How Artificial Intelligence Contract Analysis Is Changing Corporate Legal Departments

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The members of corporate legal departments work optimally when they are engaged in valuable and meaningful work. Employees want to feel appreciated, recognized, and presented with opportunities for personal growth. In other words, they want to spend more time assessing risk, shaping strategies, and solving complex legal conundrums and less time buried in mundane, repetitive, and simplistic legal work. If they don’t, they’ll leave. By way of example, law firms lost nearly a quarter of their associates last year, and studies show that salaries are not the main culprits anymore.

Within the past five years, artificial intelligence (AI) contract analysis has emerged as a logical solution in this regard. The technology has advanced enough to meet the needs of legal departments feeling the squeeze of shrinking labor pools, heavy document volumes, and rising client expectations.

How Artificial Intelligence Contract Analysis Reshapes Legal Work  

Artificial intelligence contract analysis can help legal teams overcome a number of department-specific challenges. AI can review an agreement in less than five minutes as opposed to 1-2 weeks that it may take an attorney to do, for example. It can even review and assess third-party changes to standard forms—providing a risk assessment of those changes per the company’s AI Digital Playbook

Companies leveraging AI-powered contract analysis software are seeing increases in productivity and efficiency as well. The catalyst of this transformation is how AI improves contract management processes to free up personnel while also improving the quality and consistency of contract drafts. Below are three ways AI contract analysis is reshaping legal work today:  

    • Attorneys are free to engage in more value-based work. While basic software for creating and reviewing document templates has existed for years, the next generation of legal software can now compare clauses to similar past agreements and flag sections of contracts that deviate from firm-specified criteria. It can also incorporate company best practices with greater speed and efficiency, enabling attorneys to focus on their roles as counsels and negotiators—not as contract reviewers.
    • Contracts are more consistent. AI can effortlessly scan a wide range of agreements to maintain consistent terms that are in line with the corporate legal playbook, ensuring unfavorable positions are remedied as soon as possible. And while human reviewers are prone to fatigue and inexperience, AI software is not.
    • Work is streamlined. In the past, resources were poured into training new attorneys for company playbook standards, compiling checklists, and comprehensive hours of multi-level review. While human oversight is still required for high-level escalations, AI can reduce the number of escalations. Attorneys spend more of their time on value-adding work. Legal teams inherently become more agile and modernized.

How Does AI Contract Review Work?

What makes artificial intelligence contract analysis truly unique is its ability to conform to predetermined rules and guidelines. This capability is possible owing to advances in:

    • Natural language processing (NLP): the ability to categorize data and process language.
    • Rule-based learning: the ability to find language that fits into specified parameters.
    • Machine learning: the ability to study data, apply provisions, and group outliers.
    • Deep learning: the ability to develop systems to understand parts comprising data.

Once a contract draft is uploaded to an AI contract review platform, the following processes occur in a matter of minutes:

    • The system scans and fully redlines the document, leveraging a previously developed playbook or set of configured machine learning rules—marking errors and omissions, flagging deviant or potentially risky clauses, and inserting contextual notes to allow for more informed decision-making. 
    • Changes can be applied automatically at the click of a button, or escalated to an attorney for more in-depth course correction. 
    • As the AI scans and “remembers” more agreements, the algorithm becomes better at recognizing patterns and similarities between contract drafts.

AI Contract Analysis: Only One Part of the Solution

Artificial intelligence contract analysis often results in faster, better, and more accurate results. But it’s also important to understand that AI cannot do everything by itself; attorney involvement is still necessary for handling complex negotiations in line with company strategy. 

How departments incorporate AI depends on their goals. Presently, the greatest value can be seen in teams that handle large volumes of contracts, as AI reduces time spent on review. As the technology continues to develop further, AI will become a critical part of how all legal teams conduct business.

LexCheck is an award-winning AI-powered contract analysis solution that’s changing how corporate legal departments approach contract review. Contact us at sales@lexcheck.com or schedule a demo to experience the technology first-hand.

gary-sanghaGary Sangha | Founder & CEO

Gary Sangha is the Founder and CEO LexCheck. He's a serial entrepreneur and an academic. Gary previously founded Intelligize, a legal technology company that was acquired by LexisNexis. He's affiliated with the University of Pennsylvania and Stanford University and started his career as an attorney at Shearman & Sterling and White & Case.