the contract negotiation stage, you may want to research relevant laws, case precedents, and legal opinions that may impact the terms and clauses of your contract.

AI tools can quickly scan vast databases of legal information and provide relevant documents, references, and insights that pertain to the contract at hand. This expedites the research process and ensures that legal counsel and business teams have access to up-to-date and pertinent legal information.

AI can also help in the interpretation of complex legal language and provide recommendations for clauses that may need modification to align with current legal standards or best practices.

This is one of the best features of SpotDraft AI, which allows you to ask questions in plain English and get insights into any area of your contract. 

Regardless of how complex your question is, SpotDraft AI will offer clear and accurate responses, feeding from its vast database of up-to-date legal information and advanced LLM algorithms.

Also read: Choosing the Right Legal Research AI Tool for Your Team

AI contract negotiation: The future

“If the use of AI can free up current staff from spending time on transactional tasks, the value (if not immediately apparent) is exponentially greater than merely paying less for legal services.”

~ Sterling Miller, CEO and Senior Counsel for Hilgers Graben PLLC
‍Ten Things: Artificial Intelligence – What Every Legal Department Really Needs To Know

AI is, indeed, in its early stages in the legal tech industry. But with the unprecedented capabilities it has shown, it is safe to say that it has a glittering future.

Negotiation remains a crucial component of every contractual relationship, and with AI set to streamline critical aspects of the contract negotiation phase, we can anticipate remarkable transformations in the way contracts are formed, reviewed, and executed.

SpotDraft, a future-driven CLM, is leading the charge in the proliferation of AI in various aspects of contract management, from contract generation to negotiation and tracking, with the ultimate goal of helping businesses close deals faster than they’d ever imagined.

Curious about how this will benefit your team? Request a demo.