If You’re Willing To Trade Time For Quality And Risk, Then AI Is Great For Contract Review

TLDR: This isn’t legally recommended. But contract review is inevitably a game of risk and trade-offs need to be considered. Bidders are already using AI for contract review and arguably, this is a better option than reviewing contracts without any technical or legal background at all.

The Contract Review Reality 

Not everyone can afford lawyers or have the time to do an in-depth contract analysis for every bid. 

While AI is no substitute for expert-grade knowledge and can miss critical details, provide incorrect answers, or overlook complex legal nuances. It's still far better than making contract decisions without any analysis or a second opinion.

The reality is, there are bid managers and project managers alike who already use AI for contract review, and this is not a bad thing. The risk trade-off can definitely be worth it - it just depends on your business context.

Our Recommendations For Using AI For Contract Review

DISCLAIMER: DO NOT use public AI platforms for contract review. Privacy breaches can lead to serious legal and business implications.

Platform Recommendation:

1. Claude
2. Google Gemini

Based on our experience and feedback from users in our network, we find Claude best overall for contract review. It seems to demonstrate the strongest ability to handle the legal nuances required for contract review.

Three Approaches to AI For Contract Review

Approach 1: Basic Contract Exploration 

This is the most basic level of review.

Upload your contract and engage in conversation with the AI to screen the document. These are some example questions:

• "Are there any obvious red flags in this contract?"
•  “If we are late on X, what are the complications/penalties?”
• “What are the key risk factors in this contract?”
• “Are there any unusual or concerning clauses?”

Approach 2: Using Templates To Streamline Review

This approach moves from questioning on a contract-by-contract basis to a more streamlined approach.

Develop a template document with key questions that AI can populate consistently across all opportunities. Example template structure:

• Risk assessment sections 
• Penalty and liability analysis
• Delivery and performance requirements 
• Payment terms and conditions 
• Termination and dispute resolution clauses 

Then upload your contract documents and get AI to populate this template. This creates a decision document based on your business's key priorities with clear yes/ no recommendations for proceeding.

Approach 3: Comparative Analysis With Benchmark Contracts 

This is the gold standard approach.

Create a library of contracts, both those your company has accepted and rejected in the past. These serve as comparison standards. 

Now when you need to review new contracts: 

• Upload both the new contract and your benchmark examples
• Ask AI to analyse differences and flag concerning variations
• Request specific comparisons on terms that matter most to your business. 

TIP: You can also use this analysis to inform your negotiation strategy 

This comparative approach adds crucial context for the AI that transforms isolated contract review into a more specific analysis. This is good for increasing AI accuracy and relevancy to your business.

BONUS TIP: For Long Contracts

With complex and lengthy contracts, here are some ways to maximise results:

• Use models with good context length capabilities (Claude or Google’s Gemini are quite reasonable)

OR

•  Do a manual review first, find the relevant sections that you need cross-checked 
• Then upload only these sections clause-by-clause into AI. This bypasses context length issues and the AI losing context.

The Bottom Line 

Using AI for contract review (although not legally advised) is a better approach than making uninformed and unqualified decisions.

If you’re willing to trade quality assurance for speed and cost, and your risk tolerance aligns with AI’s liabilities, then this approach can provide substantial business value.