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Contract analysis

Introduction

There is no doubt that the world of law and the legal industry in particular is going through major changes and developments, which is why it is crucial to introduce new solutions and improvements. This has also affected the area of contract analysis to a great extent. With the help of technology especially the use of artificial intelligence (AI), the legal industry has changed the approach used in analyzing contracts. Risk Assessment and Guidance (RAG) AI is the leading edge of this transformation. RAG AI is an intelligent computer system that has capabilities of assessing, interpreting and advising on intricate legal contracts. It is an application that has revolutionalized the provision of legal information to law firms and legal departments.

Challenges

There are many issues that the legal industry faces in contract analysis. One of the major issues is that there are simply too many contracts to be reviewed and assessed. This results to backlog, slow response and at times, loss of opportunities. Also, the issue of legal language as well as the complexities and details that are involved in contracts are some of the challenges. The conventional approach of reviewing contracts is that the process is slow and is also associated with human error. Also, the need to maintain consistency in the risk appraisal of numerous contracts and the need to update the analysis in line with the dynamic legal requirements are some of the challenges that are worth noting.

AI Solutions

RAG AI has been identified as a possible answer to these challenges. This is because RAG AI has capabilities in machine learning, and natural language processing, which enables it to comprehend legal jargon. It can read through hundreds of contracts, highlight important sections of the contracts, cross reference them with set of principles and give a risk score. Some of the big law firms across the globe such as Linklaters and Allen & Overy have already adopted AI platforms like Kira and Luminance in contract review process. Apart from helping legal departments speed up the process of contract review, AI also minimises the chances of errors that are sometimes made by humans. In addition, it gives a unified risk profile for all the contracts, so that legal experts can have clear recommendations to make.

Benefits

There are numerous advantages of applying RAG AI in contract analysis. First, it cuts down the time and effort required for a manual check therefore increasing the efficiency of the work. Second, it enhances the accuracy and consistency of the risk assessment hence minimizing the chances of missing out on certain clauses or even legal implications. Third, it enables legal professionals to concentrate on important decisions that add most of the value to the organization. Last but not the least, it offers a mechanism for constant improvement as the AI system itself is a dynamic entity that gets better with every new contract that it processes.

Return on Investment

There is a return on investment (ROI) of RAG AI in contract analysis in several aspects. McKinsey in its report stated that AI could cut the time required for reviewing a contract by almost 60%. This means that there are huge savings in terms of time where employees are concerned. Also, the decrease of mistakes and the capacity to recognize possible legal problems at the initial stage can help organizations cut down on legal expenses and even avoid penalties. In addition, the enhancement in efficiency and productivity can result in shorter contract preparation time and hence enhance the customer satisfaction to a level of may lead to enhanced business.

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