Table of contents
In our automated contracting introductory post, we saw an overview of how automated contracting is changing the legal and business world by leveraging artificial intelligence (AI), machine learning, and blockchain technology to streamline contract creation, negotiation, execution, and enforcement. This article delves into the key components of automated contracting, illustrating how they function through real-world applications.
Key Components of Automated Contracting
Automated contracting comprises several interconnected technologies that facilitate various stages of the contract lifecycle. Below are the core components, along with practical examples.
1. AI-Powered Contract Drafting and Generation
AI-driven systems use Natural Language Processing (NLP) to draft contracts based on predefined templates and industry-specific legal standards. These systems:
- Identify key contract terms and clauses.
- Customize contract language based on historical agreements.
- Reduce human errors and inconsistencies in contract drafting.
Real-Life Example: Legal tech companies like Ironclad and LawGeex use AI to generate employment agreements, NDAs, and other business contracts automatically. For instance, a start-up needing an NDA can input key terms, and AI will instantly generate a legally sound document.
2. Automated Contract Review and Risk Assessment
AI-driven contract review platforms analyze legal documents, flag risky clauses, and suggest revisions. These platforms use machine learning to compare contracts against best practices and legal regulations.
Real-Life Example: Evisort and Kira Systems assist corporations in reviewing complex procurement and M&A contracts, identifying non-standard terms and compliance risks to prevent costly legal disputes.
3. Smart Contracts for Automated Execution
Smart contracts are self-executing agreements stored on blockchain networks that automatically enforce contract terms when predefined conditions are met.
Real-Life Example: A supply chain agreement between a retailer and a logistics provider can use a smart contract on the Ethereum blockchain to release payments once the delivery is confirmed via IoT tracking devices.
4. Electronic Signature and Authentication
Digital signature solutions integrate with automated contracting platforms to facilitate seamless and legally binding contract execution.
Real-Life Example: Platforms like DocuSign and Adobe Sign enable businesses to sign contracts electronically, reducing turnaround time for agreements in real estate, finance, and employment contracts.
5. Automated Compliance and Performance Monitoring
Post-execution, AI monitors contract performance, tracks deadlines, and ensures regulatory compliance through automated alerts and reports.
Real-Life Example: Banks and financial institutions use AI-driven compliance tools like ClauseMatch to monitor adherence to regulatory contracts, automatically flagging discrepancies in loan agreements or investment policies.
6. AI-Assisted Dispute Resolution and Adaptation
AI can help mediate contract disputes by analyzing historical legal cases and proposing resolutions. Some smart contracts include built-in, self-executing dispute resolution mechanisms.
Real-Life Example: Online marketplaces like eBay use AI-driven dispute resolution systems to assess contract violations, such as refund claims, and decide outcomes without human intervention.
Way forward?
Through AI, blockchain, and digital technologies, automated contracting enhances efficiency, reduces risks, and improves legal compliance. Real-world applications demonstrate its impact across industries, from finance and supply chains to legal and e-commerce platforms. As automation advances, organizations must balance technological benefits with regulatory considerations to maximize the potential of AI-powered contracts.
We’d love to continue this conversation with you! At White Bison, we’re committed to shaping the future of AI-powered contracting, bridging the gap between automation and legal compliance. Whether you’re looking to streamline contract workflows, navigate evolving regulations, or explore innovative AI-driven solutions, we’re here to help. Let’s connect and explore how we can collaborate. So reach out to us anytime!
