How to Save Time and Money Using AI-based Software for your Contract Review

As new tools are made, what will soon separate success from failure is the ability to use these tools in a fast and effective way.
Artificial Intelligence
Legaltech
January 28, 2021

Let’s face it, some things in the business world are too expensive to not look for solutions. In San Francisco, the average hourly rate for a contracts lawyer is $455. A week’s worth of work and that’s over $18,000 of funding gone. Yet, this is a task that has to be done. Especially for young companies looking to quickly expand their incoming business, they will need to contract out certain tasks. Finding office space, engaging with third parties, and searching for viable options to stretch their dollars as far as possible. Each one of these tasks requires a contract, and each contract needs to be reviewed. But do you need a high priced lawyer to get the same protections for your company? Artificial Intelligence (AI) and machine learning advancements have increasingly answered “no”.

While the work of a lawyer is often detailed strategy and invaluable risk analysis, other tasks are less cerebral. As a small company, with every contract you receive, half the battle is reading and flagging. While the information gained from reading the contract is important, reading over every page and section simply takes time. Time that many companies cannot afford. This is one stage of the contracting process that is open for innovation and improvement. It is only after clauses and sections are identified, categorized, and presented to humans that we can begin to make informed decisions to address them. This process can be performed by AI through a straightforward process of pattern recognition. 

Machines have been reading patterns before they were reading code. As far back as 1804, Joseph Marie Jacquard constructed a loom to operate via punch card. Years later, IBM revolutionized the punch card system with the Keypunch. Modern or ancient, these systems use various methods to register not a code, but a shape of inputs that are translated to certain settings and information for the machine to carry out. Reading and flagging can also be broken down into this kind of pattern recognition. Machines must be trained with “structured data”, information that is already categorized and labeled with the desired outputs humans would find useful. This process is essentially showing a machine contract clauses. Then another and another, and another. This allows the AI to learn the various potential inputs of structured data that can be labeled as a certain clause. This system is not as complicated as other learning algorithms and thus is easier to train and more quickly adaptable to other situations. The AI then takes that information and uses various commonalities to make a decision on unstructured data in the form of new contracts. If AI is trained to recognize the various contract clauses that present the most risk to a small company, it can present this unstructured data in a way that anyone can understand it and respond.

The average organization’s internal information is composed of about 90% unstructured data. This not only includes new contracts coming in, but stored information, old contracts, user data, and company financials. The most important elements of each category are all waiting to be organized to maximize their usefulness. Once properly trained, AI can perform this task in a time and cost efficient manner. There are three clear categories where an AI would save significant time and money for the average company: contract intake, internal data organization, and employee mindshare.

AI’s attention to detail and reliability

Every large customer, big deal, product order requires a contract. With each of these contracts comes its own set of risks. Each of these contracts needs to be reviewed by a trained eye to understand the context of the business, and what presents the most risk for you. A trained AI can speed up that process and distill down the information to its most important pieces. Sometimes companies like to spread out their various rights throughout a contract, sometimes it is bunched into one section. Other times, a contract will use definitions that muddy the waters, forcing readers to skip to the definitions section over and over, losing their train of thought in the process. These natural shortcomings of the human brain is where an AI can really make the difference in contract analysis. In a recent survey conducted by ContractLogix found 64.3% indicated the “inability to extract key data from contracts” negatively impacted their contract management processes. With AI, each page, each word, is looked at with the same level of attention. The AI can track every pattern and every cause simultaneously, connecting definitions, clauses, risks, and flags into one report for the user. It can also mark secondary risks based on the user’s needs. For a marketing executive, she wants to know what rights are available to share partner information. For a sales lead, he wants to know the length of the deal, deliverable details, and the price. For a lawyer, she wants to know the liability and termination provisions. The AI tool can get the correct information to the correct parties, while ensuring they aren’t missing anything because of the continued diligence of the machine. 

AI’s understanding will help secure company’s present and future

Once a contract is executed, there is a continual need to both organize and understand their elements. Establishing business relationships is important, but so is maintaining those relationships. Prompt action and informed decisions based on the contract are important pieces to showing your partners you value the work put in to creating the contract. By having all of the information from your contracts easily accessible and reliably organized, your company should be able to make prudent decisions. The sales team will be able to coordinate finances and cashflow by knowing the prices, payment schedule, and deliverable information extracted from each contract. The legal team will always be informed as to quick and responsible remedies if any issue arises out of the deal. Every issue that could present itself to your company is better addressed if your teams have the right information at their fingertips. At company level, you can also make more effective strategic decisions if you use AI tools to understand the macro-data about your contracts. The variability of the AI’s understanding allows your company to not only understand previous metrics, but also apply new ones with fresh training programs. This ensures a company secures its present while forming its future. 


AI’s role in reducing monotony in our professional lives

Businesses always strive to save money and maintain their employee focus on valuable activities. Significant numbers of professionals have cited “boredom” as their reason for seeking new work, while monotonous activities were cited as negatively affecting “our judgment, goal-directed planning, risk assessment, focus, and control over our emotions”. It is in the financial and reputational interest of companies to ensure their work is engaging and their employees are happy. By shuffling off monotonous work to machines, an employee can focus on more engaging tasks with greater mindshare. Studies have shown “repetitiveness, and the routinisation of work practices” can lead to “a undermining, deflating, and contagious condition which fuels the production of mediocre and uninspired work.” Reducing boredom makes the employee feel more engaged and put in greater effort in their work. Additionally, simply by introducing AI to a workflow, it fundamentally cuts down on human error. Entire processes could be changed with the introduction of a machine into a single step. Drafting a contract entails a writer, fact checker, negotiator, and overall executor, either handled by one person or a team. Introducing AI to the flow can replace at least half of these roles, since the language used in the contract had been previously written and approved, saving time and money. 

AI tools also place more factors that would usually be “unknown” into the hands of the company. This shift helps the company save money in two ways: preserving valuable employees and cutting down on retraining new ones. A company needs to consider the overall cost to the company by keeping on older employees or training new ones. Issues such as moral, education, institutional knowledge, training, and gaps in productivity are all calculations that a company must make. Joe Hadzima, Senior lecturer at MIT Sloan School of Management found replacing an employee can cost 50-60% of their annual salary. By shifting monotonous tasks to AI and other automated processes, it allows the company to better adjust to these costs. Ensuring employees are happier makes them more likely to stay at your company. By decreasing the probability employees will leave on negative terms, it makes a company more likely to affect the decision through more tangible actions such as salary, benefits, and perks. All of these more prominent factors put more control in the hands of the company, reducing variables and thus eliminating costs. Taking these small steps to ensure your employees are happy had a blossoming effect, reaching every part of your organization.

Enter SpeedLegal


Enter SpeedLegal. This fresh, innovative company, founded by Hans Paul Pizzinini and Sami Ullah, seeks to bring structure to the world of corporate contracts. This company understands the amount of tasks that AI can handle to free up time and resources for any company. SpeedLegal’s technology is trained on thousands of contracts to recognize and organize different elements of a contract. Each clause is paired with a parent; each section is labelled with tags to display the most high priority information for a business. While lawyers need to know minute details of a deal in a dispute, the vast majority of contracts are completed without dispute. This means the most important information presented from each contract is business-related: partner info, start/end date, price, termination policy, and deliverables. SpeedLegal’s tools help businesses sort their vast contract information and present it in an easily digestible way, allowing sales and business leads to focus on continuing relationships and getting the contract done. 

SpeedLegal is also working hard to continually improve its services for the future of AI use to other matters. There are a lot of tasks we do in the business world that can be broken down into pattern recognition. Making effective decisions is tied to organized information - the more information available, the better the decision. The future application of AI is truly limitless, allowing contracts to be drafted entirely by AI, with only minimal interference by humans. Cars are already being driven by machines, and processes we have used for years are being improved. There are so many systems we currently use for no other reason than “that is how we always have". But with AI, we can take a fresh look and truly explore the possibilities without the threat of bias, fatigue, informational asymmetry, and human error. With small adjustments, AI can be applied to rigid processes to check for human or institutional errors, and stretch resources to all time highs. Google’s Deepmind was taught how to recognize patterns in eye scans to identify diabetic retinopathy and diabetic macular edema in India. With an estimated 72 million diabetic patients, all needing to get checked for these diseases, only a tiny portion of the patients were able to be served at any one time.

Conclusion

In this fast-paced world, where advancements are happening at a faster rate, the lifeblood of a company is more important than ever. Costs, resource management, and employee health are the most important factors when determining the viability of a company. As new tools are made, what will soon separate success from failure is the ability to use these tools in a fast and effective way. So many parts of our work have been replaced by machines simply because we understood the fundamental nature of the task itself. From a horse to a car, from a hand drill to an assembly line, from a reader to an AI, all of these tasks are better left to machines. AI tools are the first step in becoming more competitive when it comes to managing your contracts. By increasing the contract intake process, companies can increase cash flow, quickly reallocate resources to new deals, and solidify relationships. By streamlining the contract internal organization, companies can make more effective business decisions, assign employees to more pressing tasks, and conserve resources. By assigning monotonous tasks to an AI, companies can maintain employee morale, reduce unknown employment variables, and increase employee loyalty and focus. SpeedLegal has designed tools to help corporations more effectively allocate resources to tasks we actually need humans for. With AI tools from SpeedLegal, companies can not only save their bottom line, but also their employee’s motivation and drive. This makes these new tools invaluable to the 21st century company. 



Our latest news

Join the conversation