AI Contracts: Not a Silver Bullet

By Concord Editorial   Aug 12, 2021
Using AI Contracts has some cons, including a need for human review and lack of customization.

Are AI contracts better? 

AI is an excellent tool that helps us work more efficiently. As a result, AI contracting software is on the rise. Today, software designed with artificial intelligence is used in everything from writing contracts, to predicting and suggesting your next steps in the process. Even so, AI is not fully developed enough to ensure all of your contract management needs are met. 

What’s more, the term is often used as an umbrella, but it doesn’t necessarily mean that all AI is created equal. Likewise, the technology is dependent upon the way it’s applied. 

How do you know when you’re getting what you’ve paid for? First, let’s take a look at what AI does well in AI-based contract management, and where there are gaps. 

Here’s how AI can best support the contract management process, where it’s unreliable, and what solution is most effective. 

What is an AI Contract? 

An AI contract is one in which a form of artificial intelligence helps manage, sort, and review contract data and content. 

Today, AI adds value in the following ways within the contract management process: 

  • To identify similar language or phrasing
  • Analyze and summarize legal clauses and data
  • Sort by certain terms, ranges, or clauses
  • To craft and draft legal contracts 
  • To predict contract management steps

On the market today, relays Harvard Business Review, AI in contract management is applied in many ways. 

Common AI Applications

Finds patterns and form insights – For instance, AI can make connections and form insights between relevant documents and new contracts. These connections can speed up the drafting and review process.

Provide legal review – Businesses can use AI to review contracts for legality based on company legal policies. It’s used to some degree in redlining, as a review assistant, or to highlight potential problems with wording or clauses. Companies can use these AI applications for high-volume, routine contracts to create more efficiency in the process.  

Evaluate risk and revenue potential increases  – Finally, AI can identify data that reveals where businesses can increase revenue, or avoid risk. 

These are just some of the more common ways companies today use AI. They are all extremely valuable means of reducing errors, and time in the contract management process. But how does AI actually work to facilitate these applications? 

A Quick-Read Guide on Better Contact Efficiency: Best Practices for Contract Efficiency

Three Types of AI in Contracting Software

You’ve probably seen a lot of mentions of AI, machine learning, and natural language processing (or NLP). However, contract management software companies use these terms throughout their marketing materials. So it’s good to understand what they all actually mean, and how the technology applies. 

First, there’s different schools of thought that categorize AI into either four types. Generally though, an even simpler way to think about AI is how it’s designed:  

  • Elementary or “AI-lite” 
  • Robust AI
  • Strong or “super” AI

For the most part, this is the way you can think about how contract software companies apply AI. 

To be sure, artificial intelligence is really the function of data sets working together to produce better results. This is where the AI crossroads occurs. 

There are certain sets of data that are a foundation of basic AI. For example, organizations apply basic AI with chatbots that offer only a narrow experience of conversation and choices. 

Machine Learning

Moving on from basic AI are data sets that create machine learning. Machine learning, per MIT, is a way of programming computers to respond with human logic and behavior. Programmers “train” computers with data sets. Over time, the software learns from more and more data, including content and user behavior patterns. 

These can include natural language processing (NLP), where the software understands and applies language naturally. You find machine learning in predictive text, suggestions for search, media, social media content, and ads. 

Finally, AI includes deep learning, or “super AI”.

At this point, most contract management businesses offer a mix of machine learning (which include natural language processing considerations), and basic AI. Software that finds revenue opportunities, identifies risk, reviews, and redlines legal contracts all have these applications. 

The Cons of AI Software

Considering AI contact software is much like finding a trustworthy, master mechanic. You’ll want a general understanding of the design team’s prowess in applying and training data. Where the wrong, or incomplete information is programmed, wrong results are produced. 

Basic AI works well enough to bsee stable and trustworthy. Reviewing contracts for certain clauses, content, or offering suggestions based on behavior is helpful. But machine learning is not always reliable, and that’s one of the biggest drawbacks of AI contract software. 

That can result in the following mishaps: 

  • Predictive suggestions that leave out risk considerations or revenue opportunities
  • Inaccurate or poorly connected legal analysis
  • Data interpretation based on an input error or incorrect data
  • Not enough data to train a program to continue to learn correctly

In actuality, AI contract software learns over time, but only time will show you exactly how well the program continues to learn. 

As a safeguard, astute programmers design machine learning software so that humans can also monitor algorithm (or data) updates. But even better at this point, is human oversight of strategy and insights. 

Automation Continues to Rule

AI automation designed with machine learning is still not wholly reliable. Automation as  a set of tasks performed to help you work more efficiently continues to be a safer option.  

Your contracts, and the information in them, are crucial and foundational to your business. Automating contracts speeds-up time in the contract lifecycle process, while not exposing your business to any unnecessary risk. 

Here’s how automation best supports any size business’ contract management: 

  • Deadline notification
  • E-signature notification 
  • Extracting important data
  • Easy, customizable search
  • Workflow set-up
  • Clause and data reporting
  • Bulk upload of any type or size of contracts
  • Bi-directional data updates with commonly used software
  • Secure, easy access for stakeholders

There’s great progress being made in AI. Still, automation keeps you in control while making the process much more efficient. Whether you have thousands of contracts to manage in renewals and signatures, or a handful, automation is a fail-safe to support your business now. 


You can hear directly (from humans) how Concord’s contract management software can integrate into your business’s digital space. Sign up for our weekly 1:1 short Q&A:  Concord Q&A

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