AI Contract Review, Explained

AI is revolutionizing the way we work, and one of the biggest changes involves how organizations review contracts. 

AI contract review helps you scan contracts, extract key terms, flag potential problems, and surface insights. Instead of manually poring through densely-worded documents, you can train AI to help with the work that might take a human hours or even days. 

This is especially valuable for businesses handling large volumes of contracts, such as real estate firms, financial institutions, and legal teams. But AI can be equally beneficial to small business owners, real estate professionals managing lease agreements and sales contracts, local banks working on loan agreements, and sales and procurement teams working on vendor and supplier contracts. 

Legal departments are among the biggest users of AI contract review. A survey by ALM and Bloomberg Law found that contract-related tasks represent at least half of the daily work of more than four in ten (43 percent) corporate counsels. That means that in the course of a year, each of those attorneys is devoting 120 days to dealing with contracts. 

Procurement, sales, HR and finance also recognize the benefit of AI. By 2027, half of procurement contract management will be AI-enabled, Gartner predicts.

Benefits of using AI contract review

A recent Deloitte study found that 88% of legal teams have already experienced gains in productivity and efficiency, with more than three-quarters (78%) reporting reviewing contracts as one of the areas where AI has had the greatest impact.

Speed is the most obvious benefit, but not the only one. 

Here are five ways you can benefit from using AI contract review software:

1. Improved accuracy and consistency. AI reduces the risk of human errors, such as missing critical clauses or misinterpreting legal language. Unlike humans, AI doesn’t suffer from fatigue and can apply the same level of scrutiny every time.

2. Cost savings. By automating routine reviews, AI can reduce legal costs, which is particularly impactful for startups and small businesses that may not have the budget for a full legal team.

3. Risk mitigation and compliance issues. AI can flag terms that potentially fail to comply with industry and government regulations, and check if contracts align with company standards and policies. Maintaining consistency across agreements reduces the likelihood of future disputes.

4. Faster negotiation and redlining. AI can generate plain-language summaries of complex legal language, highlight unfavorable terms and suggest edits. Negotiations move faster and contract turnaround time is accelerated.

5. Better collaboration. AI-powered contract management platforms allow disparate teams – legal, sales, and procurement, for example – to collaborate in real-time by setting up custom workflows. This reduces back-and-forth email exchanges, which speeds up approvals and contract turnaround time.

Tips for deploying and using AI to review contracts

Start by establishing best practices, guidelines, and policies, just as you would with any new software tool. Your legal team should develop a company-wide policy about where people can use AI, and enlist the HR team to communicate these practices. Training and education play a huge role – employees must learn how to use the new tools but also understand issues around data privacy and security. 

Having a top-down company-wide policy ensures that AI tools don’t just creep into the organization on an ad hoc basis. It also makes it easier to decide whether new tools fit into the guidelines you’ve established..

Here are five things to consider when deploying and using AI contract review software.. 

1. Define clear goals for ROI. Identify specific problems that AI can solve, align AI initiatives with business outcomes, and set measurable KPIs to track performance. Don’t just use “AI for AI’s sake.” Measure impact continuously.

2. Start small and scale gradually. Begin with pilot projects, gather feedback, refine AI models, and then scale up. Look for easy use cases: simple tasks that can be automated quickly. 

3. Watch out for hallucinations. AI makes mistakes – plain and simple. It’s an imperfect technology, and you can’t rely on it to make big decisions. This means humans still need to check the work done by AI. The goal is not to replace people, but to help them get more work done with less effort – the workplace equivalent of zipping across town on an eBike rather than walking.

4. Keep humans in the loop. Employees can help AI systems get better over time, learning how to identify issues and anomalies. Some can be re-skilled to learn how to train and refine AI models. 

5. Integrate AI with other systems. AI gets even more powerful when it’s used to connect disparate functions and create automated workflows. Typical integrations include document management systems, CRM software, and legal databases.

Docusign AI-Assisted Review

Docusign AI-Assisted Review enables organizations to turn contracts around faster by empowering teams to streamline processes, reduce bottlenecks, and maintain compliance. Docusign AI-Assisted Review leverages the power of generative AI in a Microsoft Word add-in that helps users:

• Review and suggest: Review contracts against your organization’s pre-approved playbooks, identify places where language doesn’t align with your standards, and get markup suggestions to bring terms back into compliance.

• Generate content: Describe in plain language the markups or new language you’d like to insert and let AI generate it for you. 

• Answer questions: Ask questions about the contents of your contract and get quick answers thanks to AI, along with links to relevant source text to confirm for yourself.

See how Docusign AI-Assisted Review enabled the legal team at a global retailer to handle a 30% spike in contract volume without adding headcount or sacrificing accuracy.

Learn more about Docusign AI-Assisted Review.