Empower Your Legal Department with AI-powered Contract Analysis

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Artificial intelligence (AI) is transforming business by automating operations that were earlier time-consuming and prone to human mistake. One such area is contract review. This saves time and improves efficiency and accuracy in legal and business operations.

Use of AI to Analyze your Contracts

The most compelling way to integrate AI into contract analysis is to assign it repetitious, manual activities that require less attention from a highly trained legal team. An AI-powered CLM solution will exercise the advanced capabilities of Natural Processing Language (NLP), Machine Language (ML), and OCR to maximize its benefit. Once it starts running around your business, it helps your organization; it can:

It helps convert all the documents into easily searchable text, accelerating AI analysis.
It ensures constant flow across the business’s best practices by automating the recommendation of clauses and templates.
Monitor and send automated notifications related to your contracts’ obligations, operations, and risks.
Capture contracting trends in visual dashboards and reports for easier active decision-making.

AI Contract Analysis: Tools and Techniques for Legal Transformation

Optical character recognition (OCR)

OCR, or optical character recognition, is a technology that extracts text from digital images of physical documents. It analyzes the characters and converts them into machine-readable code. This process is said to be as text recognition.

Here’s how OCR works together with AI:

Document Conversion: OCR translates scanned paper documents or image-based PDFs to editable text formats such as .txt or .docx.
Data Extraction: Once the text has been extracted, AI algorithms can analyze it to find key clauses, parties, dates, and other pertinent information.
Data Structure: OCR-extracted data is frequently unstructured. AI assists in converting this data into a format appropriate for further analysis and storage.
Quality Enhancement: Advanced OCR systems frequently use AI to improve accuracy, particularly for complicated layouts, handwriting, or low-quality photos.

Natural Language Processing (NLP)

It is the key component of AI-powered contract analysis. It enables machines to comprehend, interpret, and infer meaning from human language as expressed in contracts.

Here’s an overview of NLP’s role:

Entity Extraction: Identifying and extracting important information such as names, dates, numbers, and clauses.
Clause Classification: Classifying contract terms into distinct sorts (obligations, warranties, termination) to facilitate study.
Sentiment Analysis: Determine the general tone and sentiment of the contract in order to identify potential dangers or opportunities.
Relationship Extraction: The process of identifying relationships between entities and clauses in order to better comprehend contract structure.
Contract Summarization: Creating succinct summaries of complex legal papers to provide quick overviews.

Machine Learning (ML)

It is the fundamental intelligence of AI-powered contract analysis. It enables systems to learn and improve through experience without being explicitly designed.

Here’s how machine learning is applied:

Pattern Recognition: ML algorithms look for patterns in large datasets of contracts to recognize similar provisions, obligations, and potential dangers.
Predictive Analytics: By evaluating previous data, machine learning may identify potential concerns such as contract breaches, renewals, and renegotiations.
Anomaly detection: ML detects strange contract phrases or disparities, which may suggest errors or hidden hazards.
Risk Assessment: ML models may compare contract terms to established risk factors, assisting in prioritizing review efforts.

Benefits of AI in Contract Management

AI is transforming the world of contract management. Its automation capabilities streamline processes, improve visibility, and enhance decision-making. Below mentioned are some of the benefits of AI in contract management:

Enhanced Productivity: Contract AI enables lean legal teams to work more efficiently by automating mundane operations that would otherwise take up most of their time.
Quicker Contract Completion: Contract AI can draft, summarize, and review contracts in seconds, allowing contracts to advance more quickly.
Lower costs: AI contract tools can automate some of the work that would otherwise be outsourced to contractors and legal firms, resulting in cost savings.

However, the most significant advantage for in-house lawyers is that it significantly reduces the volume of low-value work that arrives on their desk.

Conclusion

With the power of AI-powered contract analysis, legal departments can transform their operations. Through faster contracting, reduced errors, increased risk mitigation, organizations can achieve significant cost savings and focus on strategic planning.