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AI for contract management: A departure from error-prone processes to automated agreement handling

ai contract management
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In the ever-evolving business landscape, contracts serve as vital conduits, facilitating the smooth flow of transactions within the corporate ecosystem. They are pivotal in establishing trust, mitigating risks, and fostering profitability as businesses expand and cultivate diverse relationships with stakeholders such as suppliers, partners, and customers. However, managing a multitude of contracts is a complex chore, fraught with challenges due to their varied and often disordered nature. Inefficiencies in contracts can diminish significant value from deals, making effective contract management imperative.

Enter AI-powered contract management — an effective tool that transforms the handling of contracts. With AI, businesses can navigate through an extensive array of contracts with precision, enhancing efficiency and decision-making. AI clarifies critical contract elements, such as expiration dates and legal provisions, facilitating informed decisions that strengthen a company’s competitive stance. According to Future Market Insights, the global contract management software market, valued at approximately $2,200.1 million in 2022, is projected to witness a robust CAGR of 12.9%, reaching nearly $2,448.7 million by 2023.

In the evolving domain of contract management, AI emerges as a crucial ally for legal professionals, amplifying their expertise and efficacy.

This article aims to unravel the intricacies of AI in contract management, shedding light on its transformative potential, myriad use cases, and the profound benefits it can offer businesses.

What is AI-based contract management?

AI-based contract management involves utilizing Artificial Intelligence (AI) technologies to optimize and streamline the processes involved in drafting, organizing, and overseeing contracts. These AI systems are engineered to comprehend the nuanced and complex language typically found in legal contracts, mirroring the proficiency of a human lawyer.

AI algorithms undergo training to recognize patterns and discern various elements within contracts, allowing them to identify key terms, conditions, and concepts effectively. They achieve this through a meticulous analysis of contextual and repetitive language present in legal documents.

AI-driven contract management significantly reduces repetitive administrative tasks across the entire contract lifecycle. For instance, AI software can automatically extract vital data and highlight specific noteworthy terms, such as effective dates, governing laws, or personal details. Without AI, legal professionals would need to tag and capture such information manually.

This automation not only enhances efficiency but also augments the accuracy and consistency of contract management processes.

Why do we need AI for contract management?

Contracts are a crucial foundation for establishing trust and accountability among multiple parties. They ensure adherence to clauses, timely payments, completion of work, and more. However, understanding these multi-page documents can prove to be difficult and time-consuming. This complexity arises due to the detailed and legalistic nature of the language used, making it challenging to grasp the full scope of obligations, rights, and provisions contained within them.

In an environment where time equates to money, industries such as law firms, government agencies, HR departments, and real estate brokers confront the challenge of managing extensive contracts.

Consider the scenario where the expiration date of a contract is nearing, or there are alterations in legislative regulations affecting contractual terms; it becomes imperative for law firms to notify their clients promptly. Additionally, it is crucial to monitor agreed-upon payments and deliverables closely. Fortunately, a substantial portion of these tasks can be streamlined and made more efficient through automation, thereby substantially cutting down the time and expenses associated with these processes.

This is where technology steps in. The integration of AI into contract management has made significant advancements in replicating tasks that were previously executed solely by law professionals. Technological integration into contract management has seen remarkable advancements, with AI replicating tasks traditionally handled solely by legal professionals, such as data extraction and risk mitigation. This synergy of technology and human expertise heralds a new era of efficiency and precision, minimizing errors and accelerating the contract lifecycle, making the management of contracts more effective and agile.

By identifying critical terms to mitigate risks and accelerating the entire contract lifecycle, the synergy

Launch your project with LeewayHertz!

Leverage the power of AI to simplify contract management. Partner with us for robust solutions to simplify your operations, leaving behind complexity and risk.

Key factors to consider when implementing an AI-powered contract management system

Implementing an AI-powered contract management system necessitates thorough planning and consideration of several crucial factors, such as:

Data quality

Accuracy: AI-powered contract management systems thrive on precise data. Ensure that the data entered is accurate to make informed decisions.

Completeness: The data should be comprehensive. Missing information can hinder the performance and the decision-making capabilities of the AI.

Timeliness: The data should be up-to-date to reflect current realities and make relevant decisions based on the most recent information.


Compatibility: Ensure the AI system is compatible with existing CRM, ERP, and document management systems for smoother operation and information flow.

Coordination: Detailed planning is essential to ensure that all systems work in harmony without glitches, contributing to smoother operations.

User adoption

Training: Invest in extensive training programs to familiarize the team with the new technology, ensuring they can use it efficiently.

Support: Offer ongoing support and resources to users to solve any issues swiftly and ensure consistent and productive use of the new system.


Access control: Implement stringent access controls to restrict access to sensitive information, allowing only authorized personnel to access confidential data.

Data protection: Robust security measures, such as encryption, should be in place to protect the data from potential threats and unauthorized access.

Use cases of AI-based contract management systems

AI in contract management has various use cases, which include:

AI-based contract management systems

Data extraction

AI simplifies real-time data extraction from diverse file formats, including PDFs, images, and word processors. AI’s Natural Language Processing (NLP) capabilities enable the extraction of crucial details such as expiration dates, stakeholder names, legal clauses, and contract terms and conditions. This automation streamlines contract setup, freeing up valuable time previously spent on tedious tasks. The extracted information can be leveraged for various purposes, from sending deadline notifications to identifying ambiguous language for legal review or sending reminders to clients.

Intelligent workflow automation

AI’s capabilities extend beyond data extraction; it can also orchestrate contract reviews, approvals, and workflow automation. Managing stakeholders can be a challenging aspect of contract management, but AI offers valuable assistance by:

  • Sending timely signature request emails.

  • Automatically sending reminders to those who missed initial emails.

  • Comparing various contract versions and highlighting changes.

  • Ensuring everyone accesses and collaborates on the correct contract version.

It functions as a digital shepherd, guiding stakeholders efficiently towards their necessary tasks.

Extract insights from the contract

AI is exceptionally adept at extracting valuable insights from contracts. AI can identify patterns, trends, and anomalies in the contract by analyzing large datasets. For example, it can pinpoint common clauses, frequently negotiated terms, or areas of high legal risk. These insights empower businesses to make well-informed decisions, negotiate contracts more strategically, and better understand their contractual relationships. AI-driven insights also enhance risk management by highlighting potential compliance issues and offering early warnings of contract-related challenges, allowing for proactive mitigation measures.

Bulk document organization

AI-driven contract management tools excel at efficiently organizing extensive contract libraries, simplifying the process of locating specific contracts or data. This streamlined approach saves time and minimizes the likelihood of errors or omissions.

By simply uploading a batch of documents, AI swiftly tags and organizes them, automatically grouping attachments to consolidate all pertinent information for a particular case, deal, or contract, all at the click of a button.

Contract review

AI-powered contract review refers to using AI technologies to automate and enhance the process of reviewing and analyzing legal contracts. This technology-driven approach aims to improve contract review efficiency, accuracy, and speed, benefiting businesses and legal professionals in various ways.

The average contract review takes approximately 92 minutes. AI can streamline contract reviews by automatically identifying potential issues or areas of concern, ensuring accuracy, completeness, and compliance with regulations in less time. Moreover, AI can reveal unexplored cost-saving opportunities that have previously gone unnoticed during manual reviews.

Contract risk analysis

Automated contract management systems integrated with AI capabilities can scrutinize contract terms, identify potential risks, and evaluate adherence to internal policies and external regulations. These systems can extract and assess crucial contract data by harnessing natural language processing flagging non-compliance or potential discrepancies. This proactive approach to risk management empowers organizations to mitigate potential pitfalls, promptly address non-compliance issues, and avoid legal disputes.

Managing contract volume

As businesses grow, the volume of contracts they handle escalates significantly. For instance, enterprises may oversee as many as 20,000 contracts concurrently. AI proves valuable in efficiently managing this extensive contract load by:

  • Automating routine tasks

  • Detecting potential areas of concern.

  • Streamlining bulk uploads.

  • Centralizing related documents in one location.

This alleviates the workload on contract managers and enhances overall efficiency, ensuring effective contract management.

Contract creation and standardization

AI contract management solutions expedite contract creation by automatically generating drafts from established templates and user-defined parameters. This eliminates the potential for manual errors and reduces the time required to draft contracts while ensuring document accuracy. Businesses can enhance efficiency, reduce turnaround time, and uphold compliance with internal policies and legal mandates by standardizing the contract creation process.

Intelligent contract management systems ensure consistency in contract structures and language while saving substantial time for legal professionals. These systems enhance efficiency, maintain standardization, and offer language improvements, streamlining the contract drafting process and enabling law professionals to focus on strategic tasks.

Launch your project with LeewayHertz!

Leverage the power of AI to simplify contract management. Partner with us for robust solutions to simplify your operations, leaving behind complexity and risk.

Automating contract lifecycle management

AI plays a pivotal role in automating different phases of the contract lifecycle, including contract initiation, approval workflows, and monitoring essential dates or milestones. With AI algorithms, organizations receive timely notifications for contract renewal, expiration, or re-negotiation, enabling proactive management and minimizing the risk of missed opportunities or compliance issues.

A primary challenge in contract management is maintaining visibility throughout the contract lifecycle. AI technologies provide real-time visibility into contract status, critical dates, and obligations. Advanced contract management systems can generate automated alerts for contract renewals, milestones, or potential risks, ensuring businesses never overlook important deadlines.

Predictive analysis

AI leverages historical contract data to extract insights and predict potential contract risks and outcomes. By examining past contract records, AI algorithms reveal patterns, trends, and areas where there is scope for improvements. This data-centric approach empowers organizations to make informed decisions and improve their contract management processes.


Contract negotiations often involve multiple parties, intricate terms, and prolonged back-and-forth interactions. By incorporating automation, AI can streamline the negotiation process by facilitating collaborative efforts, tracking revisions, and offering insightful suggestions. AI contract management software can analyze past contracts, identify key negotiation points, and propose favorable terms based on historical data. This expedites the negotiation phase, minimizes delays, and enhances the likelihood of reaching mutually advantageous agreements.

Smart approval routing

Streamlining approval processes is pivotal in simplifying contract management. Acquiring signatures from various stakeholders can become complex without suitable management technology. This complexity increases when contracts have variations necessitating additional approvals, such as lengthy agreements or those exceeding a specific monetary threshold. AI can utilize contextual cues to pinpoint sections requiring approval from different stakeholders and seamlessly incorporate these steps into the workflow. Furthermore, the system can draw from past approval routing experiences to identify where extra steps are warranted, ensuring a smooth and efficient approval process.

Metadata extraction

Metadata extraction is greatly enhanced by AI, allowing for the automatic retrieval of crucial contract details. This encompasses extracting vital information like involved parties, effective dates, termination clauses, and payment terms. AI-driven tools additionally aid in validating, converting, and arranging the extracted data, streamlining contract management. This feature is readily accessible and delivers substantial value to businesses, enhancing workflow and offering benefits through alerts.

Contract language translation

AI-driven translation tools provide the capability for instant contract translation across languages. Nonetheless, it’s crucial to acknowledge that while AI can aid in translation, accuracy might fluctuate due to regional idiomatic expressions and language subtleties. Consequently, implementing a validation process is crucial to ensure the reliability of the translated contract.

Contract summarization

Contract summarization emphasizes essential points and pertinent details in the contract. These summaries can serve as valuable tools for grasping vital facets of a contract, offering rapid insights to related parties and executives, and eliminating the need for exhaustive document review.

Data security and confidentiality

Amidst the digitization of contract management, concerns regarding data security and confidentiality are paramount. However, AI contract management software offers robust security measures to safeguard sensitive contract data. These systems provide controlled access, encryption, and secure storage solutions, ensuring only authorized individuals can access and modify contract information. Automated audit trails further enable organizations to monitor and trace contract changes, thus upholding data integrity and compliance.

Benefits of using an AI-powered contract management system

Here are some of the key benefits of using AI-powered contract management systems:

Improved accuracy: AI-powered contract management systems utilize advanced algorithms to review and process extensive contract data. By doing so, they can pinpoint mistakes, discrepancies, and irregularities within contracts. This meticulous analysis minimizes the likelihood of errors, enhancing accuracy and adherence to legal requirements. Ultimately, this technology streamlines contract management, enhancing reliability and mitigating potential risks associated with faulty contracts.

Eliminate errors: Considering the entire contract lifecycle, there is ample opportunity for mistakes. These errors may involve omissions of critical clauses or oversights regarding compliance requirements. AI contract management software ensures that all stakeholders are informed of any changes and are held accountable for compliance, thus reducing the likelihood of errors.

Enhanced efficiency: AI-powered contract management systems utilize advanced algorithms to handle repetitive tasks like drafting contracts, extracting key information from them, and analyzing their content. This automation reduces manual workload, accelerates processes, and enhances accuracy, ultimately streamlining the contract management lifecycle.

Better compliance: AI-based contract management software is pivotal in facilitating legal and regulatory compliance for businesses. These systems utilize AI algorithms to meticulously analyze contracts, cross-referencing them with relevant standards and regulations. Automating this process ensures that contracts adhere to the legal parameters, minimizing non-compliance risk. This saves time and mitigates potential legal issues, fostering a secure and compliant business environment.

Improved decision-making: AI-based contract management offers businesses valuable insights and analytics that serve as a foundation for informed decision-making. These systems uncover trends, patterns, and anomalies by analyzing vast contract data. This empowers businesses to optimize processes, identify bottlenecks, and streamline workflows. Moreover, the insights garnered enable a more effective contract management strategy, enhancing negotiation tactics, risk assessment, and resource allocation. Ultimately, these AI-driven capabilities lead to improved operational efficiency and more successful business outcomes.

How industries can gain a competitive edge with AI-powered contract management software

Contract management software can provide significant advantages to various industries by streamlining and automating various aspects of contract creation, negotiation, execution, and management. Here are several industries that can gain a competitive advantage with contract management software:


The healthcare sector manages a substantial volume of daily contracts, necessitating meticulous handling of agreements involving third parties like insurers, pharmacies, medical equipment suppliers, and more. Healthcare firms benefit from contract management software in the following key areas:

Payer and provider contracts

Vendor contract management

Contract security

Compliance tracking


Many companies rely on legal professionals and law firms to efficiently manage their contracts. Consequently, legal practitioners and firms can harness the power of contract management software to enhance their contract-related processes, elevate service quality, and expedite service delivery.


Large-scale manufacturing industries handle extensive contracts, often spanning global vendors and international suppliers. Consequently, effective contract management becomes a formidable challenge. Manufacturing companies should consider adopting contract management software to address these complexities.

Consumer goods

Consumer goods companies, much like their counterparts in manufacturing, often contend with a substantial volume of active contracts involving suppliers, vendors, and business partners. Consequently, they recognize the necessity of implementing contract management software to handle intricate compliance requirements and adhere to contract deadlines effectively.

Real estate

In the real estate sector, managing contracts is a fundamental aspect of business operations. AI can aid in automating workflows, ensuring legal compliance, and managing various stakeholder agreements efficiently, which can be pivotal in closing deals promptly and maintaining a steady workflow.


Technology companies frequently engage in contracts involving intellectual property, partnerships, and customer agreements. AI-based contract management can enhance the handling of these contracts by improving accuracy, protecting intellectual property, and optimizing negotiation processes.


Educational institutions handle contracts related to partnerships, vendor agreements, and employment. AI can streamline the management of these contracts, ensuring that educational institutions operate smoothly, maintain compliance, and effectively manage their resources.


Retailers manage contracts with suppliers, service providers, and partners. AI can optimize contract management processes by automating repetitive tasks, improving negotiation strategies, and ensuring that the best terms are secured to enhance business operations and customer satisfaction.

The public sector

Government agencies manage a vast array of contracts related to public services and projects. AI can facilitate improved contract management by ensuring transparency, compliance with regulations, and effective allocation of public resources.


AI in contract management is reshaping the way businesses handle their agreements. By streamlining operations, ensuring consistency, and unlocking valuable insights from contract data, AI empowers organizations to navigate contracts more efficiently and make informed decisions that drive competitiveness and success. The utilization of AI in this field not only streamlines operations but also promotes better decision-making and regulatory compliance. As technology continues to evolve, embracing AI for contract management is not just a choice but a strategic imperative for businesses seeking to grow in the ever-changing business landscape.

By embracing AI’s unique capabilities, you can now leave behind the complexities and risks associated with contract management. Partner with LeewayHertz to simplify your contract management processes with robust AI-powered contract management solutions.

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Author’s Bio

Akash Takyar

Akash Takyar
CEO LeewayHertz
Akash Takyar is the founder and CEO at LeewayHertz. The experience of building over 100+ platforms for startups and enterprises allows Akash to rapidly architect and design solutions that are scalable and beautiful.
Akash's ability to build enterprise-grade technology solutions has attracted over 30 Fortune 500 companies, including Siemens, 3M, P&G and Hershey’s.
Akash is an early adopter of new technology, a passionate technology enthusiast, and an investor in AI and IoT startups.

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