Every aspect of business operations has been disrupted by digitisation, and many expect the next major wave will come from the impact of AI. 

After only a few months of public access, large language models (LLMs), such as ChatGPT, have shown exponential growth in their capabilities. It seems inevitable that modern contract management will be radically shaken up as the technology is improved and de-risked for legal processes.

Contracts – with high word counts, standard phrases, critical key terms and specific dates – are a great use case for refined and applied AI LLMs. They promise to help an array of stakeholders make workflows smarter and decrease risks from missed details and opportunities.

Here are four reasons why smart companies will be watching, testing and training in AI tools in 2023 and beyond.

An eager apprentice

To begin with a note of caution: current AI tools aren’t yet up to the job of writing contracts. They need considerable human supervision, and their tendency to ‘hallucinate’ – to make up ‘facts’ to fill out responses – can turn legal professionals pale.

Notwithstanding, AI LLMs are already capable of helping with specific jobs adjacent to contract management. It’s already common for contracting teams to use AI to review lengthy agreements and pinpoint specific language on a topic. And AI can already identify the presence or absence of key clauses or concepts (not just words) in agreements to provide an important first-pass risk assessment for inbound agreements instantly.

But the successors to current AI tools will assist in generating and possibly even negotiating contract terms – ideally in conjunction with a vetted learning corpus of data. The capability of these tools markedly improves with every iteration. Already, AI assistance has provided support presenting arguments in court.

Every business should consider the role generative AI can play in their processes today, and as it grows in capability. Those that invest quickly when the tools are equal to the task, and are already trained in their use, will quickly overtake technology laggards.

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AI is evolving fast

In 2023 and beyond, legal professionals will work alongside data scientists and software engineers to develop use cases, and to create and test new tools specific to contract management to extend the reach and power of LLM AI.

Before long, expect standard agreement tools using AI to analyse language and offer suggestions and a rationale for altered or more beneficial terms. 

Teams will use AI to build robust risk assessment models that can help refine new contracts. You can imagine it sitting alongside the grammar checker in a word processing application.

Another clear use case for AI is creating and analysing data about the contracting process and its management. With new digital platforms that can manage the entire end-to-end contracting workflow, AI will observe each step and collect new types of data from third-party systems. These metrics can be analysed and turned into recommendations to optimise negotiation. 

Modern electronic signature technology, already a default for many organisations and documents, will include new types of acknowledgements in new types of documents. If the contracting workflow can be digitally connected from the earliest stages to the final signature, AI tools will be better able to use this data to learn, improve, and optimise the whole process, end-to-end.

The result will be a growing gap between the speed and efficiency of teams that manage the entire agreement process digitally, with AI and automation, and those that manage manually.

With AI and further digitisation, contracts will transform beyond paper

Indeed, the very nature and purpose of contracts will change as AI matures. Ink-and-paper contracts are important but come with a set of undesirable consequences: storage, obsolescence, and the substantial problem of efficient search. 

Following a basic move to electronic signatures and digital contracts, the next improvement lies in digitising contract operational workflows and management. The goal should be to move to future-proofed digital assets that are interconnected and create action outside the organisation. For example, such digital assets might change their contractual contents in response to prior inputs, or signal changes in other connected solutions.

So, the next generation of electronic contracts will be continually self-updating and digitally connected. The contract as a mere static document will become a relic.

By way of analogy, the advent of GPS-powered satellite navigation devices and apps made a paper map – pretty unchanged for hundreds of years – into a smart technology. ‘Maps’ now tell you your ETA, reroute you, support smarter, quicker, or greener driving choices, and let your loved ones know your location for you. The same shift is happening with contracts. 

AI will boost more than productivity

Digital contract management provides the advantage of removing in-person authentication and promoting smart, location-agnostic use of electronic signatures, ultimately boosting productivity. AI promises to build on this productivity in other ways, particularly in supporting increased visibility into digital operations – and thus organisational integration, security and resilience. 

We’re seeing many strands relating to, or feeding into, AI come together across business functions. 

Within legal teams, AI will support contract management’s move to a more strategic function. Legal teams will be able to do more to accelerate deal closure, strengthen compliance, mitigate risk, optimise vendor contracts, and hold parties responsible. Corporate lawyers will use data generated by self-service tools to understand more about contracting efficiencies. And AI will, at some point, play a part in analysing operational data from other tools and uncover insights to accelerate revenue and control costs in a continual loop.

Those are just a few of the possibilities AI brings to contract managers. By the end of the year there are sure to be more solutions and use cases proving its power for early adopters incorporating AI intelligently. To do so, select careful metrics to measure the utility of AI tools within contract management. For example, those to ensure that AI supports impactful, trusted, and seamless contract management. 

We recommend experimenting with new technologies, learning how to use them, and finding the areas where they are already helpful. But ensure that the outputs are carefully vetted. Once the value of new tools and approaches is proven, and the extent of that value is measurable, ensure the benefits can be incorporated into the agreement workflow and used to drive business productivity and effectiveness.

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