Many corporate legal departments use AI for research, litigation strategy, dispute resolution modeling, and offering basic help online. Any legal team can benefit from the use of AI in legal services, especially for contract review and negotiation processes. With large corporations handling, on average, 350 contracts each week, there is an increasingly urgent need to improve resource efficiency through digital transformation.
How Are Legal Professionals Using AI for Contracting?
The 2021 EY Law Survey found that 92% of organizations are looking to change the way contracting is handled. Corporate legal departments’ most widely used tools include e-signature (84%) and contract process management (51%) software, but AI-based solutions that redline, review, and negotiate agreements are a close third—presently used by 42% of businesses.
Businesses that have not yet adopted AI technology cite the following reasons:
- It can be difficult to change people’s way of working (58%)
- Talent with process management expertise is needed to chart the path forward (34%)
- There is no time to oversee the transformation (24%).
As a result, half of all organizations have co-sourced some of their contracting processes to alternative legal service providers (ALSPs) to “test drive” the use of AI in legal services before redirecting the technology in-house. According to the survey, 41% of large corporations and 27% of small corporations have plans to re-engineer the contracting process in-house over the coming year.
How Will AI Digital Transformation Affect Legal Practice?
Corporate legal departments have specified a number of challenges that make a compelling case for using AI in legal services. Here’s what they said about their contracting processes, as noted in the EY Law Survey:
- 75% of organizations do not have preapproved fallback terms.
- 71% of contracts are not monitored for deviances from standard terms.
- 69% of businesses do not use preapproved templates consistently.
- 69% of contracts do not follow a corporate legal playbook or guidance document.
The consequence of these inefficiencies translates to a loss of revenue for over 50% of the businesses surveyed. As driving revenue and growth are top priorities, business leaders have set their sights on using AI to save 30% or more on contracting costs—reducing risky errors, closing deals faster, and creating more streamlined workflows all around.
Understanding and filling the gaps in a contracting technology stack can greatly improve operations, not to mention employee morale. Considering that 96% of organizations face challenges when contracting talent, giving junior attorneys the opportunity to serve in a strategic role rather than overburdening them with routine contract reviews is a great way to keep the best employees more engaged with their work.
What are the Applications of AI in Contract Law?
The application of AI in contract review and negotiation can be seen with leading legal tech providers like LexCheck—an AI-powered contract review and negotiation solution developed by attorneys and AI linguistics researchers from Stanford.
Seamlessly integrable with existing IT infrastructures, LexCheck enables corporate legal departments to:
- Fully automate preliminary contract review work—completing it in five minutes, not five days
- Compare drafts to an AI Digital Playbook and achieve standards compliance at scale.
- Receive attorney-quality redlining and guidance for nearly all types of business contracts
- Mitigate human error and risk for the company
- Automatically contextualize adjusted clause insertions with numbered references that can help train staff on the company’s standard negotiating positions
- Accelerate contract review and execution processes
- Reduce junior-level attorney training costs
- Determine which contracts require escalation to senior legal staff
Change rarely comes easily, but an AI-powered partner like LexCheck can help kickstart your department’s digital transformation. LexCheck’s AI works smarter over time as you input more data and apply attorney guidance. With the creation of an AI Digital Playbook and a dozen contract samples, you can form the basis for an automated, streamlined contract review process that harnesses the power of machine learning.
Gary Sangha | Founder & CEO
Gary Sangha is the Founder and CEO LexCheck. He's a serial entrepreneur and an academic. Gary previously founded Intelligize, a legal technology company that was acquired by LexisNexis. He's affiliated with the University of Pennsylvania and Stanford University and started his career as an attorney at Shearman & Sterling and White & Case.