- last updated: 18 Nov, 2024
- 15 min read
- Arpita Chakravorty
Intro
Managing contracts has become increasingly complex, where ensuring every clause meets internal standards and regulatory requirements is essential. Traditionally, legal teams have relied on contract clause libraries to streamline the review process, but as contract complexity grows, clause libraries alone aren’t always enough. The next step forward in contract management is using AI to go beyond static clause libraries and enable real-time clause intelligence.
The Benefits of a Clause Library in Contract Review
While clause libraries are often associated with contract drafting, their true potential is unlocked when used in contract review. Here’s how clause libraries specifically aid in making contract reviews faster, more reliable, and compliant:
- Accelerated Review Processes: A clause library provides an easy reference for approved terms, enabling legal teams to spot non-standard language quickly. This streamlining of clause reviews saves time, allowing legal professionals to focus on high-risk areas of the contract.
- Consistency and Quality Control: Having a set library of pre-approved clauses maintains consistency across contracts, allowing legal teams to spot deviations and non-standard terms more easily. These vetted clauses serve as a quality benchmark, reducing ambiguity and ensuring alignment with compliance requirements.
- Improved Team Collaboration: A clause library is a centralized tool that supports not only the legal team but also sales, procurement, and other departments by providing a single source of truth. This collaborative tool ensures that all departments are aligned, reducing misunderstandings and expediting contract approvals.
Though clause libraries lay the groundwork for efficient contract review, they can’t always catch the hidden risks embedded within complex clauses. This is where advanced AI technology can make a significant impact.
Improving Contract Clause Review with Generative AI: What CLM Should Be Doing
Advanced AI has transformed the contract review process, enabling a deeper, more contextual understanding of contract language. However, for GenAI CLM solutions to truly excel in clause review, they must deliver capabilities that go beyond basic clause matching. Here’s how an ideal AI-powered CLM should support clause review at a detailed level:
- Precise Issue Identification: AI needs to analyze each clause for nuanced issues, such as vague language, compliance risks, and dependencies. By detecting these at an issue level, AI can provide targeted insights that extend beyond simple keyword matching.
- Contextual Risk Detection: Contract risks often arise from the interaction between multiple clauses rather than from single clauses alone. AI must assess clauses in their broader context, identifying potential risks that may span several sections of a contract.
- Intelligent Redlining and Suggestions: Beyond flagging non-standard clauses, AI should generate specific redline recommendations. These tailored suggestions allow legal teams to amend clauses without overhauling the entire contract, saving time and preserving context.
- Pattern Recognition Across Contracts: An ideal CLM would leverage AI’s pattern recognition capabilities to identify frequently occurring risk-prone language. This insight helps legal teams proactively address recurring issues, strengthening future contract reviews.
By going beyond traditional clause-matching, a GenAI CLM that fulfills these requirements can enable legal teams to gain a more comprehensive view of contract risk and make more informed review decisions.
Why Most Contemporary CLM Solutions Fall Short in Clause Review
While many contract lifecycle management (CLM) solutions offer clause review features, most fail to address contract risk on a truly granular level. Contemporary CLM platforms typically use learning AI models trained on limited contract data, restricting their ability to capture the full range of potential risks in complex contracts. Many CLM systems merely suggest blanket clause replacements, even when a minor deviation could be resolved with more precise amendments. This one-size-fits-all approach not only introduces potential inconsistencies but also falls short in addressing specific risks embedded in nuanced contract language.
Further, most AI-driven CLMs lack the source citations that legal professionals rely on for assurance, making it difficult for legal teams to fully trust AI recommendations. Without transparent explanations, legal professionals are often hesitant to use AI-generated recommendations, fearing unverified changes might increase risk.
Such limitations highlight the need for a more advanced approach to clause review—one that is trained on expansive contract data, understands context, and provides source-backed suggestions that legal professionals can trust.
Sirion’s Advanced Clause AI: Deeper Issue Detection for Risk Mitigation
Sirion’s Advanced Clause AI is designed to address these gaps by offering a robust, comprehensive approach to clause review. Unlike other solutions, Sirion’s AI is trained on millions of contract-specific data points, leveraging a blend Large Language Models (LLMs) and Small Data Models (SDMs) to enhance accuracy and contextual understanding. It provides transparent explanations for each recommendation, enabling legal professionals to review confidently. Here’s how Sirion’s AI goes beyond standard clause review, focusing on precise issue detection:
- Define: Customize contracting playbooks within Sirion’s platform, setting standards and preferences that the AI will follow. Sirion’s AI is equipped to detect even nuanced deviations, allowing it to align with specific business needs and legal frameworks.
- Review: Sirion’s AI analyzes each clause in the contract, identifying issues across various risk categories and providing context-based redline suggestions. With explanations for each recommendation, legal teams gain the clarity needed to assess deviations within the broader contract context.
- Act: Based on AI-generated insights, legal teams can accept, modify, or refine redline suggestions. The platform enables collaboration by allowing teams to tag stakeholders for additional input, ensuring a comprehensive review and resolution of all contract issues.
Sirion’s AI empowers legal professionals by combining advanced issue detection, context-aware recommendations, and transparent reasoning—a combination that mimics the nuanced approach of seasoned legal experts.
The Way Forward: Manage Risk with Confidence and Precision
Contract lifecycle management today isn’t just about drafting contracts faster; it’s about reviewing them smarter. With Sirion’s Advanced Clause AI, organizations can achieve a level of contract intelligence that goes beyond standard clause review, identifying and mitigating issues before they become risks. By taking contract review one step deeper with advanced issue detection, Sirion delivers AI-driven insights that reflect the expertise of seasoned legal professionals.
Additional Resources
Contract Clause Library: What it is and Why You Need One
20 Important Contract Clauses for Businesses to Know
What is Force Majeure Clause? Using AI for Effective Response
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