AI in contract management

Imagine a world where managing contracts is no longer challenging, and artificial intelligence automates repetitive tasks and helps obtain valuable insights effortlessly. Many think this is the future, but the truth is it is already a reality that AI in contract management can bring to your business.

Let’s explore how AI revolutionizes contract management and the benefits it offers while not forgetting how vital human input is.

Key takeaways

  • A business can use AI to automate and optimize contract management processes, providing cost savings, improved accuracy, and enhanced efficiency.
  • Sales, finance, supply chain, and legal teams can leverage AI to reduce costs by automating repetitive tasks and optimizing processes.
  • Human input is essential for accurate analysis of contracts, while regular updates are needed for AI systems to remain effective.

Natural Language Processing

AI’s ability to understand and analyze contract language can be attributed to Natural Language Processing (NLP). NLP algorithms can be trained to detect specific legal terms and important clauses.

This includes indemnification provisions, termination clauses, and payment terms. This allows for improved contract life cycle management.

AI-based contract management tools provide valuable features, such as:

  • Automatic alerts or email reminders, based on names and dates identified within a document,
  • Highlighting potential legal issues,
  • Automatically redlining revisions,
  • Proposing edits to enhance the contract’s efficacy.

These tools utilize AI to identify key terms and perform these tasks, making contract management more efficient and effective.

Machine Learning

Machine learning, a branch of Artificial Intelligence, enables computers to learn and make predictions or decisions without explicit programming, using data and algorithms. It uses algorithms use data to recognize patterns and trends, then apply those patterns and trends to make predictions or decisions, continuously learning and adjusting to new data.

Machine learning’s incorporation into contract management automates many tasks, including data extraction, workflow automation, risk management, and ensuring compliance. Additionally, machine learning can facilitate contract drafting, execution, review, and renewal, thus supporting the legal team’s work.

Despite these advantages, AI algorithms may still struggle with contextual understanding and require regular updates to remain current.

The role of AI in the contract management process

According to the Enterprise Legal Reputation (ELR) Report by Onit40% of legal teams spend half of their workday reviewing and handling contracts. While legal teams handle a large volume of contracting processes, almost every team is exposed to poor contract management.

Just think about how much time sales, procurement, finance, and other teams spend with contracts and legal documents. Poor contract management can cost up to 9% of a company’s total revenue.

As the volume of contracts and complexity of legal language grows, businesses have two options. Either they hire more employees or rely more on technologies like artificial intelligence to keep track of contracts, mitigate risk, and streamline their contract management processes.

AI in contract management

AI-powered contract management automates tasks, enhances efficiency, and generates insightful analytics, ultimately improving the contracting process. However, while AI offers numerous benefits, it cannot replace the invaluable human touch in contract management.

Businesses equipped with AI-driven tools form a powerful team capable of making informed decisions and executing contracts precisely. When businesses integrate AI into their contract management strategies, they can save time, lower the risk of human error, hire fewer lawyers, and focus on strategic legal tasks. Meanwhile, AI can handle the time-consuming administrative work.

Now, let’s dive into how AI-based contract management can transform a business’ processes.

Workflow automation

Workflow automation uses software programs to streamline and automate a sequence of tasks or activities without human involvement. Such automation boosts company productivity, decreases mistakes, and helps save time and resources.

AI-powered contract management software offers several advantages when it comes to workflow automation. It can reduce errors, accelerate contract creation and document assembly, and decrease contract preparation costs. AI can be employed in various tasks, such as automated contract review, approval, and automated renewal, ultimately simplifying the contracting process.

AI contract management tools incorporate user-friendly tools into contract management software, streamlining the management of contracts throughout their lifecycle. With AI-powered contract management software, employees dealing with contracts can be more efficient and effective in their roles.

Automating mundane tasks allows businesses to shift their focus to more complex and valuable work, thus minimizing the time dedicated to legal review. However, AI-powered workflow automation may face limitations in contextual comprehension and the need for regular updates.

Contract data extraction

Contract data extraction, which involves identifying and extracting critical data points from the contract text, is vital for efficient contract management. AI-based contract data extraction offers improved accuracy and time savings by automatically recognizing and classifying essential data.

AI-driven contract management tools can categorize contract types and parts of the contracts into various sections, including agreement, confidentiality, dispute resolution, IP rights, terms and conditions, and much more. So you can smoothly identify potentially risky terms and help you mitigate legal risks. 

However, there are challenges associated with utilizing AI for contract data extraction. For instance, the AI algorithms need updates and manual testing as AI-driven contract management might face difficulty comprehending the contract context.

Despite these challenges, AI can automate the process of extracting significant data from contracts, providing cost and time savings for legal departments and identifying revenue opportunities that may have gone unnoticed.

Risk management and compliance

In contract management risk analysis plays a pivotal role in contract management and compliance. Risk analysis involves identifying, assessing, and mitigating potential risks, including taking steps to mitigate risk while ensuring compliance with applicable laws and regulations.

Artificial intelligence assists in risk assessment and compliance by detecting possible issues, recommending modifications, and tracking regulatory changes.

AI provides a valuable asset for risk mitigation by recognizing potential problems, recommending modifications, and tracking regulatory modifications. Integrating AI into risk management and compliance allows organizations to proactively mitigate potential risks and maintain compliance with regulatory requirements and industry standards.

Improved contract lifecycle management with AI

Contract lifecycle management (CLM) involves monitoring and tracking all aspects of a contract from start to finish. The contracting process includes the following steps:

  • Drafting
  • Negotiation
  • Approval
  • Execution
  • Renewal

AI can facilitate the automation and optimization of contract processes, accurately identifying and extracting data points from contracts to ensure you comply with the important clauses and due dates. How can you use AI-based contract management in the course of these steps?

You can easily set reminders for contract expiration and renewal dates or locate essential or standard clauses you are looking for while reviewing contracts. Or you can just ask AI-based tools to perform legal review.

AI offers cost reductions, improved accuracy, and enhanced efficiency in contract management, reducing the time and effort needed to review and renew contracts.

Drafting Contracts

AI assists in drafting contracts by utilizing auto-redline functionality, which identifies contract clauses that can be replaced with preferred clauses, helping organizations better prepare contracts.

AI in contract management
Juro’s tool can speed up contract drafting and can be valuable for contract managers

Auto-redline functionality allows organizations to:

  • Prepare contracts efficiently by detecting and substituting clauses in crucial contracts with preferred ones,
  • Pave the way for confident contract reviews,
  • Ensure intelligent drafting of new contracts,
  • Draft contracts with high accuracy while minimizing errors and potential risks.

Utilizing this functionality can be a great benefit for a business to keep down wasted time on contract drafting.

Executing Contracts

AI technology facilitates contract execution by automating tasks, tracking progress, and recognizing delays.

AI monitors progress by tracking deadlines, flagging potential issues, and providing real-time updates. Additionally, AI uses data analysis to identify areas of inefficiency, thereby identifying bottlenecks in the contracting process.

Contract Review and Renewal

Automated contract review is a technology-assisted process utilizing software to review and analyze contracts. It employs artificial intelligence to extract relevant information, optimize processes, and detect patterns.

AI in contract managment (contract review)
Lawgeex’s platform can help you to find the perfect contract terms in specific contracts.

Both drafting and reviewing contracts are time-consuming tasks. It takes approximately 92 minutes to review one contract on average.

Automated contract review can help minimize the time, risk, and cost associated with manual review. It increases accuracy and detects concealed risks and potential areas for improvement.

Despite the potential limitations in contextual understanding, AI can streamline the contract review process, providing valuable insights into the performance of contracts and identifying areas for improvement.

Real-world applications of AI contract management software

AI has practical applications in contract management, such as streamlining contract managers’ processes, recognizing potential revenue sources, and normalizing contracts across industries. Automation of tedious tasks like document review, risk assessment, contract analysis, and due diligence through AI can significantly reduce the time and cost of a business.

In addition, AI can be employed to:

  • Assess contracts for potential revenue opportunities, including upsells, cross-sells, and discounts
  • Detect shared language and clauses across various industries, enabling the standardization of contracts
  • Reduce the time and cost associated with contract negotiations

Utilizing AI in these ways can significantly improve AI contract management and efficiency.

Legal department

Legal departments can benefit from AI by automating repetitive tasks, allowing them to optimize their time and increase efficiency. Processes such as document review, contract analysis, and data entry can be automated using AI, enabling legal professionals to focus on more complex tasks, such as legal strategies and risk management.

Legal departments leveraging AI allow organizations to efficiently identify and address potential risks, optimize processes, and reduce costs. This powerful combination of AI and human expertise can lead to more effective and efficient contract management.

Other teams

Any teams working with a large volume of contracts and legal documents can improve their efficiency by deploying AI in contract management. Sales, procurement, or finance teams can enjoy the benefits of AI when it comes to managing contracts.

Overcoming the limitations of AI in contract management

AI in contract management may face limitations, such as accurately interpreting context or subtleties of language, potentially resulting in errors or misunderstandings in contract analysis.

The potential future of contracts with AI lies in the following:

  • Highly routinized, standard-template-based contracts,
  • Adjusting contracts only where necessary to meet individual requirements,
  • Reducing the time spent on drafting, reviewing, and renewing contracts,
  • Improved risk mitigation.

By addressing the limitations of AI and harnessing its potential, organizations can optimize their contract management processes and achieve greater efficiency.

Contextual Understanding

While AI might have difficulty understanding context and nuances in contract language, human input remains indispensable for accurate analysis. Contextual understanding is crucial for contract management, as it enables contract managers to comprehend the intricacies and subtleties of contracts and the implications of certain clauses.

By incorporating human expertise alongside AI, organizations can ensure that contracts are accurately drafted and executed and that potential risks are identified and addressed. This blend of AI and human input allows for a more comprehensive and precise approach to contract management.

Frequent Updates

Regular updates are essential for AI-powered contract management systems to maintain their effectiveness and adapt to changing regulations and industry standards. Some potential drawbacks of AI regarding frequent updates include limited comprehension of context, high implementation and maintenance costs, and difficulty in providing logical explanations for AI forecasts.

To address these challenges, organizations can implement strategies such as incorporating AI into human decision-making processes, utilizing AI to automate tedious tasks, and utilizing AI to detect and address potential risks. Organizations can optimize their contract management processes and stay current with industry trends by ensuring frequent updates and maintaining a balance between AI and human expertise.


AI-powered contract management has revolutionized the legal field, automating tasks, enhancing efficiency, and providing valuable insights while requiring human input for optimal results. From drafting and executing contracts to risk management and compliance, AI offers a multitude of benefits for organizations.

By addressing the limitations of AI, harnessing its potential, and maintaining a balance between AI and human expertise, organizations can optimize their contract management processes and achieve greater efficiency.

Frequently Asked Questions

What are the AI tools for contracts?

Legaliser and Kira Systems are two powerful AI tools for contracts, allowing users to quickly upload contracts for review and analysis. Other platforms like LawGeex and ContractPodAi also offer AI contract review and analysis services.

What is the disadvantage of using AI in contract management?

AI tools can be limited in their ability to identify nuances and subtle differences in contracts, and they cannot provide legal advice, making them a potential disadvantage when using AI for contract management. Additionally, more time and creative thought must be taken when drafting contracts to consider potential events and address consequences in advance.

How is AI changing contracts?

AI is streamlining and accelerating contract review cycles, optimizing terms and conditions, standardizing clauses, flagging non-compliant ones, and surfacing new insights from contract data. It also enables companies to access critical variables like clauses, dates, and parties in their contracts more effectively by first training an algorithm on a set of historical data.

What is the role of AI in contract law?

AI can help streamline contract review processes, identify patterns and key terms, and reduce contract errors and inconsistencies. It can also extract important data points and flag deviations within a contract, simplifying contract analysis and management.

How does AI-powered contract management work?

AI-powered contract management leverages AI to automate tasks, boost efficiency, and generate insight, all within a streamlined contract management software.

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