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27 October 2022 ·

You can get excellent results when using AI to manage contracts if you realize its limitations



Your learning journey of Artificial Intelligence (AI) is not one to undertake alone or in a silo. One should never assume that a technology will simply speak for itself.  When it comes to using AI technology effectively, legal professionals -- whether working for a firm, for a department or for a tech vendor -- have much to gain from collaborating with other legal professionals in industries outside of their own.   You probably know already how failing to use technology effectively will likely slow your profitability and competitive edge.  That’s why now is the time to digest the basics of this tool but be sure you understand what it can and cannot do before you attempt to maximize the best it can offer.  What follows clarifies AI basics and builds upon that framework.  Once you fully understand what AI can do for your processes, you might be surprised at how quickly the best strategies are available at your fingertips!

What it is - and is not

The term AI means artificial intelligence, which at its most simple level, is creating a machine that can think and reason like a human being. However, we are not quite there yet. We more commonly use AI to refer to different types of algorithms that can “learn” and perform tasks. So, with that definition in mind, let’s dive briefly into the types of algorithms we most frequently use to perform legal-related tasks like identifying problematic areas of a contract or drafting a document.

The first algorithm is natural language processing or NLP for short. NLP is how a computer interprets written language. Natural language processing takes a sentence, for example, and breaks it down into individual parts, like nouns and verbs, and creates an organizational hierarchy of related items.

The second algorithm is machine learning or ML for short. The two types of machine learning are called supervised and unsupervised. Both are frequently used in contract review and management. The key difference between the two is this:

  • With supervised machine learning the algorithm is given the answers to questions, essentially if/then types of questions.
  • With unsupervised machine learning, the algorithm looks for things it has seen before, e.g., clauses similar to clauses that it has identified before.

How can AI support contract management?

The two types of algorithms described above allow you to efficiently review documents. For example, checking a contract to ensure that it contains all the terms that you want it to contain or reviewing a third-party document to see how much of it agrees with your standard template. The speedy review of documents allows legal professionals to understand potential risks, issues, and clauses within one contractual document or multiple documents.

As you perform more of these types of tasks using a contract management AI tool, you can gather and analyze data to facilitate a more transparent, strategic, and productive contracting function -- and better yet -- allow you to use analytics to improve your contract templates and manage key contractual relationships.

However, it is critical to remember that these algorithms need data to function properly, and lots of it. This means you need to:

  1. Organize your contract documents so you can provide the AI-based tool samples of key documents to use as a guide when reviewing documents the algorithm has not seen before.
  2. Be willing to work with the AI-based tool to refine how it interprets your agreements and the information and types of data provided to you.

Do you see how the AI and CLM industries might collide?

We professionals are increasingly becoming aware that contract lifecycle management (CLM) needs to become more than just managing contracts through the lenses of status, milestones, and deadlines. We are seeing a strong need for AI tools1 to provide the automated drafting, review, and even negotiation of contractual documents. AI plus the algorithms can be game changers for many companies.

So, how are companies incorporating AI into their applications and processes? Some choose to either hire more developers to partner with or acquire third-party solutions. Others have gone a step further and established their own platforms offering many types of tools and functions all surrounding CLM.

Where is the future of AI heading?

AI is just starting its development journey. Thus far, AI focuses on automation and data analysis -- meaning that AI is now more capable of analyzing large amounts of data or automatically creating or reviewing documents. However, countless efforts are underway to improve AI with a stronger focus to help AI make better decisions independently and act upon those decisions without needing human input or guidance.

We are still not nearly at the point where thinking and self-aware robots are commonplace or a normal part of society and robots are not yet coming to take your job.  But we are at the point where AI can save you from doing time-consuming, repetitive, and standardizable tasks.  Keep in mind, however, that if those are the only types of tasks you do every day, you should be concerned about AI eventually replacing your current job.

So, what is one thing I wish everyone knew about AI?

Technology is not the answer to everything. Technology is a tool. Like any other tool, it is most effective when used properly. In practice this means meeting people where they are, understanding their level of tech fluency and competency and understanding how to help connect potential users with the right tools and help existing users learn how to use those tools most effectively.


  1.  Reference as example Malbek’s stated definition of tools.


Colin Levy, the legal tech evangelist and startup advisor at Malbek,

is a sought-after legal tech writer and speaker. He was a key speaker at TECHxpo2019, a conference sponsored by the Ontario Bar Association, and has been featured in Above the Law. He also writes frequently on his blog, which was named by Feedspot as one of the Top 30 Legal Blogs in 2020. He is a graduate of Trinity College in Hartford, Connecticut and Boston College Law School and currently lives in Weston, Massachusetts with his husband and two demanding cats.


From the very beginning, Malbek’s founding team knew they were going against the grain. The world of contract lifecycle management solutions is full of tools with clunky user interfaces, configurations and implementations that are costly, and customers that are generally underwhelmed. It doesn’t need to be this way, and that’s why Malbek is forging a new path.  From products that delight to exceptional people who make everything run smoothly, Malbek stands apart as a company that is both remarkable and refreshing with a unique culture that creates an amazing working environment.

Colin Levy
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