Contract Lifecycle Management (CLM) solutions often boast an enticing feature known as auto redlining, enabling the automatic review of draft contracts by artificial intelligence (AI) to suggest changes. While this functionality may seem promising, its utility and effectiveness warrant closer examination.

I approach this feature with a degree of scepticism. Contracts represent a record of the collaborative arrangement between parties, leveraging their unique skills and experiences to create shared value. The question arises: Can AI, based on the analysis of countless contracts, truly capture and enhance the maximum value that can be achieved through collaboration by these two or more particular parties?

This post is part of a series of posts aimed at providing practical options for organisations that don’t want, can’t use, or cannot obtain a full CLM solution and are looking for guidance on what they can do with the tools they have and some reasonably priced add-ons. For more background and context, please see this introductory post.

Undoubtedly, AI can offer insights into negotiating legal provisions such as indemnities and limitations of liability, which typically consume substantial time and resources. However, focusing solely on these aspects may not address the broader issue of value leakage, as World Commerce and Contracting research suggests is common in contracting.

Additionally, introducing auto-redlining technology may not necessarily streamline the contracting process. The software may generate numerous suggested amendments - possibly in the hundreds - requiring significant time and consideration to evaluate each one’s materiality and negotiate their impact. In a world where both parties utilise similar AI-powered technologies, this could lead to a rapid back-and-forth process, resembling a high-speed game of ping pong.

The unintended consequences of reducing human involvement in this process are worth considering. An effective negotiation process not only establishes contractual terms but also identifies opportunities for constructive collaboration, addresses potential friction points, and fosters successful long-term relationships by learning how to work together. By relying solely on technology, we risk losing these benefits.

Furthermore, a technology-driven approach may exacerbate certain issues. Online interactions often lack the nuance and restraint of face-to-face conversations, potentially leading to more aggressive behaviour. Some systems have already demonstrated the potential for exploitation, providing customers with ready-made arguments for unwarranted refunds or discounts (perhaps even fraudulently). This behaviour may prompt companies to employ their own AI systems or adjust their terms to minimise vulnerability, thus altering the nature of customer relationships.

In light of these considerations, rather than endorsing technology that automates redlining within Word or SharePoint, it is important to question whether this functionality aligns with your organisation’s objectives. As Microsoft Copilot becomes available, it may be more valuable to leverage its capabilities by having a knowledgeable human armed with the necessary background information and understanding of the relationship to seek suggestions on how to enhance clauses without compromising the essence of the deal.

Working with LawHawk

In my own contract drafting, I prioritise creating terms that are fit for purpose, reflecting our actions and processes and how we work sensibly while minimising the need for unnecessary negotiations. This approach focuses on optimising collaboration and achieving the best possible outcomes.

If you want better CLM outcomes and want to look at your options and get a practical assessment of which options will best suit you, get in touch. We can recommend and introduce you to full CLM solutions or help with more targeted interventions, depending on your needs.