Understanding Contract analysis and review
Contract Analysis is a process of understanding what is within your contracts. The main purpose behind trying to understand the ingredients of any contract is to see what are your organization’s obligations with respect to the contract being analyzed and what are the associated risks for the organization in the event of failing to perform these obligations.
Most organizations prefer this as Contract Review, and this is most likely performed by either an external legal counsel or using in-house legal teams. The normal contract review process happens either when you are authoring a fresh contract with your customer, supplier, or vendor or when you are accepting the third-party paper. In both these cases, the reason for the review is to figure out if any of the contract clauses are deviating from the standard templates and if yes how much are they deviating and if that is reasonably acceptable.
The process of reviewing or analyzing contracts has been a manual task for a long time which involved going over a huge number of documents, understanding large volumes of text to elicit specific information pieces like a date, price, contract value, payment terms, force majeure clause details, etc and this is quite a time consuming, tedious and pricey.
Adoption of Artificial Intelligence in contract analysis
In recent years, technologies like Artificial intelligence started being used in contract analysis processes and software which made automatic retrieval of key metadata from contract documents possible and within minutes. In addition, the adoption of Machine learning (ML) for Natural language processing (NLP) has seen a lot of success in accurately performing tasks that were only done by humans.
The technologies got further enhanced with the introduction of Deep learning which can get a lot deeper into your contracts. For example, consider a use case of your legal department wanting to know how many of your contracts have a termination of convenience clause which can get your business at risk. Similarly, if your supply chain department wants to know what is the lead time for a particular material from various available suppliers or your sales department wants to understand how many customers have 60-day payment terms against the normally accepted 30 days. Without using technology this process could take a considerable amount of manual effort but with the help of deep learning, this process can be fully automated.
For more information visit now:https://blogs.docskiff.ai/how-ai-based-contract-analysis-software-works/
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