AI Contract Review vs Human Eyes: What’s the Right Balance?

6 min read

Here’s how you can ensure you review contracts quickly – without sacrificing accuracy.

Contract review is an essential part of most legal professionals’ day-to-day work. Whether you work in real estate, corporate, or wills and estates, and whether you’re in-house counsel or at a firm, you’ve reviewed (or will review) hundreds, if not thousands, of contracts during the course of your career. Contract review is an important task, to be sure, and getting things wrong during a contract review could open your organization up to legal risks. However, there are only so many hours in a day, and you have other tasks to get to. That’s where technology comes into play; the right AI contract review app can accelerate your contract reviews and reduce errors. But without a human in the mix, you run the risk of the AI making wrong decisions. So what’s the right balance? Here’s what you should know about using technology to accelerate contract review – without sacrificing accuracy.

Human Contract Review: Costly and Time-Consuming

Traditional contract review is tedious, cumbersome, and error-prone. While legal practitioners do possess the knowledge and expertise necessary to expertly review contracts, reviewing a contract manually takes a great deal of time – which can make it quite expensive for your organization. The risk of human error during contract review also rises as you add more contracts to your legal team’s to-do list, as mental fatigue increases the risk of your team making a mistake.

In one famous case, a lack of due diligence during the TimeWarner / AOL merger in 2004 led to a $99 billion USD mistake. America Online (AOL) had worked to acquire TimeWarner at the dawn of the golden age of the Internet, with great expectations on both sides. However, the lawyers on the merger rushed the due diligence process, which resulted in several important flaws being missed. The merger resulted in $99 billion USD in losses, making it one of the biggest merger losses in history.

It’s also essential that your contract reviews be 100% accurate, which can be challenging for human reviewers. Human contract review can vary depending on the legal professional in question, as different people have different ways of working and different means of assessing contracts. If you have several different people reviewing one contract, this can result in differing opinions on the contract itself.

Finally, manual contract review is very time-consuming. The process of manually reviewing a contract involves going line-by-line through a document that could be hundreds of pages long. This level of scrutiny, while beneficial for mitigating risks, means a complex agreement could take weeks to review.

AI Contract Review: Fast and Efficient, but Poses Risks

Emerging AI solutions are now taking on the task of contract review. Contract review apps like Speed Legal and LexCheck promise speed and efficiency, freeing up your legal team to conduct other work.

AI contract review can enable your legal team to review hundreds of pages of contracts in just minutes, which is significantly faster than human review. An artificial intelligence contract review system is also fully consistent in its analysis, applying criteria uniformly across all reviews.

AI systems work on pattern recognition, and excel at identifying trends. This means an AI contract review app could find something your team missed. And finally, AI contract review apps are able to scale with your organization, reviewing an ever-increasing number of contracts without needing significantly more time or money.

While these benefits are enticing, it’s important to understand that AI-powered contract review apps have limits. A fully automated contract review process that acts without human oversight could pose risks to your organization.

Firstly, a fully automated contract review system could lack critical insights or actionable suggestions for improving contracts. Without the human element, your contract review AI lacks the creativity necessary to imagine what a better contract could look like. One major hesitation with using AI contract review systems is that they often don’t understand key human concerns. For instance, consider a situation where a client wants to ensure they can assign a contract to a buyer without a major penalty. While an AI contract review system may pick up on an assignment provision, it could miss the penalty clause. Human lawyers would know to look for other common areas that have been litigated in the past, drawing from their legal experience and expertise to mitigate risks.

Secondly, AI-powered contract review software depends upon a large dataset in order to analyze contracts and make decisions. If you don’t have a large backlog of contracts to draw from, your AI may not have the information it needs to apply your preferences and precedents.

The Right Balance: A Human-in-the-Loop AI System

So if a solely human approach is inefficient, error-prone, and expensive, and a solely AI approach lacks context and insight, then what’s the solution?

Enter: The Human-in-the-Loop AI contract review.

A human-in-the-loop system is exactly what it sounds like: An AI-powered contract review system where a human reviewer has oversight and control over the final product.

An artificial intelligence engine can quickly review your contract to identify key concepts, which can reduce the amount of time taken for contract review. But with a human in the loop, you can ensure your AI’s accuracy by having a human reviewer double-check its work. So if your AI, for instance, flags a potential phrase as a risk when it’s actually a uniform phrase, your human reviewer can override the AI’s decision and stick with the original language.

A human-in-the-loop system also offers the benefit of improving your AI over time, as artificial intelligence systems continually learn from human input. As your contract review processes go on, your AI will get smarter and more accurate, reducing the amount of administrative time your team needs to review contracts.

(Human-in-the-loop AI systems are also beneficial for a variety of other tasks, like document drafting and improving client interaction.)

Contract review is a time-consuming, tedious endeavour that legal professionals conduct on an ongoing basis – making it an ideal task to outsource to AI. However, while artificial intelligence can accelerate contract review and better identify problem clauses, it also poses risks, like lacking the legal expertise necessary to suggest better wording. That’s where human reviewers shine. A human reviewer can review a contract and improve upon it, resulting in better compliance and fewer risks. That’s why a human-in-the-loop AI contract review process is ideal. It combines the efficiency and accuracy of an artificial intelligence engine with the unique judgment of a qualified legal professional. With a human-in-the-loop AI-powered contract review process, you can balance speed with accuracy and get the best of both worlds.

Artificial intelligence is changing much more than just the world of contract review – it’s also helping legal professionals to accelerate document drafting, automate workflows, and better manage their entities. If you’re ready to discover how technology can help you save time, cut costs, and reduce errors in your documents, then you’re ready for Appara. Visit https://appara.ai/contact to book a demo and unlock your FREE trial today.