When it comes to implementing new technology, it’s often tempting to ignore the practical applications of the technology or determine if it actually addresses relevant challenges and focus only on the bells and whistles. Rather than asking, “What is our AI strategy?”, legal departments evaluating the potential upside of AI-based tools should consider the core challenges their legal teams face when managing the lifecycle of corporate contracts.
There are certainly plenty of ways that AI tools can benefit your contract management process, especially for businesses dealing with a large volume of contracts, but it’s always best to evaluate your challenges and identify areas of opportunity before investing too much time into new technology.
For organizations with a high volume of contracts, they will want to consider tools that provide expedited contract review/pre-execution review, which automates routine review of contracts prior to finalizing a contract (pre- signature). Legal teams will also benefit from post-execution review technology, which offers visibility into contract renewals and other terms that need to be continually monitored.
AI-based contract management software automatically identifies key variables such as dates, parties, value, etc. and draws on specific criteria to ensure contract consistency through a search of similar terms within contracts and reviews similar contracts to ensure company standards are upheld. With visibility into variations across contracts, organizations can standardize provisions and more quickly address potentially non-compliant instances or other unfavorable terms. Post-execution review ensures that your legal team doesn’t miss critical deadlines or incur problems with deliverables and other contract terms, like payments.
Not knowing what is in your company’s contracts at all times poses great risk. For example, consider a commercial property lease with a giant escalation clause after a certain date. This means the company’s landlord can increase the rate of your rent on a specific timeline. Another risk around contracts is around provisions or stipulations that, if not met, can prevent you from receiving payment from customers. Without post-contract management, it’s impossible to manage what you don’t know. Post-review is especially valuable in mergers and acquisitions. For example, if a company gets sold, some of its contracts can be voided if the company goes through a change in control. Those need to be called out and potentially renegotiated for the deal to go through.
ContractWorks’ latest Ebook, How AI Contract Management Improves the Value of the Legal Department, takes a deep dive into how artificial intelligence is actually impacting corporate legal teams, the rise of legal technology, and a look at what is to come. Download your complimentary copy of the Ebook to read more about how contract management with AI impacts legal departments.