More than four out of five legal departments plan to use AI for contract review within a year
The vast majority of legal departments within large US corporates expect to be using artificial intelligence for the analysis and review of contracts and agreements within the next year.
More than a third are already employing contract AI and half expect their spending in this area to increase in 2019, according to a new survey carried out by Ari Kaplan Advisors and supported by Seal Software. A further 47 per cent of respondents say it is likely or highly likely their organisations will implement contract review AI in the coming year.
“Many companies are achieving impressive results using contract AI across common use cases, from data extraction and procurement to applications in financial services and regulatory compliance, and there are even more dramatic changes ahead,” said Ulf Zetterberg, CEO and co-founder of Seal Software.
The survey canvassed the opinions of lawyers, predominantly at Fortune 1000 businesses. In depth interviews were carried out with participants including American Express, Hewlett Packard, Nokia, Novartis. Atos and CyrusOne. Two thirds of those taking part generate revenues of more than $5bn.
Of those currently using contract AI, 91 per cent apply it to risk assessment, sourcing and contract management. This is followed by compliance and procurement at 82 per cent. In addition, 55 per cent of respondents who use contract AI identified GDPR and similar regulatory mandates as amongst its leading use cases, as the importance of data privacy and protection continues to rise.
The benefits of contract AI cited by participants include increased clarity and removal of ambiguity or uncertainty in the negotiating process, as well as a unified approach to drafting contracts and improved reliability and accuracy in contract analysis with automated identification of inconsistencies in agreements.
They also emphasised the increased speed with which they can perform these tasks and the value of additional intelligence that can be gathered across an entire contract corpus.
“One of our major key performance indicators is the time it takes to analyse a contract and contract AI has helped us tremendously,” said one survey participant. “We are thinly staffed and so it has allowed the legal team to do the work of several people in a short period of time for less money than it would cost to hire human reviewers.”
“Now, we don’t need to rely on a lawyer to insert an insurance clause or a limitation of liability clause because the system knows the specific provisions that are appropriate for which types of contracts,” added another.
However, the findings also show that contract AI still faces the challenge of overcoming popular misconceptions that AI automation will completely replace humans and serve as a panacea for contract management challenges.