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The Role of Generative AI With Complex Contracting: Exciting Possibilities Emerge

  • Legal Operations
  • 2 Mins

Generative AI use cases continue to expand as the technology matures and adoption increases. In the legal industry, there is increasing intrigue over how it can assist with contract drafting and negotiation. In the Wolters Kluwer 2023 Future Ready Lawyer Survey Report, 73% of lawyers surveyed from both legal departments and law firms expected to integrate generative AI into legal work within a year. According to the report, lawyers are optimistic on generative AI’s ability to automate routine legal operations, including contract drafting and complete a large number of tasks quickly. This is a new avenue legal teams can explore to help close recurrent gaps with contract drafting and negotiation such as the inability to integrate with an organization's CRM, financial system, and other databases or drafting clauses in the appropriate tone and voice.

For years, lawyers have approached complex contracts with a more manually focused approach. Referencing old contracts, accessing cause libraries, and discussing with colleagues has been standard practice when drafting and negotiating a new deal. While this has worked, there may be a better way that can yield the same results (or better) in a fraction of the time. Generative AI solutions have entered the chat. Let’s take a look at what questions to ask before investing in next generation contracting tools and the potential benefits.

Justifying Generative AI Strategy and Spend

According to the Thomson Reuters 2023 Legal Department Operations Index, there was a 53% increase in corporate legal departments using legal technology tools. The report noted “This increased use of technology no doubt serves to increase the productivity and output of the department’s attorneys, a vital outcome given other realities the department may be facing.” It is not surprising that when asked to rank components of cost-control strategy for the following year, efficient processes (83%) and technology/automation (57%) were in the top four responses. Using generative AI on contracts is another opportunity that aligns with these findings.

As with any new tool, lawyers want to know how it will help them do their job and practice law more efficiently.

Some questions that will need to be answered when deciding what to invest in include:

  • What longstanding process gaps can the tool address and how?
  • Are there any anticipated adoption hurdles?
  • How can usage help shift costs?
  • What strategies can be employed to combat inherent risks? Examples include misinformation and maintaining ethical duties such as confidentiality.

Having a provider that has experience with the tools can answer these questions and provide demonstrations to foster better buy-in can be invaluable. A partner with experience integrating generative AI into the organization’s contract database so that it is highly usable is also key.

Benefits of Using Generative AI for Contract Drafting and Negotiations

Enriching the contract drafting and negotiation processes with generative AI can improve outdated and inefficient processes. First, consider the risks of using a model that is market facing and not integrated with the organization’s internal systems. This opens the door for unintentional leakage of sensitive information, drafting that does not adhere to company guidelines or takes on too much risk, and other liabilities. This makes tools with easy integration capabilities that can be trained on an organization’s own data more appealing and less risky. Chances are that company decisionmakers will be more inclined to buy into those tools.

To be even more effective, legal teams should consider going beyond merely using generative AI on their own data. Accounting for context will increase the tool’s value and lessen the likelihood of certain errors. Think of nuances that the tool may miss such as whether a certain clause has been flagged under a previous contract or whether the contract language sounds like how a specific business unit phrases their deals. This will require a provider with the capabilities to add an intelligent layer on top of the organization’s contract database to tag and account for factors such as clause commonality, versioning, partner preferences, and more.

Taking these steps not only improves confidence in using generative AI to aid with drafting efforts – but also renders the negotiation process more effortless, on point, and speedier. This safer approach to integrating generative AI still accounts for risks but provides more context so the tool gets it right. Even so, legal teams must remember this is just an aid that can enrich the contracting process. Human oversight is still necessary to maintain quality control and the appropriate level of expertise needed on a deal or agreement. At the end of the day, it comes down to figuring out what is unique about the specific legal team’s contracting approach and creating strategy around that when bringing generative AI into existing workflows.

The contents of this article are intended to convey general information only and not to provide legal advice or opinions.

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