What is AI Contract Review Software and Why You Need It
In today’s fast-paced business environment, the traditional contract review process can feel like a significant bottleneck. The extensive back-and-forth, the risk of human error, and the time it takes to go through legal verbiage—these factors make the process cumbersome and inefficient.
In fact, the average in-house attorney spends 4.5 hours every day manually reviewing and managing contracts, according to the 2023 Enterprise Legal Management Report. One in four in the United States spends six to eight hours daily on contracts. However, despite all the time spent, of 100 corporate legal departments surveyed by Gartner, 40% admit that their contract review process is too slow.
Under pressure to turn contracts around faster, bring more work in-house, and operate under budget constraints, legal departments want to use technology to improve contract review. According to the ACC’s 2023 Legal Technology Report, three in four in-house professionals said that they want to leverage legal software more effectively in handling contracts.
Historically, the only contract technology available was traditional Contract Lifecycle Management software, a category of tool plagued by widespread dissatisfaction. For many, CLMs cost too much, are overly complex, take too long to implement, and don’t ultimately solve the most pressing day-to-day work of in-house legal teams – contract review.
But not anymore.
Purpose-built pre-signature AI contract review technology is transforming the way legal teams review contracts.
What is AI contract review software?
AI contract review software assists in examining, analyzing, and reviewing contracts before signature. Instead of manually sifting through pages of contractual documents, this software can quickly identify critical clauses and potential risks and suggest revisions. Its key benefits include:
Efficiency: by drastically reducing the time required to review and finalize contracts.
Accuracy: through reducing human errors by providing consistent and automated reviews.
Scalability: it can handle large volumes of contracts without additional resource demands.
Cost savings: reducing the need for extensive manual review leads to financial savings in the long run.
Why Your Organization Needs Contract Review Software
Contract Review software, particularly platforms that responsibly integrate AI into their products, can be a powerful force multiplier for legal teams of all sizes. As in-house teams face limited, if not declining, legal budgets while the scope and complexity of their work increases, they need powerful technology to help.
Here are some key areas where AI-powered contract review tools can be particularly effective:
Maximizing the Capacity of Your Current Team
- Time constraints: Manual reviews are time-consuming. By using contract review software, these reviews can be conducted more swiftly.
- Optimizing time: The time your team spends on reviewing contracts could be better spent on strategic tasks. Using software allows for better allocation of your and your team’s time.
- Training costs: Continually training your team on the nuances of new contracts or changing regulations can drain resources. Contract review software can be updated to reflect these changes, ensuring consistent and up-to-date reviews.
Cost and Time Savings with AI
- Maximizing Review Quality with Limited Time: While human reviewers may be able to conduct impeccable reviews with unlimited time, the reality is that time is limited. AI contract review bridges this gap by rapidly analyzing and pinpointing potential issues, ensuring both high-quality and efficient reviews. In essence, the solution to ensuring top-notch accuracy in the time you have is software.
- Return on investment (ROI): AI + expert legal guidance frees up time and monetary savings—combined with reduced human error—which offers a compelling ROI for businesses.
Scaling and Growing Your Organization
- Future-proofing: As your organization grows, so will your contract workload. Implementing software ensures you are prepared for this surge in volume.
- Volume matters: The more contracts your organization processes, the higher the chances of oversight or errors slipping through. Manual reviews can become overwhelming and error-prone as the volume increases. While your contracts are growing, your time isn’t.
- Complexity is key: Not all contracts are made equal. Some have multi-layered clauses and terms that can easily be misunderstood or misinterpreted. Software can help streamline the understanding and categorization of these complexities.
Not a CLM
Pre-signature contract review software is a focused-solution distinct from Contract Lifecycle Management (CLM) software. There are dozens of CLM companies–old and new–that build software to manage contract workflows and obligations after signature. This technology emerged decades ago and is helpful to streamline contract processes across an enterprise.
The challenge with many end-to-end CLMs is that they often require significant time and resources to implement, but after all of that effort, do little to alleviate the painstaking work of contract review. More recently, some CLM vendors have begun to market contract review tools. However, it is important to actually examine some of these features and investigate their functionality. Are these tools able to detect and revise contract risks, or do they require users to do all of the AI training and prompt-engineering on their own?
Often, being a jack of all trades makes it easy to become a master of none. This is especially true in the realm of contract review, which requires deep legal expertise, the ability to detect countless risks that vary based on the contract type and your position, and the precision to insert markups tailored to the agreement being negotiated. Choosing software that falls short of these criteria can lead to investing in a tool that diminishes your team’s time instead of amplifying it.
Navigating a noisy market
Given the flurry of companies jumping into the fray, the market for meaningful and effective contract review software has become muddled and noisy.
That’s why we created this buyer’s guide to help contract teams learn more about purpose-built AI contract review software, understand what to look for, and access checklists and insights to judge the market.
