AI and ML in CLM

First Reviewed : February 9, 2023
Last Reviewed: February 9, 2023

Contract Lifecycle Management (CLM) software has been around for a while, offering legal departments a wealth of benefits from substantial cost-savings to faster contract execution. Innovations in legal technology have introduced powerful capabilities including artificial intelligence (AI) and machine learning (ML) to enhance the effectiveness of CLM.

Artificial Intelligence in CLM

According to CONGA, “AI technology can vastly improve the management of unstructured data, unleashing the most—and most immediate—value when it’s applied to contracts.” 

AI in CLM software can analyze and interpret agreement clauses, extract key information, and offer efficient workflows. Presently, AI offers 3 key applications in CLM. 

Data Extraction

Legacy contracts from older systems can be imported seamlessly – and quickly – to new CLM platforms. If legacy contracts and their agreements are active, this stage needs to be carefully executed. Data extraction is an automated CLM task that can manage obligations and create notifications.

Contract Drafting

AI-powered CLM technology offers legal departments efficient and expert advice when drafting contracts. CLM AI can review contracts and provide negotiation and risk management tactics – without ever becoming tired! It’s like a contracts-exclusive department that can run all day, efficiently and precisely.

Managing Contract Obligations

One of the biggest and most powerful applications of AI in CLM is in contract management. According to Wolters Kluwer, legal departments have bigger workloads, “due to increased regulations and associated complexity,” resulting in “inefficiencies in contract processes that can lead to lost deals and unmitigated risks,” which AI-powered CLM software can solve.

Machine Learning in CLM

JD Supra says that ML falls” within the larger sphere of AI,” and that it is a “field comprising four subcategories: supervised learning, unsupervised learning, reinforced learning, and deep learning. It’s a technique that allows computers to ‘learn’ from data. In other words, it’s a type of AI that learns by itself.”

Within ML, a useful application lies in Natural Language Processing (NLP) capabilities that allows CLM technology to recognize and mimic human speech, in order to identify and resolve hard to understand points in natural language. This is useful when drafting contracts, identifying missing contract aspects, and sorting contract attributes according to context.

Will AI and ML Replace Lawyers in CLM?

Currently, AI works by analyzing human data and input. This means that AI-powered CLM software needs a lawyer’s input at some point of the CLM lifecycle. Although future iterations of CLM technology may offer legal departments a hands-off and fully automated contract management process, that’s still a long way off.

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