How AI is Revolutionizing Contract Management

Establishing any business, big or small, involves signing contracts. 40% of the value handled by the legal departments within firms, contracts are legal documents signed by parties that define their duties.

Contract Lifecycle Management

Contract lifecycle management streamlines contract processes at key stages. The stages are request, authoring, creation, review, approval, execution, performance, and expiry. As businesses grow, contract lifecycle management becomes difficult to manage manually, as keeping track of numerous contracts is cumbersome. This is because of a lack of uniformity in contracts, like varying renewal and expiry dates, making it difficult to update and organize. To address this issue, contract management software was developed to help legal teams manage contracts more effectively. It provides greater visibility into spending, streamlines the process, and reduces administrative costs.

State-of-the-art Contract Lifecycle Management Software

A majority of big firms today have become part of the digital economy, leading them to manage big data and thus sign more contracts for smoother operations. Even the contract lifecycle management software has adapted to include Artificial Intelligence (AI) to stay up to date. But it is not just contract lifecycle management where AI and Machine Learning (ML) are changing the game; it is the entire legal field. Provakil is the modern-day legal operations management suite for businesses that provide legal services, leveraging AI and ML. Like contracts, litigation, compliance, and intellectual property, all legal operations are provided on a single integrated SaaS platform.

How AI is changing Contract Management

With AI-powered contract management software, contract data can be easily extracted, simplifying the process. Contracts can now be renewed more swiftly; disputes can be decreased, and larger volumes of contracts can be negotiated. Within the legal industry, the AI software market is expected to register a CAGR of over 28% by 2024. According to IBM Corporation, in North America, lawyers reduced the time spent analyzing trademark search results by nearly 50%. There has been an overall increase in efficiency and productivity through the adoption of AI.

1. Modified Tools
   Contract lifecycle management software that uses AI can identify and classify contract types and clauses through pattern recognition based on how the document is drafted. Each contract can be sorted by type, based on the clause content. Documents can be scanned, presenting the data by clause type and highlighting all important information for easier understanding. This is possible by training the AI software on large amounts of contracts. Using firm-specific data, AI can then sift through volumes of contracts and flag the required individual contracts.
   
   Unlike a team of lawyers, who will take time to read through contracts, AI can do this quickly, including analyzing contracts in various formats and providing analytics on the extracted data. This will also be error-free, and even if an error occurs, the required changes can be made in the software to prevent it in the future.
   
2. Maintaining Consistency
   With AI, firms can keep their terms and usage consistent throughout all their contracts. If any information must be kept confidential, such software can ensure it remains so in every contract created. There are cases where variations are introduced into the contracts, either by the vendors or by the organization itself. It is difficult to manage these variations, but AI can record and standardize them.
   
   Risk analysis is an important factor in contracts that should have zero errors. Contract management software with AI can quickly assess these risks, thereby reducing errors introduced during drafting and review.
   
3. Lesser Resources
   Previously, lawyers had to be skilled in drafting, negotiating, and managing contracts, including reviewing them. Firms required lawyers to ingeniously include certain clauses that favored the organization, which required lawyers and contracting professionals to spend hours.
   
   However, with AI, both simple and complex contracts can be easily drafted according to its requirements. Thus, lawyers can use their time to provide counsel rather than reviewing documents.
   
   AI can be used to automatically create contracts based on the firm's basic requirements. Using natural language processing, AI will interpret the context of the request and draft a contract with the appropriate clauses.

As more contracts are added to the AI-powered contract lifecycle management software database, the system can continue to improve further. In India, where contracts are made in multiple languages, AI can identify and generate documents in the required language without human intervention.

Conclusion

With the evolving legal industry and technology, AI is a necessary tool for creating error-free and varied contracts. Resources like time, money, and workforce can be saved by opting for such software.

This article gives a brief description of contract lifecycle management and how software is evolving. It then provides a detailed explanation of how AI is revolutionizing contract management.