Effective contract reviews save businesses millions of dollars every day. When all goes well, the public never hears about the contracts that save companies from financial disasters, embarrassing lawsuits, and customer loss.
Yet, overlook one comma, misplace a single phrase, or fail to flag an ambiguous term in a contract, and suddenly, the whole world is looking at the CEO scramble to explain what happened. The contract may even become a textbook example of an error for all eternity (à la the 2006 Million-Dollar Comma case.)
Legal teams can’t speed through contract reviews without risking adverse consequences. But at today’s blazing pace of business, who has the uninterrupted time and attention to detail needed to thoroughly review every contract a company signs?
With the rise of contract automation and AI, contract reviewers are now gaining the time and confidence to slow down and focus on improving outcomes without slowing down the business.
Effective contract review requires focus
Slowing contract reviews may be a tough habit to cultivate. Reviewing contracts can be a tedious, time-consuming process and a monotonous chore that requires:
- Rigorous attention to detail. Several factors can pull a reviewer`s attention away. Many contracts repeat the same general provisions. They often contain redundant, outdated, and unnecessary text copied from prior agreements. Reviewers are usually repeatedly interrupted and work in high-stress, fast-paced environments.
- A mental checklist of potential risks and issues. Every contract requires review for clarity, enforceability, risks, and compliance. Reviewers must consider the nuances of defenses, remedies, and interpretations for various contract claims and spot potential ambiguities. Many contracts possess additional unique challenges.
- Risk management tactics. Reviewers must revise language to clarify ambiguities, identify negotiation points, and resolve potential issues. If they find risks, reviewers may consider amending the contract to shift liability or minimize damages.
During manual contract reviews, legal professionals often rely on their memories to recall the steps and considerations they must take. They concentrate on mentally shuffling through notes, checking off list items, and choosing appropriate tactics. It can be tempting to cut corners, but reviewers may regret it later.
What’s at risk in a fast contract review?
Though the specter of the million-dollar missed comma haunts some lawyers, many contract reviews are low-value tasks for legal teams. Reviewing contracts for short-term, routine, or low-dollar transactions can cost more time and resources than any potential savings.
In fact, 89% of businesses struggle to manage high volumes of simple contracts, with 54% saying it takes time away from more important tasks, according to an EY Law Survey.
Low-value contracts still require attention, especially when they are with valued business partners. They can also involve significant risk when they contain ambiguous language or unenforceable terms. Meanwhile, high-value contracts demand precision and accuracy. Speeding through contract reviews contracts can result in:
- Overlooked Clauses: It’s easy to overlook clauses with significant financial or legal implications. Provisions that limit liability, impose arduous indemnification obligations, or contain unfavorable dispute resolution terms may be hidden in a contract’s standard language or a dense section.
- Unforeseen Costs: Unexpected costs, including hidden fees, penalties, and additional expenses, are not always apparent initially.
- Breach of Contract: Misunderstandings or misinterpretations of contract terms can cause a contract violation, potentially leading to lawsuits and reputational damage.
- Missed Opportunities: It takes time and expertise to spot negotiation opportunities. Skilled reviewers may be able to improve payment terms, extend deadlines, or secure additional benefits.
Contract reviewers who prioritize speed over accuracy and thoroughness can make costly mistakes. Automating routine contract review tasks is the first step to gaining the time and assurance to focus on more critical contract issues.
AI-powered contract review: precision, speed & accuracy
Automating time-consuming contract review tasks frees up the time to focus on the strategic and nuanced elements of deals and transactions that matter most to businesses.
AI delivers meticulous attention to detail. With laser-like precision, it can rapidly scan contracts of all types and lengths to identify, analyze, and flag potential risks, inconsistencies, conflicting language, and opportunities.
AI automatically applies reviewers’ mental checklists to each contract. Reviewers can also create playbooks that incorporate their tried-and-true risk management tactics and negotiation strategies and apply them during review. Libraries that contain regularly used clauses and provisions provide immediate access to ideal contract language.
AI compares drafts of contracts to libraries, playbooks, industry standards, and the latest commercial practices and auto-generates suggestions for one-click improvements to agreements. Templates legal teams develop for firmwide use share the benefits of improved contracts across the organization.
Aided by AI, legal teams can review contracts with confidence in their accuracy and thoroughness. They gain the time to slow down and review legal and financial issues with a more critical eye. More time to analyze complex legal and financial issues allows companies to negotiate more favorable terms and achieve better outcomes.
