How AI Contract Management is Shifting the Dynamics in the Legal Industry
Contract management is one of the most essential parts of the legal industry, and today, it is quickly changing due to the application of AI technology. Whether this change is good or bad is yet unclear because AI technology is still unprecedented, given that it is a relatively new application.
If you are interested in how AI is shifting the contract management dynamics in the legal industry, you are on the right page. In this article, you will learn about how AI is used for contract management, its benefits, and potential risk.
How is AI Used in Contract Management?
Ai is a program or algorithm trained according to the programmer’s desired purpose. For the AIs used in contract management, it is trained to create, review, and manage contracts to make it easier and more efficient for legal professionals to do their job.
You may ask what’s the difference between AI software and the pre-existing organization apps used by law firms. The answer to that is that AI has cognitive abilities similar to humans. They are designed to accomplish tasks assigned to lawyers, such as testing and examining data and identifying patterns that go beyond the traditional filing and organization of documents.
Ways on How AI Contract Management is Changing the Legal Industry Dynamics
AI contract management is new commonly know as AI contract review software, but it has already made a major impact on the legal industry dynamics. Here are some examples of the changes that it has created in the past few years:
- Better Tools
AI contract management is now considered a better tool than traditional filing and organizing software used by law firms and other legal businesses. This is because this technology can identify and segregate contracts and identify patterns based on key variables.
For example, it can organize contracts according to renewal and expiration dates. It can even identify specific language patterns so that you don’t have to go over each file, which can take hours manually.
- Improve Speed and Accuracy
One of the biggest impacts of AI contract management is how it is able to improve the speed and accuracy of law professionals. This is very significant given that it is not unheard of that many lawyers spend sleepless nights to go over contract details. Unfortunately, in many of these instances, lawyers experience burn out faster, and errors are always bound to happen.
This is one of the major problems that AI contract management aims to solve. It can help mitigate mistakes and lessen the causes of human errors in the reviewing process. It does so by allowing users to select specific clauses to reject or accept or flag problematic clauses that require further inspection.
Human lawyers typically take 92 minutes to review contracts. However, AI contract management software is able to do it in just 23 seconds, with an accuracy of 95%. This is significantly higher than the 85% accuracy rate of pure human effort.
- Greater Consistency
AI contract management tools are also allowing law professionals to achieve greater consistency in the contracts that they are working on, specifically if it’s in bulk for a particular company. Remember, the words on contracts must be phrased in the correct way to avoid confusion and challenges later on.
The software user can simply input a specific definition on a clause, and it can be automatically consistent through all the other contracts. The software will also flag instances where the definitions are either omitted or changed. This way, getting an iron-clad and well-written contract for your client is easier to achieve.
- Changes in Legal Role Dynamics
The adaptation of the AI contract management software also means that repetitive roles in the law industry are becoming obsolete. This applies to researchers and reviewers of legal documents and some paralegals as well since most of their tasks are now done by the AI software.
Although this shift in dynamics in terms of roles in the industry is indeed unfavorable for employees. However, it is a good thing for companies given that they will be able to cut salary expenses. It also allows them to provide more affordable and efficient services at the same time.
As time goes by, there will be less need for other legal industry roles, especially once the algorithms are more enhanced. This might be harsh news, but it’s a reality for an ever-evolving world.
Risk of AI in the Legal Industry
Unfortunately, AI contract management technology is not 100% fool-proof. Just like other applications of AI, it comes with several threats and risks. Here are some of them:
- Potential Bias
Humans have innate bias no matter how they try to be impartial, and given that a particular set of human train AI, that bias can also be transferred into the algorithm. This can create a large potential for injustice for minorities and underrepresented sectors.
- Black Box Challenge
All information inputted on an AI software by law professionals goes into what’s called a black box. This is where the software works its magic and formulate feedback to its users. However, law professionals are not IT experts, so it is difficult for them to assess whether the software is doing due diligence and following the right ethical standards.
- Data Transparency
The black box of AI technologies is also questionable in terms of transparency from the developers on how the algorithm is really working. This means that there is a possibility of capturing sensitive data such as trade secrets and no legal means to penalize the suppliers because there are no laws broken in the first place.
Although the application of AI contract management is relatively new, it is undeniable that its effects are already creating major shifts in the legal industry. Its benefits are highly favorable for lawyers and clients, given that it allows things to be done quickly in an efficient and consistent manner.
However, the risk and threat posed by this new technology should not be discounted. If these theoretical harms do come into reality, the damage from it will be costly and difficult to reverse.