What do you think the next decade holds in terms of how we write, create, review, negotiate and sign business deals (or contracts)?
In my 2020 survey, the three most likely items to impact contracting as a process were:
- Machine learning (ML) ie giving computers ‘the ability to learn without being explicitly programmed’ (Arthur Samuel)
- Artificial intelligence (AI) ie computer systems that can perform tasks normally requiring human intelligence such as visual perception, speec recognition, decision-making etc
- Blockchain ie recording transactions and data across a network of linked computers.
You will note that I have not included smart contracts on this list. If you want to know more about those, read this post.
Machine learning
Machine learning is both supervised ie where the programme is trained using labelled data, or unsupervised ie where the code detects patterns, relationships or similarities without labels.
Machine learning is used for contract review. Contract review currently involves reading a contract to identify key data about the contract, and also clauses which either do not record the parties’ agreement or those which differ from the market norm. It is pretty tedious… especially for complex contracts.
In this process, a lawyer trains the machine to recognise and learn patterns of contract language (a form of natural language processing) to be able to identify specific types of clause. It is faster, more efficient, and more accurate than lawyers!
Read more.
Artificial intelligence
At the risk of voting for my own demise, AI can guide contract writing.
Rather than providing clauses based on questions (with some background logic), AI-guided contract authoring can suggest the best terms to include and negotiate, to accelerate the deal cycle and minimise the impact on trust that is caused by one-sided clauses. It can also provide better consistency across the suites of contracts a typical organisation uses.
Artificial intelligence is also used in contract management. AI can start to make sense of large datasets eg all the contracts currently in use for a business. AI can find duplicate spend, inefficiencies in the contracting process, or where a business has profit leaks.
Read more.
Blockchain
The blockchain is a database which allows users to share and store a single source of data on a project or transaction. For example, both parties could get instant access to the final agreed terms, as well as data about changes during the project.
Read more.
What is happening?
I have not seen evidence that AI can create clear, simpler and more effective contracts, that continue to enhance trust and don’t generate additional disputes.
Many of the AI tools effectively duplicate existing styles, collate existing clauses or compare against existing contracts – which are far from clear and simple. On the other hand, contract efficiency could be improved by implementing learning from completed contracts, smarter processes and automated contract use.
I’ve seen plenty of lawyers playing with ChatGPT (a chatbot with AI) but none are convinced it is about to replace them.
The priorities for digitising contracting should include: reducing cycle time (playbooks, clause libraries and AI); more effective contract use (extracting obligations and early warnings via ML), and data-driven contracts (AI and ML).
As with all technology, these are merely tools to help the user. As Lucy Bassli says:
Technology should not be implemented before existing processes are optimised, so that technology can effectively enable those processes
What should you do?
We need to ‘start where we are, use what we have, do what we can‘ (Arthur Ashe).
We don’t necessarily need to start adopting these tools for each of the myriad stages of contracting – but when part of a structured digital transformation of contract management they can provide excellent efficiencies and useful data.
But technology is nothing without people who are trained/want to implement those new processes and use that new data. You need to understand your who, how, what before you take the magpie approach of adding something new/shiny to your contracting.
