Beast to Beauty: How AI is transforming contract review

I learned to drive on a lumbering giant, my family’s 1991 Chevy Suburban. This behemoth, affectionately called “The Beast”, lives on, a monument to another time. Still, it doesn’t hit the road much now, because it’s expensive to operate, inefficient, and lacks up-to-date safety features. 

Operating The Beast today requires a small fortune, as it guzzles a gallon of gas every 10 miles. And while ideal for epic excursions, its slow pace and enormous size makes daily commuting an unwieldy task.

Perhaps most critically, however, is the safety aspect. While its bulk provides an illusion of security, it lacks all of the standard safety features we’ve come to expect in modern cars. No airbags, no cameras, no collision detection system, no dynamic cruise control; it’s a time-capsule from an era that couldn’t do better.

Today’s contract review process feels eerily similar to this old Suburban. It’s a beast in its own right. It’s costly, inefficient, and fraught with risks. Not to mention, it’s a time-consuming process, mostly manual, and it distracts from other critical legal responsibilities. It’s like driving an old Suburban in a world full of modern cars: sure, you can do it, but why would you want to?

Yet we can’t just stop contracting! Contracts are the lifeblood of any business -  and legal departments have to review and manage contracts to help a business grow. The traditional approach to solving the contract review problem has been to hire more people (expensive), delay or triage the work (inefficient), or go faster (unsafe). 

When we imagine the future of contract review, it doesn’t involve having smart, talented people read contracts line by line to spot legal issues, and then hunt through prior contracts for useful language. Instead we see AI finding and fixing most of the legal issues, in a way that’s consistent, faster, and more scalable. In this future, legal teams can focus on solving issues that are unique to the deal and the business. 

The right AI unlocks the solution for contract review

There are 5 steps in the “value chain” of how legal teams review third-party contracts. 

The end goal of this work, for the business, is reaching agreement with the other party, and doing so quickly, cost-effectively, and with risk management appropriate to the deal.

In recent years we’ve seen improvement in parts of the value chain. Tech has enabled legal departments to automate workflows, e-sign, and store large volumes of contracts. But tech has not yet made significant inroads into the substantive legal work of contract review.

Yet substantive legal review is at the heart of achieving business goals. For many legal departments, the biggest opportunities to increase contracting speed, reduce risk, and manage cost depend on solving substantive legal review.

Review has remained the last problem to be solved because it’s the hardest problem. It requires understanding contract language word-by-word, sentence-by-sentence. But AI is unlocking this – and we are now entering a period of increasing automation of substantive contract review. 

Today, in LegalOn, for example, AI can automatically flag thousands of deeply substantive legal issues in contracts and fix them with one click, reducing risk and enabling legal departments to focus on higher-level tasks.

As I wrote in a post several weeks ago, we are still in the early innings of AI automation in legal. In that article, I developed a framework for understanding the levels of AI autonomy in legal work drawing from the evolution of self-driving cars. Currently, we are at Level 3: Conditional Assistance, where AI can assist with certain aspects of contract review and drafting, but human review and oversight are still necessary, particularly in situations that involve complexity or nuance. 

Contract Review AI Requires 4 Capabilities

The right AI for contract review will strengthen contracts, reduce risk, and elevate lawyers to higher-level decisions and tasks. This requires AI with 4 capabilities: 

• AI that is purpose built for pre-signature review. Finding contract issues demands a deeply nuanced ability to spot risks, and surgical precision in making changes and edits. Software that was designed to spot clauses or extract business terms are not sufficient. 
• AI that is managed and enriched by lawyers to help guide on why risks matter and provide insights on how to manage them.
• AI that is easy to tune to your organization - freeing legal to make substantive decisions that matter, set risk preferences, and oversee quality. 
• AI that is ready to use on Day 1 and does not require training or playbooks from the user. You wouldn’t buy a car that you can’t drive off the lot - and most organizations shouldn’t buy AI that requires training before it’s usable.

At LegalOn, we’ve been doing this in Japan for 6 years now, with over 3,000 companies and law firms as customers. It’s from that experience that we’ve learned these lessons. Customers choose us because they get technology that works on Day 1, and they use us because we’ve combined AI with current and market standard practical guidance. Our AI finds issues, as trained by our in-house legal team, and our AI fixes issues. Users have access to practice notes, they oversee the review, actively engage in making judgment calls, and handle issues unique to the deal. Our customers report 40% time savings and 90% say LegalOn improves the quality of legal work.

Today I drive a modern car, built in the last 5 years. The advanced features in it – airbags, lane departure warnings, cameras, adaptive cruise control, assisted braking – make me feel so much safer and less stressed than when driving The Beast. The difference is night and day. I look back and think, how did my parents ever let me drive The Beast? When you use AI for contract review today, you’ll experience the same feeling, and think, how did I let myself ever do things the old way? 

We encourage you to try LegalOn for yourself, for free. Sign up today for a free trial to connect with our team and experience the best AI contract review software available today.