Advanced Contract Analytics: Mitigating Legal Risk Proactively

Administrative tasks and risk management often consume a significant portion of lawyers’ time. How can legal teams shift their focus from repetitive paperwork to strategic decision-making?

Today, advanced contract analytics addresses both operational inefficiency and risk exposure in one fell swoop. It uses artificial intelligence (AI) and machine learning to automate and improve contract review, analysis, and negotiation processes. 

Cutting-edge technology now helps in-house legal teams and law firms streamline their legal workflows. Here, we explore how contract analytics works, its features, and how it benefits legal teams in managing risk and improving efficiency.

How AI & Machine Learning Support Advanced Contract Analytics

AI and machine learning are foundational to modern contract analytics, driving precision, speed, and more informed decision-making in the legal field. Now, we can automate tasks such as contract review and risk identification, enabling legal teams to efficiently process large volumes of contracts accurately. Here’s how:

AI in Contract Drafting and Review

AI tools for lawyers can rapidly assess contracts for errors, inconsistencies, missing clauses, and potential legal risks. For example, these tools can flag high-risk provisions, enabling faster and more confident review. 

Lawyers can also generate more accurate drafts quickly, which drastically reduces turnaround time while ensuring contracts meet relevant legal standards. This could lead to a gain of 200 hours per U.S. lawyer per year, totalling 266 million hours in annual productivity. Those 200 hours could translate into $100,000 in new, billable time per lawyer each year, based on current average rates, according to Thomson Reuters’ Future of Professionals Report 2024.

Built-In Legal Knowledge

Advanced contract analytics tools are pre-trained on a broad corpus of legal documents, which enables them to understand contract structures, standard clause language, and red flags out of the box. 

Foundational legal intelligence tools help support lawyers in drafting and reviewing contracts faster and with greater confidence. Lawyers can continuously improve and refine their contract creation and review processes. This is especially valuable for teams that want immediate value without the complexity of training a custom AI model.

Spellbook's Key Contract Analytics Features

Spellbook is a contract analytics tool trusted by over 3,000 law firms and in-house teams worldwide. It offers a range of features designed to increase efficiency, including:

Automated Contract Review

Say you receive a 20-page contract for review. Spellbook’s automated contract review feature instantly highlights inconsistencies for your attention and flags potential issues, such as missing clauses and ambiguous language (e.g., unclear termination clause). It also simplifies the contract redlining process by suggesting additions, edits, and rewording ambiguous clauses to ensure clarity.

AI-Powered Risk Identification

AI flags potential risks in legal documents that could expose parties to future legal challenges. Spellbook suggests specific changes to mitigate these risks, such as modifying an indemnity language or specifying more precise liability limits.

Spellbook helps law firms and legal departments standardize and automate the use of trusted language, whether that comes from internal precedent or sources like Thomson Reuters Practical Law, which is continuously updated to reflect evolving legal norms. By codifying your internal standards, Spellbook helps prevent outdated or non-compliant language from entering new contracts.

Clause Suggestions

Spellbook can suggest the most appropriate clause for a current contract based on your preferred precedents and the relevant context. When creating a new contract, select the type of clause you need (e.g., non-compete, confidentiality). Spellbook will pull pre-approved clauses from its template library, so you don’t have to manually search for them.

Playbook and Template Customization

Spellbook enables legal teams to operationalize their own historical knowledge and evolving standards by embedding firm-specific playbooks, clause libraries, and best practices directly into the drafting process. 

Repetition is common in legal work. Let’s say that your legal department often drafts sales agreements. Spellbook allows you to create and store a custom sales agreement template that includes your company’s preferred clauses, such as payment terms and confidentiality provisions. 

After you build a template, save it to the Spellbook library for reuse in future agreements. This ensures consistency across contracts. 

If a client negotiates your standard 30-day payment term, Spellbook can suggest a pre-approved 45-day alternative from your playbook. This helps you respond faster while staying consistent with company policy.

The Impact of Advanced Analytics on In-House Legal Teams

With advanced contract analytics tools, legal teams can accomplish more work in less time, thanks to streamlined workflows and improved risk management. Here’s why:

• Increased Productivity: Automating routine contract tasks (e.g., drafting, reviewing, redlining) reduces the time spent on work, allowing lawyers to focus on high-priority efforts such as contract negotiation.
• Enhanced Risk Management: AI and machine learning models minimize errors and risks early in the contract drafting and negotiation process, allowing legal teams to address and prevent issues before they escalate.
• Streamlined Compliance: With automated compliance verification, lawyers ensure agreements are internally consistent and compliant without manually cross-checking legal templates.
• Improved Decision-Making: AI tools like Spellbook surface relevant clauses, flag inconsistencies, and benchmark draft language against industry standards directly within Microsoft Word. Legal teams get the clarity and context for more informed negotiations and faster actions.

Challenges in Advanced Contract Analytics

While advanced contract analytics offers significant benefits, organizations may face challenges in adopting technology, including:

• Data Privacy and Security Concerns: Legal documents often contain sensitive data. Look for tools with robust security features to protect confidential information.
• Quality and Consistency of Legacy Contracts: Legacy contracts can pose challenges for implementing contract analytics due to variations in language and structure. Look for software that flags inconsistencies and provides suggestions for revising outdated clauses.
• Change Management and User Adoption: It may be challenging for legal teams to adapt to new software. Choose user-friendly solutions that easily integrate into the software lawyers already use, such as Microsoft Word.

Despite these challenges, the transition to advanced contract analytics can be a seamless process. Spellbook’s comprehensive approach accelerates adoption, making it easy for teams to embrace and benefit from the future of contract analytics.

Future Trends in Contract Analytics

As technology continues to evolve, the future of contract analytics looks even more promising. In fact, the global legal technology market is projected to double by 2027. 

Integration with Contract Lifecycle Management (CLM)

Organizations can manage the entire contract process (from drafting to execution and renewal) seamlessly with the integration of contract lifecycle management (CLM) systems. This holistic view improves contract performance and decision-making.

Further Integration with AI and Automation

The future of contract analytics will see even more advanced AI and automation, with the potential for fully automated contract negotiations and execution. This means enhanced analytics accuracy, making contract management more efficient than ever.

Spellbook stands at the forefront of this evolution, helping organizations and law firms future-proof their contract analytics strategies and stay ahead of emerging trends. 

Ready to revolutionize your contract analytics process? Discover how Spellbook can help streamline your workflows and improve efficiency. Schedule your 7-day free trial with Spellbook today.

Key Takeaways

• Advanced contract analytics enhances efficiency, accuracy, and risk management for legal teams.
• AI-driven features such as automated contract review, risk identification, and clause suggestions help legal teams optimize their workflows and reduce errors.
• The future of contract analytics includes deeper integration with CLM systems and further advancements in AI automation.

Frequently Asked Questions

What Types of Contracts Benefit Most from Advanced Analytics?

High-volume contracts, such as procurement or sales agreements, and high-risk contracts, such as mergers or intellectual property agreements, can benefit from advanced contract analytics due to their need for precision and the time-saving benefits of analytics.

How Long Does It Take to Implement an Advanced Contract Analytics System?

Implementation timelines can range from a few weeks to several months, depending on the organization’s size, contract complexity, and customization needs. 

Spellbook can be downloaded, installed, and activated from the Word add-ins menu in under a minute. Lawyers can start drafting, reviewing, and analyzing contracts immediately after installation.

Can Advanced Contract Analytics Keep Up with Changing Regulations?

Yes, advanced contract analytics tools can adapt to changing regulations. AI tools such as Spellbook can be regularly updated to ensure compliance with evolving legal standards. 

How Does Advanced Contract Analytics Handle Variations in Contract Language and Templates?

Contract analytics systems use AI and natural language processing to interpret and analyze diverse language in contracts and templates. AI tools can accurately identify key clauses and ensure proper contract analysis.