AI Application In Contract Lifecycle Management

Olga V. Mack
by Olga V. Mack 07 Oct, 2022

Artificial Intelligence has thoroughly revolutionized all fields. Part of its widespread appeal is the fact that it counteracts a major flesh and bone impediment - human error. Properly calibrated, synched, and maintained, AI tools are 95% error-proof. And that vestigial 5% can easily be addressed and mitigated through coding and software updates. 


Humans are less reliable and less "updatable" than AI. In this sense, there is no doubt that AI and machine learning are the future. They are integral parts of the digital revolution and their broad appeal, not to mention how pervasive they've become, are total game-changers in all industries. This is true even when it comes to a vital element in most businesses - contracts and their lifecycle


In this article, we'll address how AI is changing that landscape, improving CLM stages, and making the whole ordeal easier, faster, and streamlined.  




What is AI (Artificial Intelligence)? 

AI, or artificial intelligence, is a type of technology that allows machines to think and learn in a way that mimics human intelligence. AI can be used in various fields, such as robotics, speech recognition, software, and machine translation.


As a whole, it's important to note that AI is a wide umbrella term that encompasses many different types of technologies. Artificial intelligence is a fairly recent development, with the first AI programs created in the 1950s. They were very basic algorithms, used by companies to automate different functions and activities within their platforms and supply chains. 


The early days of AI research were focused on creating machines that could replicate human intelligence and consciousness. Machine learning was one of the first major branches of AI to be developed, and it has been used in many different ways since its creation.


Artificial Intelligence in Contract Lifecycle Management

There are a variety of AI techniques that are used in contract management software. These include natural language processing, machine learning, and deep learning.


  • Natural Language Processing: the process of breaking down a sentence into its parts and then assigning each word or phrase to a category such as a noun or verb


  • Machine Learning: the process by which machines learn from data to make predictions or decisions without being explicitly programmed 


  • Deep Learning: an artificial intelligence technique that uses neural networks to teach computers how to do things like recognize images, understand speech, and translate languages


Each of these components or processes is used when it comes to developing AI software - including but not limited to CLM apps.




In the contract management industry, AI has been in vogue for a long time. It is not just used for the creation of contracts, but also for the management of them. AI has been used to create contracts since 2012 when it was first introduced by LawGeex, an AI-powered contract review and discovery platform. 


The company's CEO, Dan Fagin, said that they "use AI to automate the work that lawyers and paralegals do."


LawGeex is not the only company using AI in its contract management process. In 2016, IBM's Watson was introduced as a tool for contract managers at law firms to use in reviewing documents and generating templates for contracts.


These were massive breakthroughs in the field of AI Contract Management and today, thanks to open-source coding and easily affordable AI, more and more vendors, software developers, and small businesses are not only employing CLM AI tools from multiple companies, but even customizing and creating their own.


AI-based Application Areas in Contract Management

AI is a powerful tool that can help in contract lifecycle management. Artificial intelligence can help in drafting, analyzing, and even negotiating contracts. AI can also be used to automate the process of contract enforcement.


Drafting Contracts

AI tools can draft various types of legal documents such as employment agreements and NDAs without human intervention. They work with massive databases, processing huge repositories and data points to draft air-tight binding contracts. 


Analyzing Contracts

Artificial intelligence is capable of processing large numbers of data points at a much faster rate than humans and is hence more efficient in identifying possible risks and potential loopholes in the contract.


Negotiating Contracts

The use of AI for negotiating contracts has been on the rise with some companies using it to negotiate all kinds of deals while others use it in specific areas like labor negotiations or price negotiations.


Contract Enforcement 

AI can be used to manage a contract lifecycle. Perfectly attuned AI, synched up with other systems and APIs (Application Programing Interfaces), can automate different key stages of a contract's life, such as releasing funds, operating and managing escrows accounts, flagging parties when there are issues, notifying folks regarding deadlines and milestones, and even renewing a contract when the previous one expires.


Organizing Contracts 

AI can help organize contracts, catalog them, and help out personnel whenever they might need to pull up a clause or check something out. 



Due to the blockchain revolution and digital ledgers, AI is now even more sought after when it comes to contracts and contract negotiations. The creation of smart contracts, which use avant-garde blockchain tech, is also partly dependent on the employment of great AI. As this avenue expands and its usage becomes more universal, artificial intelligence in a contract's lifecycle management will become even more critical - to the point where its adoption by most companies will stop being something optional or voluntary and become an obligation, a necessity they have no choice but to subscribe to in order to remain successful and maintain the level of competence shareholders have become accustomed to. 


The Main Benefit of Using AI-Powered Contract Management Software

The essential benefit of using AI-powered contract management software is that it helps you manage contracts with ease and efficiency. There is a lot of data involved in the process, and it is hard for humans to keep track of everything. AI can help you organize your contacts and keep them organized, saving you time and money.