AI-based contract management involves utilizing Artificial Intelligence (AI) technologies to optimize and streamline the processes involved in drafting, organizing, and overseeing contracts. These AI systems are engineered to comprehend the nuanced and complex language typically found in legal contracts, mirroring the proficiency of a human lawyer.

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AI for contract management: A departure from error-prone
processes to automated agreement handling
⋮ 30/10/2023
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In the ever-evolving business landscape, contracts serve as vital conduits, facilitating the smooth flow of
transactions within the corporate ecosystem. They are pivotal in establishing trust, mitigating risks, and
fostering profitability as businesses expand and cultivate diverse relationships with stakeholders such as
suppliers, partners, and customers. However, managing a multitude of contracts is a complex chore,
fraught with challenges due to their varied and often disordered nature. Inefficiencies in contracts can
diminish significant value from deals, making effective contract management imperative.
Enter AI-powered contract management — an effective tool that transforms the handling of contracts.
With AI, businesses can navigate through an extensive array of contracts with precision, enhancing
efficiency and decision-making. AI clarifies critical contract elements, such as expiration dates and legal
provisions, facilitating informed decisions that strengthen a company’s competitive stance. According to
Future Market Insights, the global contract management software market, valued at approximately
$2,200.1 million in 2022, is projected to witness a robust CAGR of 12.9%, reaching nearly $2,448.7
million by 2023.
In the evolving domain of contract management, AI emerges as a crucial ally for legal professionals,
amplifying their expertise and efficacy.
This article aims to unravel the intricacies of AI in contract management, shedding light on its
transformative potential, myriad use cases, and the profound benefits it can offer businesses.
What is AI-based contract management?
Why do we need AI for contract management?
Key factors to consider when implementing an AI-powered contract management system
Use cases of AI-based contract management systems
Benefits of using an AI-powered contract management system
How industries can gain a competitive edge with AI-powered contract management software
What is AI-based contract management?
AI-based contract management involves utilizing Artificial Intelligence (AI) technologies to optimize and
streamline the processes involved in drafting, organizing, and overseeing contracts. These AI systems
are engineered to comprehend the nuanced and complex language typically found in legal contracts,
mirroring the proficiency of a human lawyer.

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AI algorithms undergo training to recognize patterns and discern various elements within contracts,
allowing them to identify key terms, conditions, and concepts effectively. They achieve this through a
meticulous analysis of contextual and repetitive language present in legal documents.
AI-driven contract management significantly reduces repetitive administrative tasks across the entire
contract lifecycle. For instance, AI software can automatically extract vital data and highlight specific
noteworthy terms, such as effective dates, governing laws, or personal details. Without AI, legal
professionals would need to tag and capture such information manually.
This automation not only enhances efficiency but also augments the accuracy and consistency of
contract management processes.
Why do we need AI for contract management?
Contracts are a crucial foundation for establishing trust and accountability among multiple parties. They
ensure adherence to clauses, timely payments, completion of work, and more. However, understanding
these multi-page documents can prove to be difficult and time-consuming. This complexity arises due to
the detailed and legalistic nature of the language used, making it challenging to grasp the full scope of
obligations, rights, and provisions contained within them.
In an environment where time equates to money, industries such as law firms, government agencies, HR
departments, and real estate brokers confront the challenge of managing extensive contracts.
Consider the scenario where the expiration date of a contract is nearing, or there are alterations in
legislative regulations affecting contractual terms; it becomes imperative for law firms to notify their clients
promptly. Additionally, it is crucial to monitor agreed-upon payments and deliverables closely. Fortunately,
a substantial portion of these tasks can be streamlined and made more efficient through automation,
thereby substantially cutting down the time and expenses associated with these processes.
This is where technology steps in. The integration of AI into contract management has made significant
advancements in replicating tasks that were previously executed solely by law professionals.
Technological integration into contract management has seen remarkable advancements, with AI
replicating tasks traditionally handled solely by legal professionals, such as data extraction and risk
mitigation. This synergy of technology and human expertise heralds a new era of efficiency and precision,
minimizing errors and accelerating the contract lifecycle, making the management of contracts more
effective and agile.
By identifying critical terms to mitigate risks and accelerating the entire contract lifecycle, the synergy
Key factors to consider when implementing an AI-powered
contract management system
Implementing an AI-powered contract management system necessitates thorough planning and
consideration of several crucial factors, such as:
Data quality

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Accuracy: AI-powered contract management systems thrive on precise data. Ensure that the data
entered is accurate to make informed decisions.
Completeness: The data should be comprehensive. Missing information can hinder the performance
and the decision-making capabilities of the AI.
Timeliness: The data should be up-to-date to reflect current realities and make relevant decisions based
on the most recent information.
Integration
Compatibility: Ensure the AI system is compatible with existing CRM, ERP, and document management
systems for smoother operation and information flow.
Coordination: Detailed planning is essential to ensure that all systems work in harmony without glitches,
contributing to smoother operations.
User adoption
Training: Invest in extensive training programs to familiarize the team with the new technology, ensuring
they can use it efficiently.
Support: Offer ongoing support and resources to users to solve any issues swiftly and ensure consistent
and productive use of the new system.
Security
Access control: Implement stringent access controls to restrict access to sensitive information, allowing
only authorized personnel to access confidential data.
Data protection: Robust security measures, such as encryption, should be in place to protect the data
from potential threats and unauthorized access.
Use cases of AI-based contract management systems
AI in contract management has various use cases, which include:

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Data
Extraction
Contract
Review
Contract Risk
Analysis
Predictive
Analytics
Negotiation
Metadata
Extraction
Bulk Document
Organization
LeewayHertz
Data extraction
AI simplifies real-time data extraction from diverse file formats, including PDFs, images, and word
processors. AI’s Natural Language Processing (NLP) capabilities enable the extraction of crucial details
such as expiration dates, stakeholder names, legal clauses, and contract terms and conditions. This
automation streamlines contract setup, freeing up valuable time previously spent on tedious tasks. The
extracted information can be leveraged for various purposes, from sending deadline notifications to
identifying ambiguous language for legal review or sending reminders to clients.
Intelligent workflow automation
AI’s capabilities extend beyond data extraction; it can also orchestrate contract reviews, approvals, and
workflow automation. Managing stakeholders can be a challenging aspect of contract management, but
AI offers valuable assistance by:
Sending timely signature request emails.
Automatically sending reminders to those who missed initial emails.
Comparing various contract versions and highlighting changes.
Ensuring everyone accesses and collaborates on the correct contract version.
It functions as a digital shepherd, guiding stakeholders efficiently towards their necessary tasks.
Extract insights from the contract
AI is exceptionally adept at extracting valuable insights from contracts. AI can identify patterns, trends,
and anomalies in the contract by analyzing large datasets. For example, it can pinpoint common clauses,
frequently negotiated terms, or areas of high legal risk. These insights empower businesses to make

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well-informed decisions, negotiate contracts more strategically, and better understand their contractual
relationships. AI-driven insights also enhance risk management by highlighting potential compliance
issues and offering early warnings of contract-related challenges, allowing for proactive mitigation
measures.
Bulk document organization
AI-driven contract management tools excel at efficiently organizing extensive contract libraries,
simplifying the process of locating specific contracts or data. This streamlined approach saves time and
minimizes the likelihood of errors or omissions.
By simply uploading a batch of documents, AI swiftly tags and organizes them, automatically grouping
attachments to consolidate all pertinent information for a particular case, deal, or contract, all at the click
of a button.
Contract review
AI-powered contract review refers to using AI technologies to automate and enhance the process of
reviewing and analyzing legal contracts. This technology-driven approach aims to improve contract
review efficiency, accuracy, and speed, benefiting businesses and legal professionals in various ways.
The average contract review takes approximately 92 minutes. AI can streamline contract reviews by
automatically identifying potential issues or areas of concern, ensuring accuracy, completeness, and
compliance with regulations in less time. Moreover, AI can reveal unexplored cost-saving opportunities
that have previously gone unnoticed during manual reviews.
Contract risk analysis
Automated contract management systems integrated with AI capabilities can scrutinize contract terms,
identify potential risks, and evaluate adherence to internal policies and external regulations. These
systems can extract and assess crucial contract data by harnessing natural language processing flagging
non-compliance or potential discrepancies. This proactive approach to risk management empowers
organizations to mitigate potential pitfalls, promptly address non-compliance issues, and avoid legal
disputes.
Managing contract volume
As businesses grow, the volume of contracts they handle escalates significantly. For instance, enterprises
may oversee as many as 20,000 contracts concurrently. AI proves valuable in efficiently managing this
extensive contract load by:
Automating routine tasks
Detecting potential areas of concern.
Streamlining bulk uploads.
Centralizing related documents in one location.

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This alleviates the workload on contract managers and enhances overall efficiency, ensuring effective
contract management.
Contract creation and standardization
AI contract management solutions expedite contract creation by automatically generating drafts from
established templates and user-defined parameters. This eliminates the potential for manual errors and
reduces the time required to draft contracts while ensuring document accuracy. Businesses can enhance
efficiency, reduce turnaround time, and uphold compliance with internal policies and legal mandates by
standardizing the contract creation process.
Intelligent contract management systems ensure consistency in contract structures and language while
saving substantial time for legal professionals. These systems enhance efficiency, maintain
standardization, and offer language improvements, streamlining the contract drafting process and
enabling law professionals to focus on strategic tasks.
Automating contract lifecycle management
AI plays a pivotal role in automating different phases of the contract lifecycle, including contract initiation,
approval workflows, and monitoring essential dates or milestones. With AI algorithms, organizations
receive timely notifications for contract renewal, expiration, or re-negotiation, enabling proactive
management and minimizing the risk of missed opportunities or compliance issues.
A primary challenge in contract management is maintaining visibility throughout the contract lifecycle. AI
technologies provide real-time visibility into contract status, critical dates, and obligations. Advanced
contract management systems can generate automated alerts for contract renewals, milestones, or
potential risks, ensuring businesses never overlook important deadlines.
Predictive analysis
AI leverages historical contract data to extract insights and predict potential contract risks and outcomes.
By examining past contract records, AI algorithms reveal patterns, trends, and areas where there is
scope for improvements. This data-centric approach empowers organizations to make informed decisions
and improve their contract management processes.
Negotiation
Contract negotiations often involve multiple parties, intricate terms, and prolonged back-and-forth
interactions. By incorporating automation, AI can streamline the negotiation process by facilitating
collaborative efforts, tracking revisions, and offering insightful suggestions. AI contract management
software can analyze past contracts, identify key negotiation points, and propose favorable terms based
on historical data. This expedites the negotiation phase, minimizes delays, and enhances the likelihood of
reaching mutually advantageous agreements.
Smart approval routing
Streamlining approval processes is pivotal in simplifying contract management. Acquiring signatures from
various stakeholders can become complex without suitable management technology. This complexity

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increases when contracts have variations necessitating additional approvals, such as lengthy agreements
or those exceeding a specific monetary threshold. AI can utilize contextual cues to pinpoint sections
requiring approval from different stakeholders and seamlessly incorporate these steps into the workflow.
Furthermore, the system can draw from past approval routing experiences to identify where extra steps
are warranted, ensuring a smooth and efficient approval process.
Metadata extraction
Metadata extraction is greatly enhanced by AI, allowing for the automatic retrieval of crucial contract
details. This encompasses extracting vital information like involved parties, effective dates, termination
clauses, and payment terms. AI-driven tools additionally aid in validating, converting, and arranging the
extracted data, streamlining contract management. This feature is readily accessible and delivers
substantial value to businesses, enhancing workflow and offering benefits through alerts.
Contract language translation
AI-driven translation tools provide the capability for instant contract translation across languages.
Nonetheless, it’s crucial to acknowledge that while AI can aid in translation, accuracy might fluctuate due
to regional idiomatic expressions and language subtleties. Consequently, implementing a validation
process is crucial to ensure the reliability of the translated contract.
Contract summarization
Contract summarization emphasizes essential points and pertinent details in the contract. These
summaries can serve as valuable tools for grasping vital facets of a contract, offering rapid insights to
related parties and executives, and eliminating the need for exhaustive document review.
Data security and confidentiality
Amidst the digitization of contract management, concerns regarding data security and confidentiality are
paramount. However, AI contract management software offers robust security measures to safeguard
sensitive contract data. These systems provide controlled access, encryption, and secure storage
solutions, ensuring only authorized individuals can access and modify contract information. Automated
audit trails further enable organizations to monitor and trace contract changes, thus upholding data
integrity and compliance.
Benefits of using an AI-powered contract management system
Here are some of the key benefits of using AI-powered contract management systems:
Improved accuracy: AI-powered contract management systems utilize advanced algorithms to review
and process extensive contract data. By doing so, they can pinpoint mistakes, discrepancies, and
irregularities within contracts. This meticulous analysis minimizes the likelihood of errors, enhancing
accuracy and adherence to legal requirements. Ultimately, this technology streamlines contract
management, enhancing reliability and mitigating potential risks associated with faulty contracts.

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Eliminate errors: Considering the entire contract lifecycle, there is ample opportunity for mistakes.
These errors may involve omissions of critical clauses or oversights regarding compliance requirements.
AI contract management software ensures that all stakeholders are informed of any changes and are
held accountable for compliance, thus reducing the likelihood of errors.
Enhanced efficiency: AI-powered contract management systems utilize advanced algorithms to handle
repetitive tasks like drafting contracts, extracting key information from them, and analyzing their content.
This automation reduces manual workload, accelerates processes, and enhances accuracy, ultimately
streamlining the contract management lifecycle.
Better compliance: AI-based contract management software is pivotal in facilitating legal and regulatory
compliance for businesses. These systems utilize AI algorithms to meticulously analyze contracts, cross-
referencing them with relevant standards and regulations. Automating this process ensures that contracts
adhere to the legal parameters, minimizing non-compliance risk. This saves time and mitigates potential
legal issues, fostering a secure and compliant business environment.
Improved decision-making: AI-based contract management offers businesses valuable insights and
analytics that serve as a foundation for informed decision-making. These systems uncover trends,
patterns, and anomalies by analyzing vast contract data. This empowers businesses to optimize
processes, identify bottlenecks, and streamline workflows. Moreover, the insights garnered enable a
more effective contract management strategy, enhancing negotiation tactics, risk assessment, and
resource allocation. Ultimately, these AI-driven capabilities lead to improved operational efficiency and
more successful business outcomes.
How industries can gain a competitive edge with AI-powered
contract management software
Contract management software can provide significant advantages to various industries by streamlining
and automating various aspects of contract creation, negotiation, execution, and management. Here are
several industries that can gain a competitive advantage with contract management software:
Healthcare
The healthcare sector manages a substantial volume of daily contracts, necessitating meticulous
handling of agreements involving third parties like insurers, pharmacies, medical equipment suppliers,
and more. Healthcare firms benefit from contract management software in the following key areas:
Payer and provider contracts
Vendor contract management
Contract security
Compliance tracking
Legal

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Many companies rely on legal professionals and law firms to efficiently manage their contracts.
Consequently, legal practitioners and firms can harness the power of contract management software to
enhance their contract-related processes, elevate service quality, and expedite service delivery.
Manufacturing
Large-scale manufacturing industries handle extensive contracts, often spanning global vendors and
international suppliers. Consequently, effective contract management becomes a formidable challenge.
Manufacturing companies should consider adopting contract management software to address these
complexities.
Consumer goods
Consumer goods companies, much like their counterparts in manufacturing, often contend with a
substantial volume of active contracts involving suppliers, vendors, and business partners. Consequently,
they recognize the necessity of implementing contract management software to handle intricate
compliance requirements and adhere to contract deadlines effectively.
Real estate
In the real estate sector, managing contracts is a fundamental aspect of business operations. AI can aid
in automating workflows, ensuring legal compliance, and managing various stakeholder agreements
efficiently, which can be pivotal in closing deals promptly and maintaining a steady workflow.
Technology
Technology companies frequently engage in contracts involving intellectual property, partnerships, and
customer agreements. AI-based contract management can enhance the handling of these contracts by
improving accuracy, protecting intellectual property, and optimizing negotiation processes.
Education
Educational institutions handle contracts related to partnerships, vendor agreements, and employment.
AI can streamline the management of these contracts, ensuring that educational institutions operate
smoothly, maintain compliance, and effectively manage their resources.
Retail
Retailers manage contracts with suppliers, service providers, and partners. AI can optimize contract
management processes by automating repetitive tasks, improving negotiation strategies, and ensuring
that the best terms are secured to enhance business operations and customer satisfaction.
The public sector
Government agencies manage a vast array of contracts related to public services and projects. AI can
facilitate improved contract management by ensuring transparency, compliance with regulations, and
effective allocation of public resources.

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EndNote
AI in contract management is reshaping the way businesses handle their agreements. By streamlining
operations, ensuring consistency, and unlocking valuable insights from contract data, AI empowers
organizations to navigate contracts more efficiently and make informed decisions that drive
competitiveness and success. The utilization of AI in this field not only streamlines operations but also
promotes better decision-making and regulatory compliance. As technology continues to evolve,
embracing AI for contract management is not just a choice but a strategic imperative for businesses
seeking to grow in the ever-changing business landscape.
By embracing AI’s unique capabilities, you can now leave behind the complexities and risks associated
with contract management. Partner with LeewayHertz to simplify your contract management processes
with robust AI-powered contract management solutions.