Contract review automation technology examines and evaluates a contract’s important clauses using artificial intelligence (AI) and machine learning. And by doing this, the automation software streamlines the contract review procedure, making it simpler than utilizing a human approach to screen contracts for mistakes and potential threats.
What Is Contract Review Automation?
All lawyers nowadays possess the two core capabilities of reading and writing. And while reading a contract, the attorneys start by determining the contract— is it a lease agreement, an employment contract review, or a commercial contract administration? Doing this will assist the lawyer in deciding which terms to spend the most time on during the review process.
The lawyer will then repeatedly proceed to their flowchart of the contract review process to further specify which concerns to spend the most time scrutinizing. It is what we mean by a checklist for commercial contracts. The use of legal terms in contracts then makes this process even more difficult.
In addition, some clauses attorneys can almost always count on to include in a business agreement include the choice of law, competence, duration, termination, etc. However, the language incorporated in the clauses that describe these common phrases differs significantly from contract to contract, and that is the main issue that arises when one reads a contract.
Once they determine these key terms, the lawyer can begin the real work of contract review, i.e., underlining the changes she wants to make and adding remarks to the document so that the contracting party can comprehend their position. After the lawyer has completed their commercial contract checklist and fought through hours upon hours of legalese, it is only possible to reacquaint themselves with the contract.
So how can the above-described contract review procedure be automated? And how a legal contract can now be read and understood using technology. It is where contract review automation comes into the picture.
Automated contract review is a technologically assisted procedure in which a lawyer reviews and amends a contract using software in a short span than they would need to do so manually.
Also, to determine which side of the agreement the user is on, advanced machine learning algorithms and a natural language recognition engine first classify the document into the appropriate contract type (NDA, SaaS, Services, Lease, etc.), (e.g., buyer or seller, recipient or discloser contract).
The online software then scans and comprehends the words in that context to provide a detailed explanation of the contract’s provisions. Based on the document type, the AI poses and receives hundreds or even thousands of questions to develop a detailed image of the rights and duties incorporated into the contract.
Key Informations to Understand the Working of the Contract Review Automation System
Contract review automation software is made to extract data from contracts on a large scale, and this procedure is frequently compared to contract analysis. This agreement tool is specifically trained to identify and extract fundamental data from contracts, and the data is then summarized to provide contract owners with practical insights.
For instance, most contract review automation software is programmed to spot discrepancies between the language of a contract and accepted policies and agreements.
Contract managers can change any difficult contract prerequisites by highlighting these anomalies before a contract is sent out for discussion and signing. Besides, the software uses artificial intelligence (AI) to identify these trends and variations.
AI aims to release technology—such as contract review software—from the need for ongoing programming by enabling it to learn and advance. Instead of learning through coding, AI lets the software do it. You’ll often discover that contract review softwares have been “trained” to spot patterns in datasets and carry out specific jobs.
Typically, the software examines thousands of agreements throughout this instructional process. The exposure teaches the software to recognize and react to contract patterns, and the AI contract review software keeps picking up on these patterns.
What are the Benefits of Contract Review Automation?
- Helpful in Determining Contract Risk
Using contract review automation software can allow legal and commercial departments to accurately manage contract risk, which is one of the largest advantages. Contract review software can highlight errors and imprecise or out-of-date language.
By performing these rigorous audits, you can avoid future unpleasant surprises and ensure that your contracts are as compliant as possible.
- Quicker Review Processes
By using automated contract review software, lawyers can review contracts more quickly and efficiently rather than spend a lot of time reviewing each clause carefully. Legal teams can reduce the time contracts spend in the review stage by employing a high-quality contract review platform, which helps sales close deals more quickly.
Additionally, it enables legal teams to focus on higher-value tasks and reduce the time they waste on contract administration. Essentially, contract review technology can improve the efficiency of the contracting process and the legal function by decreasing the amount of time that various stakeholders must spend examining standardized contracts.
- Limitations of Contract Review Automation Software
While contract review automation has many benefits, it is not free from drawbacks. Here are a few drawbacks of contract review automation software.
- Useful During the Evaluation Stage
The fact that contract review automation tools are only useful during the review stage of the contract procedure and less so during the other phases of the contract lifecycle may be their major drawback. For instance, teams using contract review tools will still need to devote a significant amount of time to creating, reviewing, and signing contracts.
Faster review procedures will only be effective if these bottlenecks continue in other phases of the contract cycle. It is because, in a business experiencing rapid expansion, these bottlenecks can still stymie and delay deals from closing.
- Worries Regarding Accuracy
Not all contract review automation systems are created equal, even though certain studies have shown that AI software can be more effective than human review. While some platforms are still in their infancy, all are constantly learning.
It indicates that lawyers should exercise caution when eliminating human involvement in the contract review process. It is especially valid for intricate and high-value agreements.
- Effective Options Available
Even while contract review software is available to assist you in reading and comprehending your agreements, you wouldn’t require it if your contracts were created as structured data.
Your contracts are created as unstructured information when you generate them in Word or a PDF and save them. Your contracts are static files, making browsing through and challenging them difficult.
Conclusion
If you are interested in making it easy to search through your contracts for contract review, LawInsider’s contract repository makes it easy for you to upload your documents and find the hidden contracts among them. From 100 to 100,000 contracts, there are no limits and no hidden fees for the amount of documents that you can organize. With secure access and encryption for all files, you can be sure that your contracts stay safe and private.
References:
- https://contractbook.com/blog/contract-automation-benefits
- https://www.docuvantage.com/blog/contract-management/bid/74055/five-reasons-you-should-automate-your-contract-review-process
- https://juro.com/learn/contract-management-vs-contract-automation
- https://www.infosysbpm.com/blogs/sourcing-procurement/benefits-of-automated-contract-analysis.html
- https://www.app4legal.com/benefits-of-embracing-legal-contract-automation-ii-contract-management-made-easy/
Tags: Contract, Automation, Contract Review