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As the legal industry continues to evolve, technological innovations are also changing how legal services are being delivered. One crucial aspect of this change is the rise of automated contract review.  

Gone are the days when legal teams had to spend countless hours reviewing legal documents manually. With the advent of advanced technologies such as AI and machine learning, contract review has become more efficient, accurate, and cost-effective. In this blog, we'll examine how automated contract review is changing the landscape of legal tech. 

The Difficulties of Manual Contract Reviews 

Every contract includes different terms and conditions that require meticulous scrutiny for their authenticity and legality. Manual contract review is a time-consuming process that requires a lot of attention to detail, and it poses many challenges that can quickly become overwhelming. Let’s explore the hurdles that one might face in manual contract reviews, and we'll discuss some of the solutions to mitigate these challenges. 

Time Management 

One of the significant challenges of traditional contract review is time management. The process of manually reviewing a contract consumes an enormous amount of time, and it's always challenging to balance the time based on the bulk of work that needs to be reviewed and the turnaround time expected from the reviewing lawyer.  

Additionally, the review process must adhere to a strict timeline, leaving minimal room for error that could potentially hinder the clients who are signing the contract. To mitigate this challenge, attorneys must create a timeline that could guarantee optimal time utilisation and delegate duties, thus minimising the burden of revising the document. 

Inconsistencies Due to Manual Work 

Another essential challenge in manual contract review is the inefficiency of maintaining consistency in reviewing the documents. It's easy to overlook some essential aspects of the contract review process, such as the wording and the clauses that may be inappropriate or inaccurate. An attorney can also struggle to maintain consistency while reviewing the number of contracts since it gets easier to miss information.  

The solution to resolving this challenge is to have multiple attorneys working on the review process since having more people to review the documents helps eliminate the inconsistencies in contract review. 

Limited Resources Available to Legal Teams and General Counsel 

Valuable resources such as manpower, time, and technology are critical in the process of manually reviewing contracts. Many firms encounter the problem of multiple reviews that usually pile up, leading to a backlog. The limited use of resources, especially technology, leads to an ineffective review process that can inhibit the accuracy and quality of the consolidation of pertinent data.  

To limit this challenge, firms should consider investing in new AI contract review technologies that can offer streamlined contract review, which offers more efficiency and accuracy. 

Risk Management and Contract Reviews 

Risk management is an essential component of contract review because it helps assess the vulnerabilities of a contract. It entails assessments of various potential scenarios, such as contractual risk management, reputation, and the probability of growth. Manual contract review can be tasking, and it can lead to cognitive biases that can lead to errors in an assessment of contract risks. The utilisation of an experienced contract reviewer can help identify, mitigate risks for the clients and consistently produce favourable results. 

Dynamic Nature of Contracts 

Traditionally, contract review was a static process, but with the evolution of contract language, there has been a shift towards the dynamic nature of contract reviews. Today, contracts are more technology-oriented and more complex, comprising various aspects that require careful consideration.  

Manual contract review may not offer the best solution to address this challenge, and automation may be the best solution. The use of artificial intelligence for contract review can help improve contract reviews quality, generate better results, and save time. 

In summary, manual contract review can pose several operational challenges. These challenges include time limits, inconsistencies, limited resources, risk management, and the dynamic nature of contracts. Now, let’s explore solutions for minimising these challenges.   

What is Automated Contract Review? 

Automated contract review is a process in which artificial intelligence (AI) technology is used to analyse and review contracts with minimal human intervention. This technology utilises advanced algorithms, natural language processing (NLP), and machine learning to interpret the text of contracts, extract key information, identify clauses, clauses, terms, and potential risks, and provide actionable insights.  

Automated contract review aims to streamline and expedite the contract analysis process, improve accuracy, and help legal professionals make informed decisions more efficiently. 

How Does Automated Contract Review Work? 

Automated contract review leverages artificial intelligence (AI) technologies to streamline and enhance the process of analysing and reviewing contracts. Here's an overview of how it works, step by step.  

Data Collection and Preprocessing 

Relevant contracts are collected and stored in a digital format. The text data is preprocessed to remove unnecessary formatting, ensuring that the AI system can work with clean and standardised text. 

Natural Language Processing (NLP) 

NLP algorithms are applied to understand the language used in contracts. This involves breaking down the text into sentences, phrases, words, and clauses. NLP enables the AI to grasp the contextual meaning of words, phrases, and clauses. 

Entity Recognition 

The AI identifies entities like parties' names, dates, amounts, addresses, and other important details within the contract. This helps in categorising and structuring the content. 

Clause Extraction 

The AI is trained to recognize specific clauses or terms based on patterns it has learned from a diverse set of contracts. It can identify clauses like indemnification, termination, payment terms, and more. 

Contextual Understanding 

Contract review AI analyses the relationships between clauses, terms, and sections in the contract to understand the contextual significance. This enables it to interpret the contract as a whole and not just isolated clauses. 

Risk Assessment and Compliance Checking 

The AI compares the contract's content to predefined risk indicators, compliance requirements, and legal standards. It highlights potential risks, discrepancies, or non-compliance issues for review. 


The ThoughtRiver AI system can be customised to align with industry-specific terminology, company policies, and legal requirements using custom playbooks. This ensures accurate analysis tailored to the organisation's needs. 

Contract Reporting and Insights 

The AI generates reports that summarise the contract's key terms, potential risks, compliance status, and other relevant information. These reports provide actionable insights for legal professionals. 

According to a LexisNexis study, 92% of those surveyed planned to increase their adoption of AI to use for legal analytics in the next year, while 68% said they already relied on their legal analytics to price out projects. 

User Validation and Collaboration 

The AI-generated analysis is presented to legal professionals for validation. They can review and make adjustments based on their expertise, ensuring the final analysis is accurate. 

As the AI reviews more contracts, it continues to learn and improve its accuracy and understanding. This ongoing learning process enhances the system's capabilities over time. 

In summary, automated contract review uses NLP, machine learning, and law-specific AI algorithms to swiftly and accurately analyse contracts, identify key terms, assess risks, and provide insights. This way, automated contract review technology improves efficiency, reduces errors, and enhances the decision-making process for legal professionals. 

Benefits of Automated Contract Review 

Automated contract review is revolutionising the legal industry by enhancing efficiency. Manual review can take days or even weeks to complete, but automated contract review can drastically reduce this time frame. Legal teams no longer have to scan every single document line-by-line to identify crucial issues.  

In addition, AI-powered contract review tools can quickly identify problematic areas and flag them for further review, saving lawyers valuable time. 

Accuracy Improvement with Automated Contract Reviews 

Despite legal teams' best intentions, there's always the possibility of human error in manual contract review. But with automated contract review, these chances are minimised, if not entirely eradicated. The use of AI ensures increased accuracy by identifying errors, omissions, and inconsistencies in documents. This technology can also identify clauses that are missing and suggest necessary amendments. 

Cost-Effective Solution 

Manual contract review is an expensive process, and companies spend millions of dollars annually on it. With automated contract review, companies can reduce expenses significantly. As automated contract review requires less time and fewer resources, companies have the potential for cost savings. The use of technology improves efficiency and accuracy, ultimately leading to reduced costs, providing businesses with some relief amid the current economic climate. 

Closing Deals Faster with Automated Contract Review 

Legal advice is essential for businesses; however, lengthy contract review processes can often hinder business decisions and put contracts at risk of cancellation before they're even signed. Automated contract review can speed up the contract review process, allowing businesses to close deals faster by identifying and addressing issues before they become contentious points and stall the process. 

How Do You Use AI for Contract Reviews? 

AI contract review expands your legal workflows by introducing automation, efficiency, and accuracy to various stages of the contract review process. Using AI for contract reviews involves integrating advanced technologies like natural language processing (NLP) and machine learning into the contract analysis process. Here's how AI expands the capabilities of automated contract reviews: 

  • Faster Contract Analysis: AI-powered tools can swiftly analyse and extract key information from contracts. This speed accelerates the entire review process, allowing your legal team to handle a larger volume of contracts in less time. 

  • Clause Extraction: You can train the AI to recognize specific clauses based on patterns in the contracts. The AI can identify clauses like indemnification, confidentiality, and termination. This eliminates the need for manual search, saving valuable time for your legal professionals.

  • Contextual Understanding: Enable the AI to understand the context of clauses and terms by analysing their relationships within the contract.

  • Risk and Compliance Assessment: AI can spot potential risks, non-compliance issues, and discrepancies within contracts by comparing contract content to company’s risk indicators and compliance requirements standards. This proactive risk assessment enables legal teams to address concerns promptly and make informed decisions.

RELATED: Contract Review Automation: How Legal AI is Revolutionising Compliance 

  • Enhanced Accuracy: AI's machine learning algorithms learn from historical contract data, leading to increased accuracy in identifying clauses, terms, and patterns. For example, legally-trained Lexible algorithms that power the ThoughtRiver contract acceleration platform ensure 95% accuracy. 

  • Scalability: AI contract review tools can handle a high volume of contracts simultaneously, making them scalable as your organisation grows. 

In addition, AI-generated insights provide data-driven information that informs negotiations, reduces negotiation cycles, and enhances overall contract outcomes. With routine contract review tasks automated and enhanced by AI, your legal team can redirect their efforts toward more strategic and value-added activities. 

Overall, by harnessing the power of AI, you can enhance the efficiency, accuracy, and effectiveness of contract reviews, enabling your legal team to make informed decisions with greater speed and confidence. 

Which Contract Types Can AI Review? 

AI can be trained to review a wide range of contract types across various industries. Some of the contract types that AI can effectively review include: 

Non-Disclosure Agreements (NDAs)—AI can identify confidentiality clauses, duration of confidentiality, exceptions, and obligations within NDAs. 

Service Agreements—AI can evaluate terms related to services, deliverables, payment terms, milestones, and performance metrics. 

Purchase Agreements—AI can review terms related to pricing, quantities, delivery schedules, warranties, and acceptance criteria. 

Lease Agreements—AI can extract clauses regarding rent, lease duration, maintenance responsibilities, and termination conditions. 

Employment Contracts—AI can identify clauses related to job roles, compensation, benefits, termination procedures, and non-compete clauses. 

Software Licensing Agreements—AI can analyse licensing terms, usage restrictions, payment structures, support and maintenance obligations. 

Distribution Agreements—AI can review terms related to distribution channels, territories, sales quotas, and termination conditions. 

Loan Agreements—AI can identify loan terms, interest rates, repayment schedules, collateral, and default provisions. 

Partnership Agreements—AI can examine terms regarding profit-sharing, responsibilities, decision-making, and dispute resolution mechanisms. 

Supply Agreements—AI can scrutinise terms related to product specifications, delivery timelines, pricing, and quality standards. 

Construction Contracts—AI can extract clauses related to project scope, timelines, payment schedules, change orders, and warranties. 

Insurance Policies—AI can identify coverage details, premiums, deductibles, exclusions, and claims procedures within insurance contracts. 

Franchise Agreements—AI can analyse terms related to franchisor-franchisee relationships, royalties, branding, and support. 

Real Estate Purchase Agreements—AI can review terms about property details, purchase price, contingencies, and closing procedures. 

Joint Venture Agreements—AI can extract terms regarding resource sharing, profit distribution, management structure, and exit strategies. 

These are just a few examples of the diverse contract types that AI can review. Through training and customization, AI can be tailored to understand and extract relevant clauses, terms, and obligations specific to the needs of different industries and organisations. 

Final Thoughts: Automated Contract Review Transforming the Legal Tech Landscape 

Automated contract review is introducing a new era in the legal industry by enabling faster, more efficient, and affordable contract review. Companies are moving away from manual contract review and embracing AI-powered tools that improve accuracy, speed, and accessibility to legal services.  

In summary, AI contract review technology is allowing law firms and legal teams to dedicate more time and focus on strategizing and other essential duties instead of spending hours combing through documents. As we move into the future, automating contract review processes could be the key to unlocking a more agile, efficient, and cost-effective legal industry. 

Discover how global industry leaders are using ThoughtRiver's legally trained AI to perform contract analysis and accelerate time to signature.