AI-Powered Tools in Contract Analysis and Management

• Blockchain Council
• October 24, 2024

Artificial Intelligence (AI) is playing a growing role in various business processes, especially in contract management and analysis. As companies handle increasingly complicated and larger numbers of contracts, AI-based tools are helping streamline the entire contract process, reduce risks, and boost efficiency in handling these agreements.

The Growth of AI in Managing Contracts

Many businesses are now turning to AI for help with contract management. This shift is mainly due to the need to manage large data sets, analyze complex contract terms, and comply with ever-changing regulations. Companies that used to rely heavily on manual processes are now adopting AI to automate these tasks. In doing so, businesses save valuable time and reduce the chances of mistakes in drafting, reviewing, or ensuring compliance in contracts.

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Features of AI Tools for Contracts

Automated Review and Redlining

AI has significantly changed how contracts are reviewed, making the process quicker and smoother. Tools such as Malbek and Kira Systems can automatically pinpoint clauses that need changes, suggest alternative language, and mark deviations from standard terms. This greatly cuts down the time needed for manual review. For instance, Malbek’s AI-powered system speeds up negotiations by handling this process, allowing teams to focus more on strategic decisions instead of tedious edits.

Data Extraction and Clause Matching

AI excels in pulling out critical details from contracts, like obligations, deadlines, and payment terms. It can also compare contract clauses to maintain consistency. Tools like LinkSquares are designed to sift through hundreds of contracts and extract important information, which helps improve accuracy and save time on manual tasks. This feature is especially helpful for companies managing multiple contracts across various regions, where following different laws is essential.

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Monitoring Compliance

Keeping contracts compliant is another area where AI is proving highly effective. In industries with strict regulatory rules, ensuring that contracts meet local and international standards is vital. AI-based platforms such as Enlighta assist by constantly scanning for legal changes and updating contracts when necessary. This helps companies avoid fines while staying ahead of regulatory shifts that could impact their contracts.

Practical Uses of AI in Contract Management

Several businesses are already benefiting from using AI-powered contract tools:

Bloomberg Law

Bloomberg Law recently launched its Contract Assistant, which uses generative AI to quickly analyze large contracts and bring key information to the surface. This tool helps legal teams by providing insights into specific contract details like renewal dates and amendments. By simplifying these tasks, in-house legal teams can cut down the time and effort needed for contract reviews.

ContractPodAI

ContractPodAI is another popular platform that uses advanced natural language processing (NLP) to analyze contracts on a large scale. The tool can identify patterns in contract data, group similar clauses, and flag any that stand out. This allows businesses to gain deep insights into their contracts, which is particularly useful for those managing a large volume of agreements across different sectors. Quick and accurate adjustments can be made efficiently across many contracts.

Icertis

Icertis is another company that has added AI to its Contract Lifecycle Management (CLM) software. This helps businesses draft, review, and manage contracts more efficiently. By automating tasks like contract creation and matching clauses, Icertis ensures that contracts remain both compliant and optimized for a company’s specific needs.

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AI’s Role in Managing Risk

Managing risks is an essential part of analyzing contracts, and AI tools are quite effective in this area. They can quickly spot and classify risks based on contract clauses and terms, helping companies avoid potential problems before they escalate. For example, AI can identify unfavorable terms in third-party contracts and suggest modifications to reduce risk. This improves a company’s risk management efforts, reducing the chances of costly disputes or compliance issues.

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What’s Next for AI in Contract Management?

Looking forward, AI’s role in contract management is expected to grow even more. As these tools become better at understanding language and processing data, they may offer more advanced features, such as predictive analytics. This could allow companies to forecast contract outcomes, anticipate risks, and optimize terms to meet their business goals more effectively. Also, developments like blockchain integration could improve contract security and transparency, while smart contracts may automate tasks like payments and performance tracking.

Final Thoughts

AI-powered tools have become essential for modern businesses when it comes to managing contracts. From automating the review and redlining process to extracting clauses and ensuring compliance, these tools are helping to streamline what used to be manual, error-prone tasks. As AI technology continues to improve, the opportunities for further advancements in contract management are vast, making it a critical tool for companies wanting to stay competitive in an increasingly complicated legal environment.

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