2021 Buyers' Guide to Contract Analytics and Review Solutions

Contract Negotiation and Analytics software is one of the top innovations transforming the legal industry right now. It's helping legal departments and procurement teams work with reduced staff while improving overall agreements and guiding negotiations to quicker execution. However, not all of the available software solutions offer the same benefits. Any legal department that wants to take advantage of this tech needs to have some clearly outlined goals in mind.

In some cases, there is a tradeoff between detail and full automation. Fully automated solutions may not offer as much information for guiding contract negotiations. Meanwhile, software capable of providing detailed guidance often cannot work without human intervention. LexCheck is currently the only platform in its class that provides highly detailed reviews with full Artificial Intelligence (AI) automation.

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Current Legal Industry Challenges

ai-graphicThe legal industry is in a state of flux as departments recover from the pandemic and develop strategies for the future. One major area of focus is legal technology, which can be used to streamline processes, facilitate telecommuting processes, and provide support for overburdened staff members. The demand for legal technology innovations has never been more prevalent, with 58% of corporate law departments1 saying workloads have increased significantly due to the pandemic. Thirty percent of all departments intend on increasing their spend on technology in 2021.

AI has emerged as the most impactful of these technology solutions. One of the top targets for this change is contract management, with a specific focus on the use of AI in contract analysis, due diligence, and risk assessment. Advanced solutions have the ability to not only improve overall contract analysis results but to streamline negotiations while accelerating the process from review to execution.

1Hart Shepherd, Lisa. 2021 State of Corporate Law Departments. Thomson Reuters, 2021.

How Does Contract Negotiation and Analytics Software Work?

While it may be impossible to outline how every single software system works, there are similarities that these systems share. Most leverage data, machine learning, and natural language processing to increase a legal team’s efficiency and accuracy.

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Data
Every contract an organization negotiates also creates a rich source of data. The outcomes of these negotiations help companies predict the future of similar agreements. Many companies will use a grouping of contracts as a method of training their system and giving it the data it needs to guide attorneys.
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Machine Learning
Machine learning is a subset of AI that focuses on teaching computers how to make assessments and predict outcomes. The AI uses the context it's given to build models that allow it to identify patterns, make decisions, and improve contract results.
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Natural Language Processing (NLP)
NLP combines linguistics, computer science, and AI to enable computers to read content and build context around it. This is an essential component in contract review, as the machine must understand the content in order to provide context and make recommendations.

The phrase "makes recommendations" may give readers the impression that contract negotiation software is capable of revising documents for attorneys. This isn't always the case. In many instances, these "recommendations” will take the form of flagging or highlighting, designed merely to alert the attorney that there may be a problem without providing a path for resolution; human intervention is required to complete the process. Revision and suggestion capabilities differentiate many products on the market.

Types of Contract-Focused Legal Technology on the Market

AI-enabled legal technology that focuses on contract negotiation and analytics is helping corporate legal departments and procurement teams seek their strongest positions while also accelerating the negotiation process. Options range from simple data extraction utilities to fully automated AI authoring and redlining solutions. While there are many players in this space, they can generally be organized against two main capability continuums:

Text Extraction vs. Fully Automated Authoring and Redlining
Human-in-the-Loop vs. Fully Automated
Many legal contract analytics solutions can process documents and be trained to extract text of a desired nature. This requires the input of hundreds of carefully curated samples to train the AI and "teach" it by repetitive example what is critical for that specific agreement. More advanced solutions will go beyond simple data extraction; they may offer AI generated suggestions for revisions that can allow attorneys to replace inefficient language. In advanced cases, they eliminate the need for human-attorney review completely. These solutions can generate revisions which can help streamline negotiations. With the assistance of these features, attorneys focus on the key provisions that are of specific interest to a given business situation based on their unique needs. “Human-in-the-loop” describes an application of artificial intelligence that continues to require some level of human interaction. Some contract negotiation and analytics solutions are heavily dependent on humans to garner the best results. For these solutions, the AI is not the primary feature but an enhancement that allows human operators to complete tasks more efficiently behind the scenes. Contrastingly, AI-powered solutions on the mature end of this spectrum are fully automated and require no human intervention for process completion. These solutions use data, natural language processing, and machine learning to make inferences from written content and actually adjust the contract language to preferred positions in the same way human attorneys would have done for a given situation.

Most major players in the market can be measured against the above two capability continuums. Software that extracts data but cannot generate alternative or suggestive language will naturally be limited in the value they deliver in reducing legal effort for common contract review tasks. Ones that are capable of coherently rewriting contract language, on the other hand, frequently require some level of human-in-the-loop support, which is similarly limiting for obvious reasons. Of the solutions outlined below, only LexCheck has the capability to both automatically adjust the specific language of an agreement and nearly eliminate the need for human assistance. It provides a fully automated, detailed review that approaches attorney-quality marked-up responses, dramatically accelerating the contract review process.

Choosing the Right Contract Review Solution

ai-powered-review-graphicContract review is a standardized service designed to fit several business needs. Choosing the right option is going to depend on the overall goal of implementation. There are a few questions any organization should ask as they evaluate their options:

#1: Is the primary goal management or improvement?

Contract lifecycle management is different from contract negotiation and analysis. Lifecycle management often refers to the bulk management of a large number of contracts. Meanwhile, negotiation and analysis is designed to improve individual results and is forward looking. An organization worried about bulk management should lean towards an option that might only "read" contracts but can break them down into fields and store them in a database. Meanwhile, an organization looking to improve the outcome of contracts, in other words, how they are negotiated, will want to choose a solution that offers recommendations based on those readings.

#2: Is negotiation a critical component?

Some contract analysis software goes beyond simple redlining to provide information that helps companies negotiate better terms. This is especially useful when an organization has a negotiation playbook that they follow. In this case, the organization would do better to rely on a platform with either strong AI-enabled recommendation capabilities or a human-in-the-loop component.

#3: Are deadlines flexible?

The negotiation and contracting process can take time. For some companies, this is not a problem. They have room to negotiate and time to wait. In this case, a human-in-the-loop solution that takes a little longer might be fine. However, if deadlines are strict, full automation will likely provide a faster path to project completion.

#4: How experienced is the contract reviewer?

Someone who has drafted thousands of Non-Disclosure Agreements or Master Service Agreements is likely to make far fewer mistakes than an individual working on their first one or even their twentieth. A contract drafted by someone highly experienced in the industry might only require a basic markup. However, if the drafter isn't confident in their overall experience negotiating that type of document, a platform that offers recommendations would be far more suitable. Of course, no amount of experience will counteract unrealistic deadlines and sheer exhaustion that inevitably lead to unintentional negotiation errors.

#5: Are the contracts bespoke or standardized?

Contract analysis software runs on data. This can present a challenge when trying to deal with bespoke matters where little information is available. If working in a complex contracting environment, a human-in-the-loop solution that allows for specific customization based on a given subject is necessary. Nonetheless, commonly negotiated or boilerplate issues in those documents can still benefit from automatic contract negotiation, further enabling the attorney to focus on negotiating the truly bespoke parts of that contract.

Contract analysis software is invaluable for meeting challenges in the legal industry. It can act as a contract management database or as a negotiation aid based on the specific solution. The right fully automated and intuitive platform can help tackle these agreements while focusing the negotiations that surround them.

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LexCheck provides intuitive, fully automated contract analysis guidance that helps you improve all aspects of your agreements. Request a demo from us to see how we can improve your contract management.
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