One simple step to mitigate contractual dilemmas

One simple step to mitigate contractual dilemmas

Sir Arthur Charles Clark once said, 

                   “Any sufficiently advanced technology is indistinguishable from magic.” 

And the words rightly describe an Artificial Intelligence (AI) in the modern day world. You may be the business organization which lacks a strong legal cell or may be the one which possesses an efficient team of lawyers. In either case, the challenge of managing a great deal of contracts never comes to an end. Long working hours are invested by lawyers in reviewing the terms of the Contract, in extracting and interpreting the potential of clauses of any contract. And, now imagine an AI which does the same work in the blink of an eye and with better efficiency. 

The consequence of failing in endeavours to meet such challenges is extravagant. Contracts, often, in the stage of negotiation requires a higher degree of acumen in scrutinising the clauses and envisaging the risks involved before agreeing to the terms of the contract. Overlooking any clause of such nature has the potential to turn the tables for the business. As a consequence, the act of expecting zero human error is humane for any business organization; however, humanly impossible at the same time. And that’s when Artificial Intelligence (AI) creates its magic! Any business organization, legal or non-legal, requires the impeccable efficiency of technology in extracting, reviewing, negotiating and authoring of contracts. The precision, time and affordability in which an AI contracting software reads, extracts and analyses the contracts of bulky nature, is inimitable for any human potential.

AI values your time and legal resources: 

The software reads huge piles of contracts in no time and extracts the relevant data as per the requirement of the business organizations. Statistical revelations exhibit that experienced lawyers in the US have only 85% average accuracy compared to the average accuracy of 94% when compared to AI contracting software, as per a study undertaken by professors at Duke Law, University of Southern California and Stanford Law School. Gillian K. Hadfield, Professor of Law and Economics at the University of Southern California, observed on the study undertaken by stating “This research shows technology can help solve two problems – both making contract management faster and more reliable, and freeing up resources so legal departments can focus on building the quality of their human legal teams.”1 Thus, when extracting data becomes the headache of the artificial intelligence, the legal counsels of the business can work towards analysing, interpreting and in decision making; which works best for the growth of your business. 

AI supports your terms and policies: 

The AI contracting software helps to maintain uniformity in the companies’ template, allowing only minimal and permissible amount of deviation in the terms of the contract. The software can easily highlight the clauses that does not adhere to the companies’ terms and policies. New employees of the company, who are yet to be induced to the terms and policies of the company are better guided by the expertise of the artificial intelligence. As employees may come and employees may go but AI would go on for ever! Thus, change in human resource causes no change in companies’ terms and policies. Variations in terms and policies have far reaching effect on the companies’ consistency and standardised policies. Simple predictions and suggestions of the software saves a great deal of loss to the AI software users. 

AI is also equipped in enlisting the clauses that are not dealt in the contract, however, they are expected to exist in a contract of a given specific nature. The legal counsels are, then, in a better position to interpret and analyse the available clauses with the extracted data and understand the reasons for which certain clauses have, intentionally or unintentionally, failed to assimilate as a part of the Contract. The legal counsels may then suggest such incorporation of clauses in order to bring clarity and transparency to the contract and eliminate all such chances of ambiguity with respect to the Contract. The legal counsels of the business may then shift their attention from bare understanding and extraction of data to suggesting why certain clauses do not form a part of the contract as opposed to the suggested templates. Such invaluable suggestions optimise business potential and explores depths of human potential with the help of technology.

AI understands your risk: 

It is important for every business in the market to understand the potential risk of entering into a contract. Every business needs to undertake the required research before even entering into a pre-contractual negotiation with the other party of the contract. The task of determining the risk becomes much easier when the first draft of the negotiable contract is formulated by your organization. Then the company or firm is only required to analyse the compromises and amendments that are proposed by the other party. However, on the other hand, when the first draft of the contract is proposed by the other party, a thorough risk-analysis of all clauses is undertaken in order to understand that no clause goes against the business of the contract or its major terms and policies. The degree of flexibility is presupposed in order to crack deals for the business. And for such assistance, the software labels the nature of clauses as ‘High’, ‘Medium’, and ‘Low’ depending on the degree of stake that the clause bears in the contract.

The AI contracting software at Vaultedge, in cases of high risk laden clauses also suggests the probable alternative clauses texts to the software user. This helps the organization to circumvent such high risk clauses and opens up doors for negotiations with a varied set of clauses and their expected outcome in the contract negotiation playbook. It helps the organizations to understand the limit of negotiability, as in, which clauses are readily acceptable to the policies of the company and when it is time for the negotiators to terminate the same as it is no longer viable for the business. For instance, your business is pre-decided on the acceptable terms of limitation of liability, the moment the other party exceeds the limit of liability, the AI underlines the clause in question and indicates the degree of risk involved in accepting the clause proposed by the other party. And also suggests texts that can be replaced in place of the clause that is in question. Thus, the software becomes your first hand legal advisor, before even seeking help from any legal counsel.

 AI helps you to calculate your negotiation outcomes: 

Every negotiation involves a great amount of research which is to be undertaken to crack business deals. In general parlance, any business organization has some standard templates. Any deviation from the standard template requires the parties to negotiate on the terms of the High Risk Medium Risk Low Risk clauses. For such negotiation, a risk matrix is drafted, which when decided with regard to the allowed degree of flexibility, is approved by the senior management. The risk matrix helps to decide the extent till which the terms can be negotiated and when it is time for the negotiators to walk out of the contract as it stands no longer workable for the business. This entire process takes a certain amount of time, as the approval process is lengthy and requires concurrence of the senior management, making it more time consuming at every step the contract needs any discussion on any ambiguous clause.

And this entire extensive process can be easily compressed by means of a contract negotiation playbook with already consisting alternative texts to guide the contract negotiators in the right way. A contract negotiation playbook contains various suggestions and the resulted decisions that may be yielded in case the suggested clause is accepted or proposed. The playbook is a storehouse of suggested clauses and alternative clauses of specific contracts with expected risks and determined outcome. If, for instance, the indemnity clause of your organization does not include any indirect damages, however, the contracting party has incorporated both direct and indirect damages as a part of the contract, the suggested text in the AI will highlight the concerned indirect clauses with suggestions of eliminating such a clause as it is outside the permissible limits of negotiation, thus, helping the contract negotiation process to reduce time and unnecessary approval processes.

 To conclude, it can be easily said that artificial intelligence is nothing but magic as it has immense potential for smooth running of business. As business is nothing but a nexus of contracts. All steps of business growth requires contracts. Well drafted contracts and negotiable terms can take any small idea to a great height. The above steps of contract extraction, policy compliance, calculating risks of the contract, negotiation of such risks and ultimately signing of the contract compiling in one simple word is a pre-contractual dilemma that any business goes through before signing any contractual document. And any such contract requires legal insight, which is readily available by means of artificial intelligence which can do everything that a legal personnel does but reduces time, increases efficiency and assists the business decision maker or the legal personnel with better and tested outcomes to decide from. This helps any business from growth point of view; the lawyer from the assistance point of view; and the business to achieve its maximum potential. AI is that magic of today that settles all contractual dilemma in just one step!