Use of AI in Contract Drafting and Review

Introduction

Contracts are legal agreements between two or more parties. They are used in almost every business or professional deal whether hiring someone, buying or selling products, or making business partnerships. Two important tasks in contract work are:

1.Contract Drafting – writing or preparing the contract.

2.Contract Review – checking the contract to make sure everything is correct and legal.

Traditionally, both of these tasks take a lot of time, effort, and legal knowledge. But now, Artificial Intelligence (AI) is helping to make them much easier, faster, and more accurate.

What is AI?

Artificial Intelligence (AI) is a type of computer technology that can think, learn, and make decisions like humans. It can read, understand, and analyze language, data, and documents.

Use of AI in Contract Drafting

Drafting a contract means writing a contract that includes all the necessary terms, conditions, and clauses. AI tools are now helping with this task

1. Using Templates and Past Contracts

AI tools can study hundreds of past contracts and legal templates. Based on the type of contract like lease, employment, or NDA, the AI suggests the correct format and language.

2. Auto-Filling Information

AI can automatically fill in basic details like party names, dates, amounts, and terms using stored information, saving time and effort.

3. Suggesting Clauses

AI recommends suitable clauses like payment terms, delivery timelines, dispute resolution methods, etc. based on legal standards and company rules.

4. Language Checking

AI checks the grammar, spelling, and sentence structure in the contract to make sure it is clear and professional.

5. Ensuring Legal Compliance

AI tools can also check whether the drafted contract follows the latest laws and regulations in a particular country or industry.

Use of AI in Contract Review

Reviewing a contract means reading the contract carefully to find any errors, missing information, unclear language, or risky terms. AI makes this process much faster and more accurate.

How AI is used in contract review:

1. Error Detection

AI scans the contract for errors such as wrong names, dates, amounts, or repeated information.

2. Finding Inconsistencies

It checks whether the contract is consistent throughout. For example, it ensures that the terms mentioned in one part match the rest of the document.

3. Highlighting Risks

AI can identify risky clauses, such as penalties, unfair terms, or confusing wording, and alert the user.

4. Checking for Missing Clauses

If an important clause is missing like a termination clause or a confidentiality clause AI highlight this so it can be added.

5. Comparing with Other Contracts

AI tools can compare the current contract with earlier contracts used by the same company or in the same industry, ensuring consistency and quality.

Benefits of Using AI in Contract Drafting and Review

1.Saves Time – AI can do in minutes what a person may take hours to do.

2.Reduces Human Error – AI is good at spotting small mistakes that humans might miss.

3.Improves Accuracy – It ensures the use of correct and legally accepted language.

4.Enhances Compliance – AI checks that the contract follows legal and company rules.

5.Cost-Effective – Reduces the need for long hours of legal work, saving money.

6.Standardization – Contracts become more uniform, clear, and easy to understand.

Limitations of AI in Contract Work

While AI is very helpful, it cannot replace human lawyers completely. AI may not understand complex legal ideas or emotions behind certain clauses. If the AI is trained on bad or old data, its suggestions may not be useful. Contracts contain private information so data safety is very important. A lawyer must still review the AI’s work before finalizing the contract. 

Conclusion:

AI is making contract drafting and review simpler, faster, and more accurate. It helps lawyers and businesses by doing the boring, repetitive tasks. This allows legal professionals to focus on important and complex work.

Even though AI cannot replace legal experts, it is a very useful tool that improves the overall contract process. In the coming years, more businesses and law firms will start using AI for their contract work.

DISCLAIMER- This article has been submitted by Pooja Chavan, trainee under the LLL Legal Training Program. The views and opinions expressed in this piece are solely those of the author.