Using AI Powered Contract Management to Simplify Contracts and Create Efficiencies

Part 2 (4-part series) on Concrete Ways to Use AI in Contract Management to Simplify Contracts and the Benefits to Organizations 

Contracts have long been associated with complexity, featuring convoluted sentences, embedded clauses, compound structures, and jargon-filled language. However, the landscape is changing as many in-house lawyers and legal teams are now turning to artificial intelligence (AI) to drive efficiency and simplify contract language. By leveraging AI in contract management, businesses can streamline the contract creation and negotiation processes, resulting in significant benefits and improved outcomes. 

While AI technology can be either separate or embedded within a contract lifecycle management system, it’s important to emphasize that the traditional components of a CLM system; data management, workflow automation, template automation, etc., are necessary components to capitalizing on the value that AI can provide to your contract management processes. Which is why Contracts 365 has partnered with World Commerce and Contracting (WorldCC) to deliver a 4-part webinar series on Applying AI to Contract Management.

Below is an excerpt of the session exploring concrete examples of how AI and more importantly, how AI powered contract management software can simplify contracts. We focus on elements such as organization, headings, clauses, sentences, words, and punctuation, along with real-world examples to illustrate their impact.  In addition, if you are evaluating the use of AI in other areas of your contract management process, take a look at our article on ten practical ways to apply AI to contract management.

Simplifying Contracts with AI

1. Organization: A Consistent and Logical Structure

Contracts often suffer from a lack of clear organization, making it challenging for parties involved to locate specific information quickly. AI-powered contract management tools can analyze the structure of a contract and suggest improvements for a more organized layout. By establishing a consistent and logical structure, contracts become easier to navigate and understand, saving time and reducing potential errors.

2. Informative Headings for Summary of Contents

AI algorithms can generate informative headings that provide a summary of the content within each section or clause. These headings act as signposts, guiding readers to the relevant sections they need to review. Clear and concise headings contribute to enhanced readability and comprehension, ultimately facilitating the contract negotiation process.

3. Breaking Text into Smaller Clauses

Long, complex sentences and paragraphs are a common features in contracts. AI tools can automatically analyze the text and recommend breaking it into smaller clauses, each addressing a single substantive topic. By using shorter clauses, the contract becomes more digestible, allowing parties to focus on specific issues and facilitating better comprehension and negotiation.

4. Drafting in Short Declarative Sentences

AI technologies can assist in transforming lengthy and convoluted sentences into shorter, declarative statements. By simplifying the language and structure of sentences, the contract becomes more accessible to all parties involved. This reduction in complexity helps prevent misinterpretations and increases overall efficiency in contract negotiations.

5. Standard Language without Jargon or Legalese

Contracts are notorious for their excessive use of jargon and legalese, which can create confusion and hinder communication between parties. AI powered contract management tools can help identify and replace complex terms with standard, plain language alternatives. By promoting clarity and eliminating unnecessary complexities, the contract becomes more comprehensible to non-legal professionals, reducing the need for extensive legal interpretation.

6. Punctuation for Readability

AI algorithms can analyze the text to determine appropriate punctuation usage that enhances readability. Properly placed punctuation marks help readers understand the flow and structure of sentences, avoiding ambiguities or misunderstandings. Clear and concise punctuation contributes to improved comprehension and smoother contract negotiations.

Benefits of Simplifying Contracts to Businesses 

1. Decreased Negotiating Times (Real-world Example: GE)

Simplifying contracts through AI can significantly reduce negotiating times. By implementing the practices mentioned above, businesses can eliminate ambiguity, streamline communication, and improve understanding between parties. General Electric (GE) serves as an exemplary case study in embracing simplicity in contracts. By adopting a plain language approach, GE reported a 60% reduction in negotiating time. Customers responded positively to this new way of doing business, further solidifying the advantages of simplified contracts.

2. Enhanced Clarity and Reduced Misinterpretations (Real-world Example: Uber)

Contracts that employ complex language and convoluted structures often lead to misinterpretations and disputes. Uber recognized the importance of clarity in contracts and utilized AI to simplify their terms and conditions for drivers. By eliminating jargon and legalese, Uber aimed to enhance understanding and reduce ambiguity. This proactive approach resulted in a more transparent and mutually beneficial relationship between the company and its drivers.

3. Cost Savings and Efficiency (Real-world Example: LegalZoom)

Simplifying contracts with AI not only saves time but also leads to cost savings and improved efficiency. LegalZoom, an online legal service provider, leverages AI technologies to streamline its contract creation process.  By automating the generation and simplification of legal documents, Legal Zoom is able to provide simpler, more easily understood contracts to its customers that do not require a high level of tech fluency.  This saves its users the expense of retaining counsel and provides a faster and more affordable legal solution. 

Contracts 365 –Leading Contract Management Software for Microsoft 365 Customers

In an era driven by technological advancements, the legal industry is embracing the power of AI to simplify contracts and create efficiencies.  To ensure success, organizations will need to combine AI with a systematic approach to contract lifecycle management (CLM) using contract management software.  But not all contract management software is created equal.  Contracts 365 has leveraged Microsoft and its leading AI capabilities to bring new innovations to the contract management community. If you’d like to learn more about how our AI-powered contract management software can improve your contract management process, please don’t hesitate to reach out to us or, even better, request a demo, and we can show you how it works in real-time.