Believe it or not, AI contract workflow has cut down contracting lifecycle time by a whopping 68%. That’s hours, even days shaved off from draining your resources on routine admin tasks (drafting, reviewing, negotiating).
And here’s the thing, artificial intelligence isn’t a new innovation, it was there all along. However, AI as an end-to-end contract management solution is still a fresh concept that’s growing faster every year. Take Signeasy for example. Our AI assistance can help you review contracts, summarize key points, and answer tricky clause-related questions in seconds.
But, since you’re here reading this post, chances are some questions about AI contracts still bugging you right now
- What exactly is an AI contract?
- Can you really trust it with high-stakes tasks like payments, sales deals, or legal ops?
- Is AI genuinely changing contractual workflows, or is it just a market hype?
Well, we encourage a curious mind, and have answered all the questions you may have about AI contracts in this guide. So, let’s start with the definition first.
What is contract AI?
Contract AI is a process that uses large language models (LLMs), a subset of generative AI to automate repetitive contract workflow, analytical functions, and knowledge extraction to optimize the contract management processes. Simply put, contract AI is trained to learn from vast datasets, to flag risky clauses, suggest improvements, generate drafts, and extract key details like governing law or effective dates.
Here are some use cases of AI contract management:
- AI can generate contracts by populating pre-defined templates with relevant details based on inputs like deal specifics or legal requirements.
- Suggest clauses tailored to specific industries, jurisdictions, or risk profiles.
- Can rephrase complex legal language into simpler, more understandable terms.
- Flag potentially risky clauses or non-standard language, highlighting areas that need attention.
- Can ensure contracts adhere to internal policies, legal standards, and regulatory requirements.
- Can extract critical terms like payment schedules, termination clauses, or confidentiality agreements for easy access.
How to use AI in contract workflow management?
Companies that largely deal with contract management are seeing AI as one of the best practices for contract management. They’re using it to extract metadata (44% of them), pull out important clauses (39%), create contract summaries (24%), and enhance contract analytics and automation (38%).
These numbers show a trend where organizations are slowly but surely starting to rely on AI. If you want to hop on this trend, here’s a detailed guide that can help you use AI to manage your contract lifecycle too:
1. AI in contract summary
Using NLP, AI-driven contract summaries extract key information from lengthy agreements into bite-sized points. so you don’t have to manually filter through complex contracts and agreements that require meticulous review.
AI summaries can reduce contract risks by identifying ambiguous terms, highlighting critical dates like renewals or termination deadlines, and ensuring compliance by flagging regulatory requirements. It also makes it easier for teams dealing with complex documents to gather helpful insights for decision-makers by providing a clear and simple summary of contractual obligations.
AI-driven contract summaries are particularly beneficial for time-sensitive industries like legal teams, procurement departments, real estate professionals, healthcare organizations, and financial services.
2. AI in contract drafting
Contract drafting means creating the first version of a contract, outlining terms, conditions, rights, and obligations. With AI, this whole process becomes faster, smarter, and more efficient. Using AI you can analyze existing contracts, extract relevant clauses, and generate customized templates tailored to the specific needs of your business or industry.
Drafting using AI can be beneficial for legal teams, procurement departments, startups managing vendor agreements, and industries like finance, real estate, and healthcare. They often deal with high volumes of contracts, where accuracy and speed are important. AI’s ability to draft contracts efficiently allows these teams to focus on strategic decision-making and negotiation rather than manual drafting.
AI in contract drafting can help you automate template creation, interpret complex legal language using Natural Language Processing (NLP), and suggest alternative or standard clauses. It also identifies potential risks, optimizes language for clarity, and ensures compliance with legal standards.
You can take JPMC’s COiN (Contract Intelligence) system as an example of how AI can transform contract drafting and review. COiN processes 12,000 contracts annually, saving approximately 360,000 hours for the firm's legal teams. By automating tasks like interpreting loan agreements, it frees up employees to focus on more complex, value-added activities.
3. AI in key terms extraction
When skimming through a contract, important details like payment terms, renewal dates, and obligations often get overlooked. Also, Extracting specific terms manually from large contract volumes can be time-consuming and error-prone.
However, with AI’s contract terms extraction ability you can simplify the review process. Even in large, complex contracts, AI can identify and categorize specific terms, clauses, and metadata based on predefined criteria. For example, it recognizes phrases like "Payment Terms," and "Termination Clause," and understands their context within the contract. Once extracted, AI presents the key terms in a text-based format.
Here’s an example of how Signeasy’s AI assistance, helps you extract key points from your contracts:
4. AI in contract analysis and review
AI models trained on thousands of contracts learn to identify patterns and extract relevant data points. This data can also feed into analytics for strategic decision-making, such as understanding recurring payment terms or pricing patterns.
For example, analyzing payment terms can reveal how frequently clients request longer timelines or whether they take early payment discounts. Similarly, studying pricing clauses can reveal differences based on contract type, region, or customer profile. These insights can help you improve your offerings, adjust pricing strategies, and even negotiate better terms in future contracts.
“If I think where I see AI making a really good substantive impact, it is definitely in contract extraction and contract review.”- Lucy Bassli, founder of InnoLaw Group
5. AI in automatic reminders
Missing important deadlines, like renewal dates or payment schedules, can lead to unnecessary costs or missed opportunities. However, with an AI system in place, you can scan contracts for critical dates—such as renewal deadlines. Once these dates are identified, the system allows users to set reminders instantly.
For example, when AI detects a renewal date, it can prompt you with an option to add it to your calendar or task management tool with a single click. AI combines data parsing with workflow automation to trigger these reminders. It syncs extracted data with your systems, ensuring seamless alerts without manual input.
The result? You can focus on strategic tasks while AI takes care of the follow-ups, making sure no deadlines fall through the cracks.
How is AI changing contracts?
AI is changing how contracts are managed, bringing big improvements to different parts of the process, such as data extraction, automation, language analysis, and insights.
1. Data extraction
Contract data extraction is manual and time-consuming, prone to errors and inconsistencies. Contract managers spend countless hours reviewing and manually inputting data into databases or spreadsheets.
Using natural language processing (NLP) algorithms, AI can analyze contract documents and extract relevant data points, such as contract dates, payment terms, parties’ names, contract values, and specific clauses.
The automated extraction process is faster and more accurate than manual data entry, reducing the risk of errors and inconsistencies. Contracts are a rich source of information, and AI can extract valuable insights from the extracted data. This enables better decision-making, risk analysis, and contract performance tracking.
2. Automation
Managing numerous contracts requires significant time and effort, leading to delays and potential errors. Automation efficiently handles a large volume of contracts and redundant processes. With AI, contract creation, review, and approval can be automated, reducing the time and resources required for these processes.
AI-powered systems can also automate follow-ups and reminders for contract milestones. This ensures important deadlines are not missed.
Contract storage is another area where automation can be applied. The traditional process involves physical filing systems or scattered digital repositories, which makes it challenging to locate specific agreements. AI-powered automation centralizes storage and provides intelligent search capabilities, enabling users to quickly find and access the contracts they need.
3. Language analysis
Contracts are laden with complex legal language, making it challenging for both legal and non-legal professionals to comprehend the terms and clauses accurately. AI tools now have the capability to analyze contract language and simplify it, ensuring better understanding and clarity.
During the review process, AI tools can identify potential issues, inconsistencies, or missing clauses, enhancing the quality and accuracy of contracts. AI-powered systems can also summarize lengthy contracts, extracting key insights and highlighting essential information.
4. Insights and analytics
Contract analysis requires extensive manual review, making it time-consuming and prone to human errors or oversights. Using ML algorithms, AI can detect potential risks within contracts. It can identify clauses that are non-compliant with regulatory requirements or unfavorable to the organization’s interests. By flagging these risks, AI empowers organizations to mitigate potential liabilities.
AI can analyze a large volume of contracts to identify patterns and trends. This enables organizations to uncover valuable insights regarding contract performance, supplier relationships, or customer behavior. For example, AI can identify common negotiation points or clauses frequently leading to disputes, helping organizations improve their contract drafting and negotiation strategies.
Benefits of using AI in contract management
Imagine having a personal assistant that never tires, is always at your disposal, and can instantly analyze vast amounts of data—that’s AI. With its ability to simplify complex information, AI has become a valuable asset in automating contract management.
Top benefits include
1. Increased efficiency and productivity through automation
AI simplifies and standardizes contract management, giving organizations more flexibility and adaptability. By automating processes like data extraction and contract requests, AI speeds up procurement and shortens contract lifecycles, boosting productivity. It also helps identify risky clauses and alerts the team for review, improving process efficiency.
2. Reduction of manual errors and improved accuracy
Contracts contain important details such as dates, deadlines, terms, payment terms, termination clauses, and more. And going wrong with this information can lead to ambiguous clauses and non-compliance with legal requirements. AI in contract management can help minimize these errors by automating review processes, ensuring standardized language, extracting data intelligently, and checking for compliance, improving the accuracy and quality of contracts.
3. Enhanced risk management and compliance
AI enhances risk management and compliance by identifying and analyzing contract compliance terms. It enables proactive monitoring of changes in terms and conditions, helping organizations manage risks better. AI software also ensures the security of sensitive data. With AI, organizations can streamline compliance processes and achieve greater confidence in risk management.
4. Time and cost savings in contract management
Mistakes in contracts can have significant financial consequences for legal organizations. For instance, a poorly worded contract can lead to misunderstandings or disputes, resulting in costly litigation expenses. Non-compliance with regulatory requirements can lead to penalties or fines, impacting the company’s profitability. With AI, these risks can be mitigated. AI automation also saves time in tasks like data extraction, analysis, and drafting, further enhancing efficiency and minimizing the potential for mistakes.
Disadvantages of AI in contract management
While AI has made remarkable advancements, it still faces limitations in areas such as contextual comprehension, ethical decision-making, and handling unpredictability. There is a continued need for human involvement and oversight. Let’s look at the top disadvantages of AI in contract management.
1. Absence of specific regulations to govern AI tools
There needs to be more specific regulations to govern the use of AI tools in contract management. Without clear regulations in place, it becomes difficult to ensure consistency, fairness, and transparency in the use of AI tools, impacting the overall integrity of contracts. The absence of regulations also raises questions about accountability, as there are no established guidelines to monitor and govern the behavior and outcomes of AI tools used in contract management.
2. Requirement for highly skilled professionals
AI tools require the involvement of highly skilled professionals who are responsible for not only understanding the capabilities and limitations of AI tools but also ensuring their successful integration into existing processes. Smaller firms or organizations with limited resources may face challenges in accessing the necessary technical skills, making the adoption of AI tools less feasible or practical for them.
3. Challenges with bias and misinformation in AI systems
The training data used to teach AI algorithms can be biased, leading to biased outcomes. Misinterpretation of contract text and complex legal terms can also result in incorrect analysis. Algorithmic bias and inaccuracies in data extraction can further contribute to misinformation. Additionally, AI systems may struggle with understanding industry-specific context. To address these risks, human oversight is crucial to review and validate AI outputs, ensuring accuracy and fairness.
4. Ethical considerations in AI-based contract management
As AI assumes greater decision-making responsibilities, particularly in contract drafting and analysis, ethical concerns gain prominence. Recent technological advancements have raised apprehensions about the potential for AI systems to cause more harm than good to society. Ethical considerations include determining the authorship of AI-generated contracts and addressing the ongoing threat of cyber-attacks. Another ethical consideration is the concern of job displacement as AI technologies automate certain tasks. It is crucial to find a balance between leveraging AI for efficiency and productivity gains while ensuring that it complements human capabilities and creates new opportunities.
Legal operations role in the AI contract management
Unlike practicing attorneys, legal operations (legal ops) teams play distinct roles in contract management. Attorneys majorly work on the substantive aspects of contracts, the legal ops team makes sure contracts are processed quickly, accurately, and in line with organizational policies.
Their goal is to maintain efficiency. However, as organizations grow, so does the volume and complexity of contracts. Legal ops teams may struggle to keep up without a single contract dashboard, automated workflow process, and the right AI contract management software to scale their processes.
Now, AI technologies like machine learning and NLP are changing how legal teams are used to address those contract management challenges.
For example, a recent study by LawGeex, a legal tech startup, revealed that AI can review contracts faster than you can grab your morning coffee! AI outperformed lawyers in reviewing risks in NDAs. While the top-performing lawyer achieved 94% accuracy, matching the AI, the average lawyer scored just 85%. The best part is that it took the AI tool just 26 seconds to review five NDAs, while experienced lawyers averaged 92 minutes per review.
For legal ops teams, this speed and accuracy mean more than just time saved. AI’s ability to predict risks, ensure compliance, and automate repetitive tasks transforms contract management from a reactive process into a proactive strategy. Machine learning tools can identify high-risk clauses, highlight non-standard terms, and even flag potential regulatory pitfalls before they arise.
To get more answers on legal ops teams' roles in AI contract management, we had a chat with Lucy Bassli, founder of InnoLaw Group and a leader in the CLM space; she shared that there’s a mix of excitement and caution in the legal world. Legal ops teams see AI as a new tool to modernize processes and tackle time-consuming tasks like clause reviews, contract tracking, and renewal management. But attorneys? They’re a bit more careful. It’s not fear; it’s just their natural instinct to understand every potential risk before fully embracing something new.
“(For Lawyers) I don't wanna say it's fear. I think that's over-exaggerating. But I think it's caution. Lawyers like to know exactly what they're getting into. They wanna understand all the what could happen?”-Lucy Bassli
She reminded us of how lawyers were cautious about email back in the day. It took years before email became a standard part of their workflows. But fast forward to today, Lawyers are becoming more comfortable with the technology, recognizing its role in enhancing efficiency without sacrificing accuracy.
And, the benefits of AI are hard to ignore. AI doesn’t just make contract management faster; it makes it smarter. Machine learning algorithms can analyze historical data to spot risks before they happen, predict bottlenecks, and even ensure compliance with complex regulations. Plus, AI tools can process thousands of contracts in seconds. Something no human team could ever manage.
So, AI is here to help legal teams, not replace them. And for legal ops professionals, it’s an opportunity to automate their processes and make an even bigger impact. As Lucy put it, the legal world might be cautious, but it’s also ready to evolve. And AI is leading the way.
Can AI Write Legal Contracts?
The short answer is Yes, AI can draft legal contracts. AI tools, especially large language models (LLMs), are transforming how contracts are created. These tools use deep learning algorithms to understand, predict, and generate human-like text based on massive datasets, including legal documents.
AI can draft contracts quickly, ensuring they cover essential elements like clauses, obligations, and compliance. It's like having a super-speedy assistant to handle the heavy lifting of contract drafting.
However, AI still has its limits. While it’s excellent at generating a starting point, these drafts require careful human review. Legal documents often involve nuances, specific wording, or jurisdictional requirements that AI might miss.
As Patrick Lavan, marketing manager at Bloomberg Law, aptly puts it, “LLMs can give you a starting point for a legal document, but a lawyer needs to take it across the finish line.”
For legal teams, AI isn’t replacing expertise—it’s amplifying it. Lawyers can spend less time on repetitive drafting tasks and more time strategizing, negotiating, and addressing client needs. While we’re not at the stage where AI can independently create flawless contracts, the technology is advancing rapidly to pave the way for a more efficient future in legal work.
Ready to embrace AI contract with Signeasy?
Where contract volumes are sky-high, and the stakes are even higher, AI can be your greatest alley. With AI features like summaries, smart Q&A, to key terms extraction, AI can change the way you approach contract management.
At Signeasy, we’ve always been dedicated to making contract management effortless. With Signeasy AI, we’re taking that promise further by introducing smart, intuitive solutions for contract review. Signeasy AI is built with privacy, security, and transparency in mind. Your data stays yours, protected by state-of-the-art encryption, secure proxy layers, and compliance with global standards.
So, give Signeasy AI a try for free, too, and experience how effortless and reliable contract management can be.
