Artificial Intelligence
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This article is written by Vasundhara Dhar, pursuing Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from LawSikho. The article has been edited by Prashant Baviskar (Associate, LawSikho) and Smriti Katiyar (Associate, LawSikho).

Introduction of AI in the legal sector

Artificial Intelligence (AI) is fast becoming the next big thing in the Indian legal sector. AI implementations in the legal sector have already gained considerable popularity at the global level,A number of legal firms have successfully used artificial intelligence to enhance their operations. Furthermore, the AI tool is able to identify contracts written in different languages as well as their conditions and content. Additionally, the contract recognizes different patterns and features.

AI software stores data to avoid conflict and provide more precise and accurate clauses. The system allows companies to review and analyse contracts more rapidly, organize and identify large amounts of data more conveniently, minimizing the likelihood of contract disputes and adversarial negotiations, and thus impacting the volume of contracts that can be negotiated and executed.  

As a result, there is a heavy burden placed on each clause to be identified manually for any further processing, with tens of thousands of contracts being entered. However, based on the content of the clause, machine learning algorithms may be able to identify the term. Using this qualified model and tags, documents will be automatically added to a contract management program.  

Artificial intelligence saves time and money for lawyers because it allows them to draft contracts more quickly. However, it also increases opportunities for legal researchers, paralegals, and litigators. AI helps with contract management and review, as well as drafting work. AI contract drafting makes use of past or similar contracts in order to learn from them. Incomplete, incorrect, or conflicting words can cause an agreement to fall apart. Using artificial intelligence, current examples of contracts can be sorted quickly to minimise risk. Humans can be replaced by artificial intelligence by being more efficient and producing higher-quality work. In order for business relationships to be safe and effective, contracts must be well drafted. 

Contract Review and Artificial Intelligence (AI)

It is possible that a company does not realize to what extent the process will be manual. Until it has become so accustomed that it doesn’t realize how labour-intensive it is. Whenever contract management or contract reviews are concerned, this is common.

Many corporations implement elaborate manual processes for handling contracts, such as cutting and pasting data into templates, e-mailing, searching for documents, and saving them to multiple drives. A manual contract management approach, however, entails significant risks such as insufficient delivery to a customer, inability to enforce negotiated terms with suppliers, and additional work due to inefficient processes.

In the contract review process, there are a lot of concerns. It may impede the execution of powerful agreements that lead to increased revenue, increased partnerships, and valuable purchases when combined with highly manual or ineffective processes. 

Despite the fact that resources and budgets are shrinking, legal teams must do more with fewer resources. And in order for this process to be scalable, technology is required. The legal profession is undergoing significant changes due to artificial intelligence, machine learning, natural language processing, deep learning, and other advancements.

Although legal professionals’ expertise and judges will always be at the core of legal processes, artificial intelligence can serve as a type of pre-work much in the same way that a paralegal might mark up a document or run a checklist before a partner reviews it. Artificial intelligence can be used to decrease contract review time, increase productivity, reduce risks, and save time for corporate legal departments.

Five ways artificial intelligence can be used to streamline the pre-signature review process

Contract review as a self-service option

Artificial intelligence allows legal professionals to save days or even hours per first-pass review. Using the software’s web portal or email, users can request a standard contract or submit a contract from a third party. With the aid of corporate standards and transaction histories, AI learns to review and redline contracts and sends them back via Microsoft Word. This is often accomplished in a matter of seconds.

A contract review with a high volume and low editing level

There are contracts that require rapid turnaround, such as non-disclosure agreements, and they often do not depart from standard terms. Considering their volume and low editing level, they make good AI review candidates. By relying on AI to review contracts like this instead of an attorney, it can determine if it would benefit the company to make changes. Afterwards, the NDA or similar contract is either tendered directly to the other party or undergoes one last internal review if it is deemed necessary. Lawyers can dedicate their time to projects that add more value to the firm.

Wheeling and dealing of complex contracts

In addition to master service agreements and statements of works, agreements involving complex sales or purchases can also benefit from AI. In these cases, AI can guide the attorney and the contract drafter as they negotiate the agreement stand by utilizing the full company playbook and clause library.

Risk assessment of third parties to contracts

In the pre-signing phase, AI assesses contracts’ risk by checking the supplier’s documents against corporate standards and checklists. Following this, the software summarizes the risks, flags some issues based on template contract reviews and unique clauses for each company, and suggests proper edits.

Managing playbooks

AI-driven contract review, when combined with a user-friendly platform, allows teams to collaborate, manage, and automatically apply playbooks and precedents across the company. 

Legal professionals can then benefit from the real-time insight and data that the platform provides for improving playbook standards further and better understanding enforcement across the enterprise.

Contracts and forms are negotiated by businesses as often as possible. It can be challenging to adhere to company guidelines when contracts are written on “other party paper.” A slow contract execution ultimately slows down the entire process. By relying on AI systems, corporate legal departments are able to expedite business transactions and increase contract compliance while accelerating the closure and signing of contracts.

Impact of AI on the non-disclosure agreement 

Non-disclosure agreements (“NDAs”) are important for corporations since they protect the exchange of information and reduce the cost of litigation if a dispute results from a breach of confidentiality. However, drafting, negotiating, and reviewing NDAs is a time-consuming, repetitive process that mostly deals with the same legal questions. NDAs are likely to be reviewed by paralegals or lawyers in a traditional legal organization, and they are processed through regional offices that use various databases to classify them. Non-Disclosure Agreements (NDAs) can be a powerful tool to protect proprietary information and intellectual property, but only when properly negotiated. Due to the simplicity of NDAs, corporate legal departments rely on forms or templates without providing the necessary provisions to ensure complete protection. Through artificial intelligence (AI), corporations can automatically raise their preferred positions and ensure that all NDA negotiation standards are met.

Companies often draft non-disclosure agreements (NDA) as part of their contracts. Despite their commonality, however, these services are vital to protect business strategies and trade secrets. Almost every company uses the same form of NDA in almost every situation, changing only the parties’ names and the information that is confidential, and leaving the rest out. Because of this, NDAs are incredibly repetitive and routine in terms of drafting, although they’re important. Contracts are a constant burden on corporate legal departments. The preparation of NDAs can take up a lot of lawyers’ time, preventing them from doing other important work that could benefit the organization. Contractual artificial intelligence can take advantage of the routine nature of NDAs. By combining AI and contracts, business users can review and redline NDAs in less than two minutes using a risk-free self-service model. By reducing this burden, your legal staff will be able to concentrate on high-value tasks that help the business succeed.

Achieving NDA compliance through AI

Regardless of whether one starts with an NDA template, a forward-looking legal team will tailor the agreement to the needs of the organization. While reviewing and negotiating NDA agreements, artificial intelligence can help provide concise language while eliminating pitfalls that may arise. Artificial intelligence-powered contract negotiation based on natural language processing, machine learning, and company-specific data can offer:

Standards were enforced for playbook development

In most organizations, there are controls or a playbook for governing negotiations and acceptance of contracts. There is a possibility that attorneys will not adhere to the contract or will lack the time to compare its terms with all of the contract’s provisions. AI can automate the enforcement of playbook directives for each arrangement so that it is consistent. 

Resolving ambiguities

A contract should not be ambiguous. Legal experts may understand terms that a layman finds utterly bizarre. These provisions and terms can be reviewed by AI to locate ambiguity and suggest language changes. 

Augmented negotiations

The contract lifecycle management process is heavily reliant on negotiations. With artificial intelligence, the attorney can focus on negotiation targets, allowing it to focus on the most important clauses. 

Automated revisions

Concise contractual language often requires copious revisions and reviews. AI-enabled technology accelerates the review process by applying terms used in previously successful agreements as a guide to enhance the process.

Rapid contract turnaround

Artificial intelligence in contract lifecycle management can help close deals faster, one of its most significant benefits. After submitting a contract for review, the legal department receives a completed, redlined agreement for continued negotiation.

Enhanced resource assimilation

Having a potential NDA thoroughly analysed by an attorney could take days. Attorneys can focus on other strategic areas by removing the burden of painstaking reviews from AI.  

Conclusion

In spite of the many suggestions for understanding NDA negotiations, next-generation implementations of artificial intelligence in legal technology are the most efficient and effective approach. AI uses the information available in a legal department to create robust, secure NDAs based on their completed contracts and playbooks. NDAs and other routines, repetitive contracts should not divert attorneys’ attention away from more critical work. AI and contracts combine to create automated NDAs, allowing the legal professionals to focus on other tasks while empowering the business users to self-serve without having to engage in additional risk.

References

  1. https://www.lexcheck.com/understanding-nda-negotiation-made-possible-by-ai-lc
  2. https://hbr.org/2018/02/how-ai-is-changing-contracts
  3. https://blog.ipleaders.in/how-is-ai-changing-contracts/

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