How AI is Changing Contracts

How AI is Changing Contracts

AI technology stands-out in its ability to clarify and extract contract data. Contracts can be located, organized, and reviewed at faster rates while simultaneously decreasing dispute potential and increasing how many contracts a firm can execute and negotiate.

Technological advancements in artificial intelligence (AI) have remarkably reduced the inefficiencies and the challenges that companies face during the contracting process. Creating and maintaining contracts can prove to be difficult if there are ineffective, time-consuming methods. Using AI contracting technology improves the manner that firms undergo contracting in several ways.

Let’s discuss how current AI is changing contracts and how your company can benefit by implementing AI to overcome your contracting challenges.

Did you know that inefficient contracting can cause your firm “to lose between 5% to 40% of value on a given deal” based on the circumstances? (World Commerce & Contracting, 2018)

The volume of contracts a company processes can pose challenges to the organization, management, and ability to update contracts (Rich, 2018). By having a digital database of contract information, firms can quickly and efficiently view and extract various documents. It goes without saying that the contract lifecycle, from drafting – to execution, can be a lengthy and tedious process that requires high levels of manpower and attentiveness. Utilizing AI software can ease and streamline many of these processes.

AI technology stands-out in its ability to clarify and extract contract data. Contracts can be located, organized, and reviewed at faster rates while simultaneously decreasing dispute potential and increasing how many contracts a firm can execute and negotiate. If you typically have a “high volume of routinized contracts,” introducing contract management software that includes AI capabilities can improve productivity and increase efficiency in your firm’s contracting processes (Rich, 2018).

How AI is Set to Revolutionize Contract Life Cycle Management

How is AI Used in Contract Management?

During the contract management process, artificial intelligence (AI) can be applied to manage the following:

  1. Classify contracts – organizes contracts by clause and by contractor agreement
  2. Classify clauses – searches documents for meaning paragraph-by-paragraph, categorizing clauses according to content
  3. Highlight clauses – notes data that the clause protects
  4. Locate new clauses – protects new clauses in a clause repository
  5. Supervise various processes – reviewers can reorganize misclassified clauses for later identification
  6. Classify associated documents – acknowledge any associated document categories

Artificial intelligence in contracts greatly enhances and supports contract management strategies by both detecting and extracting data and by managing risk and transparency (Sehgal, 2020). By choosing to implement AI, your company can rapidly increase your contracting processes by shifting resources to create a conducive environment for generating a large volume of contracts. This in turn will offer great value to your company’s contracting process by designing more efficient pathways, and therefore potentially increasing ROI.

How Does AI Change the Contract Management and Creation Process?

Artificial intelligence in contracts enhances and optimizes contract operations. Leveraging AI will improve “decision-making by supplementing human knowledge, aggregating data, and making intelligent predictions” (Reghimi, 2021).

During the creation stage of a contract, AI helps by quickly reading complex, intricately detailed contracts. What causes AI to increase efficiency so profoundly in this stage is its ability to discover consistent patterns in contracts and comprehend their context.

AI can author contracts and include important details and clauses according to agreement details. The clause authoring capability can increase accuracy due to attentiveness towards data that seems rather minor (i.e., agreement length or supplier size).

When supplier details are included in various documents and emails, AI’s “optical character recognition” feature scans documents for crucial data points, converts them to text, then includes them into contracts (Reghimi, 2021). If the AI observes errors and discrepancies, it alerts a human, flagging the error, then later readjusts processes to account for correcting the error as it processes future documents.

Risk mitigation is an additional highlight of AI technology application. Artificial intelligence in contracts offers minimization of risk-exposure while increasing opportunity. AI mitigates risk by conducting an analysis of contract language. Following an analysis, the AI will recommend new clauses and/or language according to the document’s context and its history and performance of previous, similar contracts. Once this information is evaluated, the AI then decides which clauses are needed to provide increased protections of your organization (Reghimi, 2021).

During the approval step of the contract management process, AI uses contextual details to find where approvals are required from various individuals – automatically processing such approval steps through the contract workflow. Lastly, AI uses previous approval routing to pinpoint where further steps are needed, merging them effortlessly (Reghimi, 2021).

How Artificial Intelligence Supports Contract Lifecycle Management

How Does AI Improve Contract Renewals?

The most concrete way that AI improves the contract renewal process is by creating recommendations for the next steps. For example, it might suggest adjusting a clause or two, or it might simply suggest signing and approving the renewal (Reghimi, 2021).

During a performance analysis at renewal, AI can conduct an analysis of a supplier’s performance per contract. The AI will then recommend if renewing the contract is a smart choice for your firm. According to Reghimi (2021), “this digital analysis can generate 30-50% time savings per contract, meaning that your team is freed up to do more strategic work, identifying new key suppliers and opportunities.” In terms of purchase management, AI greatly improves your bottom-line by finding cost-sensitive, on-contract options that will result in savings and buying power during contract renegotiations (Reghimi, 2021).

Additional Applications of AI-Based Contract Management Software

The implementation of AI can revolutionize, streamline, and enhance your current contract management processing systems.

For example, AI offers cloud storage for increased accessibility from various devices. AI also increases consistency of language and key terms that span across your contract database. Additionally, AI-based contract management software can effectively manage and accurately organize third party contracts. If your firm consistently conducts a very labor-intensive contract management process due a high volume of contracts, using AI can be beneficial to due its ability to upload hundreds of contracts instantly. And finally, AI can automate tasks and increase time-efficiency (Gottlieb, 2021).


By developing a greater understanding of what AI is capable of, you can leverage its abilities to maximize results in your company’s contract management process.

Contract management software with AI capabilities can increase efficiency and productivity rates by reducing time allocated towards drafting and reviewing contracts. AI creates streamlined pipelines for better routinization and automation in each step that a contract passes through during its lifecycle.

Artificial intelligence (AI) is unquestionably changing modern-day contracts. As technological advancements to AI continue, contract solutions will only be enhanced and improved. Continue staying up to date on the latest technological developments, and we recommend returning to our blogs for more updates, resources, and information for all of your contract-based needs so that you can continue to improve your own contracting operations.


Gottlieb, A. (2021, May 31). How AI is Changing Contract Management. Frugal Entrepreneur.

Reghimi, A. (2021, May 18). How AI is Changing the World of Contract Creation and Management. JAGGAER.

Rich, B. (2018, February 12). How AI Is Changing Contracts. Harvard Business Review.

Sehgal, D. R. (2020, October 1). How is AI changing contracts. iPleaders.

World Commerce & Contracting. (2008, December 15). Driving better fiscal management and revenue recognition with enterprise contract management technologies. World Commerce & Contracting.

Disclaimer: The information provided on this website is not intended to be legal advice; rather, all information, content, and resources accessible through this site are for purely educational purposes. This page's content might not be up to date with legal or other information.

Written by Lindsey Paulk

Lindsey Paulk is a Content Writer in Jacksonville, Florida that specializes in digitally communicating all-things contract management.
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Naveen, a seasoned content reviewer with 9+ years in software technical writing, excels in evaluating content for accuracy and clarity. With expertise in SaaS, cybersecurity, AI, and cloud computing, he ensures adherence to brand standards while simplifying complex concepts.

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