The traditional approach both in in-house legal teams and law firms to reviewing contracts often involves manual processes that can be time-consuming and prone to errors. This section explores the conventional methods used by businesses to manage contract reviews and highlights the challenges associated with these practices.
Contracts are mainly reviewed manually using Microsoft Word
For the vast majority of businesses, Microsoft Word remains the tool of choice for contract analysis and reviews. Its familiar interface and comprehensive features for editing and tracking changes make it a staple in legal departments. Typically, the contract review process involves:
- Reading through the Contract: Legal professionals manually read through each contract in its entirety.
- Making Changes in Markup Mode: Using Word’s ‘Track Changes’ feature, reviewers make amendments directly on the document. This allows for clear visibility of edits, suggestions, and comments, which can be reviewed or reversed by other stakeholders.
While this method has been the standard for decades, it’s not without its drawbacks. The manual process requires significant time and attention from skilled legal staff, leading to slower turnaround times and higher chances of human error.
Help from Contract Guidelines and Templates
Most companies operate with a set of contract guidelines or an internal policy that outlines how contracts should be reviewed and drafted. These guidelines ensure consistency and compliance across all agreements. However, the accessibility and formality of these guidelines can vary significantly:
- Documented Guidelines: Some organizations have well-documented policies that provide clear directions for reviewing contracts. These documents are essential for maintaining consistency, especially in larger companies with multiple reviewers.
- Silent Knowledge: In other cases, contract guidelines may exist as ‘silent knowledge,’ understood and shared informally among team members. This approach can lead to inconsistencies and knowledge gaps, especially as staff changes over time.
- Use of Contract Templates: Nearly all companies utilize contract templates as a baseline for negotiations. These templates reflect the company’s standard terms and are adapted during the review process to suit specific deals or partnerships. Understanding and using these templates effectively is crucial for efficient contract review.
Challenges with Traditional Contract Review
The traditional method of contract review, while familiar and widely accepted, faces several challenges:
- Efficiency: Manual reviews are time-intensive, limiting the number of contracts that can be processed within a given timeframe.
- Scalability: As companies grow and the volume of contracts increases, the manual process can become a bottleneck.
- Accuracy: Human error is a risk in any manual process, and missed details can lead to significant issues down the line.
- Cost: Extensive use of legal professionals’ time for routine reviews is costly, especially for businesses dealing with high volumes of contracts.
Conclusion: there are plenty of reasons to start utilizing ai for contract review
The traditional way of reviewing contracts, centered around manual processes and Microsoft Word, has served many companies well. However, as business operations become more complex and the pace of transactions increases, these traditional methods are being pushed to their limits. Innovative solutions that incorporate AI and automation are becoming increasingly necessary to meet the demands of modern contract management, providing speed, accuracy, and scalability that manual processes simply cannot match.
