What is contract AI? A guide to AI contracts in 2023

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Contract AI is becoming increasingly popular in the legal industry, with legal professionals hoping that the latest technology can transform the way they manage their contracts. But what actually is contract AI and can it really provide any exclusive benefits that non-AI contract tools can’t? 

Let’s find out. This Juro deep dive explores what contract AI actually means, what its advantages are and whether it’s the best way to make your contract workflow more efficient. 

If you're seeking a more efficient way to manage your contracts and reduce contract admin, hit the button below to try contract automation - a non-AI contracting solution for scaling businesses.

If you're keen to find out more about contract AI first, read on.

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What is contract AI?

Contract AI is the use of text-based machine learning applied to contracts, typically to assist in the management, extraction or review of legal agreements and their data. 

Usually, AI contracting software will rely on algorithms that are trained to identify and flag certain patterns and behaviours within contracts and transform unstructured information into structured data. This is often referred to as Natural Language Processing (NLP). 

Put simply, this means that the AI attempts to extract the important data from a contract and highlight specific terms of interest, like the governing law, effective date or personally identifiable information. 

However, that isn’t the only area where contract AI can add value. There are also more specific contract AI solutions, such as AI contract drafting software, AI contract review and AI contract extraction. 

What are the different types of AI contract software?

Contract AI is a broad category of AI-powered contract tools, so it’s important to understand exactly what AI contracting platforms are available and where they can add value. These are the three most prominent categories of contract AI solution:

1. AI contract drafting software 

Contract drafting tools that are powered by AI tend to assist in the contract creation process by automatically replacing certain terms with pre-approved language and making recommendations for amendments.

In many ways, this is similar to the way that Juro empowers users to set up specific terms and pre-approved language in automated contract templates using conditional logic and smartfields. 

In fact, this is just one example of how many of the biggest benefits of an AI contract drafting system can be accessed through non-AI platforms like Juro, except that a tool like Juro also delivers the added benefit of enhanced contract editing and formatting capabilities too. 

2. AI contract review software

AI contract review software usually uses NLP to automatically find, extract and review contracts quickly and efficiently, which eliminates a heavy reliance on human review processes.

Certain AI contract review tools, like contract intelligence software, may also evaluate risk within a contract and flag any areas of concern. This can prove beneficial to lawyers preparing to enter the negotiation phase of the contract lifecycle and eliminate some level of risk within a contract by flagging potential problems with the wording of contracts or potential risk areas. 

However, even AI contract review software can’t guarantee 100% accuracy. This means that businesses using this type of software will still need to ensure that contracts are reviewed manually by someone. This can be a clunky and time-consuming process in and of itself without a more robust end-to-end tool in place to manage approvals and contract negotiations

Pros of contract AI

1. Minimizes the risk of human error

Contract AI can prove useful in minimizing the risk of human error as the algorithms won’t replicate errors sometimes made by humans due to tiredness or bias.

However, AI is not the only way to reduce these mistakes. Some non-AI contract tools, like Juro, offer automated templates and sequential approval workflows to provide similar safeguards. This enables contracts to be drafted, negotiated and collaborated on by commercial teams whilst still ensuring that legal teams to have the final say on certain terms and clauses.  

2. Can reduce the time required for contract review 

Contract AI tools will often reduce the time legal professionals spend reviewing contracts manually to minimize risk. This is because they analyze specific terms for risks and opportunities and flag these to the contract owner.


However, legal teams can still accelerate legal review through other means, like setting up approval workflows and conditions that enable business teams to self-serve on routine contracts. Most contract tools will offer this functionality, regardless of whether they are powered by AI or not.

3. Efficient for managing large contract volumes 

One of the most commonly deployed uses of contract AI is for large and growing volumes of contracts, as the software enables these to be reviewed quickly and at scale. In fact, contract AI works best when it manages a high number of contracts since this enables it to conduct volume-driven analysis.

However, whilst contract AI is positioned well for reviewing contracts at scale, the software often lacks the functionality required to do other things at scale, like mass create and sign contracts.

Fast-growth companies with a low legal headcount will need a more comprehensive solution that offers bulk actions throughout the contract lifecycle, not just at one specific phase of it. 

Cons of contract AI

There are several downsides to contract AI, including its unreliability, price, and lack of features for other stages in the contract lifecycle. Let's explore these points in detail.

1. Not entirely reliable

Despite what many believe, contract AI is certainly not 100 per cent accurate. When you're creating, reviewing and signing legally binding contracts with plenty of risk attached, relying solely on AI contract software can provide a false sense of security. This means it can introduce risk, rather than mitigate it.

Not only that, but it’s common for contract AI’s predictive suggestions to actually ignore some aspects of risk or opportunity that humans would have otherwise picked up. That’s why it’s often better to invest in contracting software that reduces the administrative work associated with contract review and negotiation, rather than eliminating the need for human review altogether.

2. Usually expensive due to its complexity

Contract AI and AI contract review tools are renowned for being among the pricier contracting solutions on the market, making them unaffordable for many startups and scaleups that require more flexible plans and pricing options. 

The most obvious reason for this is that AI is incredibly expensive to develop and train, but particularly costly to customize for your business.

More often than not, an off-the-shelf system for your contracts is more efficient for in-house legal teams, not only because it’s scaleable but also because it simplifies the process rather than complicating it.

This enables people throughout the business to engage with contracts and simplify the contracting process. By removing clutter and noise from the software, contracts become more accessible to everyone, with fewer bottlenecks and blockers as a result.

3. Lack of features for other lifecycle stages

Interestingly, most AI contract review tools don’t provide the functionality that in-house legal teams need to manage contracts from end to end. 

Due to the complexity of AI contract management tools, it’s more common for these platforms to deliver value in just one area of the contract lifecycle, like drafting contracts or just reviewing them. 

For example, most AI contract software will not offer advanced contract negotiation and collaboration features. This means that businesses will continue to rely on multiple different tools when collaborating on agreements. Switching between these different tools creates admin for legal and friction for the business - two things scaling businesses can’t afford. 

Is contract AI necessary for contract management?

AI has become a buzzword in recent years, and the legal industry seems to have glamourised the use of AI for contract management tasks like contract drafting, review, and contract data extraction

But does the software actually provide as much value as the other, more comprehensive, and affordable contract tools on the market? Or is the appeal of contract AI largely down to our fascination with AI and machine learning?

Well, whilst contract AI can prove beneficial in streamlining specific aspects of the contract workflow, it isn’t actually necessary for successful contract management at all. In fact, some contract automation tools like Juro mitigate the need for AI review and other AI tools altogether.

If you’re looking for a contract tool that focuses on examining your contracts for risks and opportunities, then you’re probably looking for an AI contract review tool like Kira or Luminance.

However, if you’re looking for a more efficient way to manage contracts and reduce contract admin for your legal team throughout the contract lifecycle, you’re probably in the market for an all-in-one contract automation tool like Juro instead. Here’s why:

1. Contracts can be reviewed quickly using tools without AI

For instance, Juro enables in-house legal and business teams to create contracts as structured data, making them machine-readable from the off. 

This is distinct from AI review software which will require teams to upload PDFs in order to transform the contents into structured data. Put simply, contract AI is used to transform unstructured data formats like PDFs and Microsoft Word files into structured data that can be reviewed and analyzed.

Juro builds contracts as structured data, making it possible to search, query and identify certain contract values and language in seconds, pre and post-signature.

2. Storing and extracting contract data doesn’t require AI

Additionally, the AI data extraction tools used for contracts perform similar functions to the features available in Juro’s contract automation platform. Since Juro contracts’ smartfields are actually built as metadata, contractual obligations can be located and viewed quickly in tables and boards - even without AI. In fact, Juro users even have the option to set up automatic reminders for certain obligations and dates through using Juro’s intuitive contract repository.

Juro users can create table views where they can see all of the important contract values like contract type, owner, modification date, client and more at once. They can even filter these to find specific collections of contracts and report on these.

This provides one single source of truth for businesses when it comes to their contracts, making it just as effective, if not more, for legal teams to maintain full ownership and visibility into the company’s contracts. 

3. Contracts can be drafted quickly and accurately without other tools 

One benefit of contract AI is that it’s often more consistent in reviewing and creating contracts than humans are. This is because the algorithms are trained to replicate common patterns and behaviors learned from existing business contracts. 

However, this level of consistency can often be achieved through automated contract templates or conditional logic instead. When using a platform like Juro, in-house legal teams can automate templates with pre-approved language, set user permissions and bake fallback clauses into contracts using conditional logic. 

This means that business teams like sales, HR and finance can self-serve on contracts with minimal input from legal, whilst legal can return to higher-value work knowing that all contracts are drafted with the terms and language they’ve selected.

Not only that, but most contract AI tools will deliver little value beyond recommending terms and language. Whereas, Juro’s rich-text editor is designed specifically for contracts, allowing users to edit, format and collaborate on contracts seamlessly. 

4. Contract tools without AI can still reduce the need to hire another lawyer

Lots of businesses buy into contract AI under the pretence that it will prevent them from needing to increase their headcount. However, AI isn’t always necessary to achieve this. 

Contract platforms that enable legal to collaborate with other teams in the business and self-serve on routine contracts are often the best way to reduce the need for an increase in legal hires. 

For example, using Juro enabled Appear Here’s HR teams to self-serve on HR contracts, which reduced the need for the business to hire a second lawyer. This was achieved without using AI.

What is the best alternative to contract AI?

The question is: do you really need contract AI at all? Or is there a solution that’s better suited to your contracting needs? 

Ultimately, contract AI is a great option for legal teams that want to automate the process of analysing their contracts in great detail. It’s a complex solution and perfect for specific use cases. 

However, if you’re looking for a more rounded solution that removes bottlenecks from the contract collaboration process, automates low-value contract admin and allows users to manage contracts in one place from start to finish - it’s contract automation you need. 

Juro is the all-in-one contract automation platform that helps visionary legal counsel and the teams they enable to agree and manage contracts in one unified workspace. Juro is the #1-rated contracting platform for ease of use, and the solution of choice for fast-scaling businesses like Deliveroo, Trustpilot and Cazoo.

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