Whilst the majority of contracts run relatively smoothly, a minority deviate from the contractual terms initially agreed by all parties, causing inflection points and disturbing the natural, intended course of the contract. This article analyses the advancements that AI has brought to the contract management process, with specific focus on its ability to detect inflection points through analysing both human behaviour and data, also shedding light on current issues that may arise from the use of AI.
For the purpose of this article, ‘inflection points’ within a contract can be defined as ‘stages whereby a party to a contract, or numerous parties to a contract depart from the straight course intended within the contractual terms agreed by all parties’. It is at this point of inflection, where a contract is likely to start to bend in the wrong direction, often leading to disputes and litigation.
The use of technology in the contract management process has advanced the industry, including the use of AI and Big Data. Advantages and benefits brought by AI technology include the following:
With AI’s main use in the contracting world being for document review and to perform searches, AI saves companies and individuals hundreds of hours of work. The commercial contract profession no longer must search through hundreds of documents to find a specific reference or cross reference clause or search a case history. Researching, drafting and negotiation preparation processes have all been significantly shortened.
Human’s when compared to the advantages of AI can be seen as slow, expensive and inefficient. AI can perform comparative tasks within seconds and therefore at a cheaper price. AI provides companies with the opportunity to capitalise on their existing data whilst relieving professionals from time consuming tasks that do not necessarily require a professional level of expertise.
AI is programmed to be incredibly precise; more so than the human eye and with repeatable, scalable results. Strict rules are followed and physical exhaustion cannot affect its ability. The Law People Blog reported AI has an accuracy of 94% compared to 85% for experienced lawyers.
The past uses of AI could be argued as more simple, high volume repeatable tasks but has since developed and can now be used to detect behavioural complexities. Kira Systems laid out a number of the more complex abilities of modern day AI including the ability to:
As AI remains relatively new, there are limitations to its use and areas in which it needs to develop further to completely transform the business world. The key limitation is that AI technology is only as powerful as its underpinning algorithm and the quality of data being analysed. As the old adage says “rubbish in, rubbish out!”.
As AI is wholly dependent upon the data it is presented with, the more information there is to process, the more powerful its processes become. Therefore, AI is nothing without an abundance of information and accurate and relevant data at that. Whilst the human brain can envision things that do not exist, that have not yet happened, and predict new outcomes; AI’s strength is to analyse historical data.
The Chartered Institute of Procurement & Supply (CIPS) reported that throughout the pandemic, 82% of supply chain leaders were frustrated with AI as historical data was no longer useful due to the unprecedented changes that had occurred. AI can be said to efficiently detect discrepancies in behaviour and outcomes but cannot predict future possibilities, unlike the human mind. It only does as is programmed to do and therefore, does not possess divergent thinking and intellection.
This also means that historical data will prove useless where unprecedented changes occur. AI can simply go as far to recognise discrepancies, but not yet predict the outcomes where the potential outcome has not yet occurred in the data.
AI is a system of computing which aims to mimic the power of the human brain in a quicker and more efficient manner. The human brain is analogous, but AI technology remain digital and still cannot match our cognitive skills in most aspects. AI is great at mimicking and replicating human actions but, in the main, does not yet possess intelligent thought. Without human reasoning the outcomes of AI sometimes show poor quality and organisational barriers.
Some machine translators today produce less than satisfactory results, but it is predicted that AI, as it sufficiently evolves, may replace human translators in the next 20 years with its progress already being astonishing. AI fails to analyse wider context not yet present in its data. AI is unable to consider idioms and common phrases, it can be argued also that it cannot consider wider theories and possible outcomes not yet seen before.
Oral advocacy requires a whole range of skills such as communication, collaboration and presentation, again skills that are not yet possessed by the majority of AI technology. Research by the London School for Economics (LSE), cited in the UK Government website, showed that although AI will change the jobs market, human skills will be more necessary than ever, especially those of leadership, decision making, creativity and empathy.
As AI does not possess human reasoning and many other skills that we ourselves possess, it is important for organisations to retain their trust in humans and to not develop an overreliance exclusively on AI (at least for the foreseeable immediate future anyway). Adopting AI into the contract management workflow for professional advisors is now an imperative to success, as it’s time efficiency free’s up many professional hours from repetitive, low skilled jobs, to focus on high-level strategic work, that AI is not yet capable of.
U.S. Consultancy group McKinsey, estimates that about 22% of lawyers’ jobs and 35% of a legal clerk’s jobs can now be fully automated through the use of AI, but we must remember these statistics can be diminished when we consider AI’s inability to think quite like a human does.
This is where professional advisors in commercial contract management come to the fore. As the bridge between pure legal advice (meaning pure interrogation of legal clauses, interpretation and presentation of facts compared to past precedent data) and business people running organisations and making strategic and tactical decisions. As we touched on in the previous articles in this current series, there are also less tangible factors to consider when making a deal and predictions of how people perceive and how emotion should be factored, are not currently skills that AI can master.
Ultimately, AI can be used to save time across the contract management process, most significantly by shortening lengthy processes that require lower skill or expertise, saving professionals time and allowing them to focus on more difficult and complex tasks. AI is adapting to professional needs by developing more complex abilities that might in the future enable it to analyse behaviours and predict outcomes, at least where there is a solid base of reliable data to analyse. Whereas some might argue that AI will never possess the equivalent abilities of the human brain, every day we see advances in this area which make it likely that AI will at some point be proficient in anticipating inflection points in the contracting process that can predict and be used to prevent claims and disputes by correcting the course of the parties. What do you think the future holds for AI across the contract management lifecycle? Please comment using the LinkedIn page further linked below.
Look out for the final article in this current Thought Leadership series ‘Future of Contracts and Contracting’. Next week we explore ‘the nature of “disintermediated” law firms and the shift to remove the intermediary in some transactions – Where can professional advisors add value?’.
We have also previously explored the following topics:
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