Contract triage and pre-screening using Automated Contract Review

This is the 2nd in a series of case studies by Lexical Labs on the use of Automated Contract Review (ACR) (sometimes called AI contract review) technologies.

ACR technologies come in many shapes and sizes and use different types of artificial intelligence (normally some combination of natural language processing, machine learning and deep learning algorithms and often a combination of supervised and unsupervised learning).  Some, including Tiro from Lexical Labs also use rules and logic based algorithms to perform deeper analysis beyond mere data extraction.    

Contrary to common misconceptions, AI and ACR technologies are:

• Cheap to set-up and run and don’t require much contract data and example agreements from their customers. 
• Easy to use by both business teams and lawyers
• Complementary to the work of lawyers and contract specialists.  ACR will handle the dense, repetitive but nonetheless important boilerplate and the specialists are freed-up to concentrate on the bespoke aspects of a contract
• Equal or superior accuracy as compared to human reviewers on the ability to extract data and analyse key issues.  According to Syke, a Legal Technology Consultancy,  studies have shown direct comparisons and benchmarking where AI has achieved 94% accuracy (in seconds) where lawyers achieved 85% (in 90 minutes).

Creativity is key to using ACR.  Users often start with something simple but impactful and expand the usage.

This case study is one example involving automated review of the first incoming draft, as part of the contract triage process.

Basically, it is like taking an instant, highly visual and data rich ‘digital contract photo’ of your contracts.  This photo is accessible by managers responsible for negotiation, approval and risk management of contracts.  The digital photo is also the window to a fully digitised version of the contract.

‍Incoming contract triage involving a ‘digital contract photo’ 

Triage is the process of screening incoming contracts, extracting key information, assessing the value and risk associated with the contract, identifying problematic terms  and then allocating the right resource to finalise it.  It is a crucial part of the contracting process that has efficiency and risk management benefits.  Triage is often performed as part of the ‘Legal Front Door’ which is a technology assisted way in which business teams seek legal assistance. 

Contracts are sent down the right ‘train tracks’ to different personnel and at different speeds.  For example, the highly valuable and urgent contracts are assigned to senior lawyers or contract specialists.  Others are assigned to more junior colleagues.  Some to procurement or sales teams specialists and finally some to business colleagues.  

An ACR systems is great for triage review because:

1. It is faster and with equal or superior accuracy -  A human, assisted by simple word search techniques, might perform this screening of a 50 page contract in 20-30 minutes whereas an ACR system can perform it in seconds to equal or superior accuracy;  
2. A near instant ‘business critical review’ is performed before any contract specialist reviews the contract.  The business team might be able to respond immediately on any red flags to the counterparty.

An example way in which triage occurs:

• Contracts are received and ingested into a contract or document platform.
• An ACR technology will review the contract and take a ‘digital contract photo’:

• First, extracting key information about the contract, including which person or team received the contract, contract type and value and term.  The ACR might also identify missing information and placeholders such as details of the parties.
• Second, performing an initial risk assessment by identifying potentially risky or problematic clauses.  The ACR might also assign a risk score.

• The ACR will present all of these findings in a dashboard.
• Potentially, the ACR will automatically complete the triage sending the contract along with the ‘digital contract photo’ down the right train track to the right person.  The reviewer then either finalises the contract or takes it to the next stage.  The digital contract photo contains all the key contract and risk information, linked to the relevant clauses.  
• Alternatively, someone manually assigns a reviewer based on the findings of the ‘digital contract photo’.
• Sometimes the ACR will also contain other contract playbook features  that assist the person negotiating the contract to respond to the counterparty by an issues list (sometimes known as a contract discussion form) or a redline.  These playbook features include acceptable fallback positions, clauses libraries and automated precedent searches.

‍What is the digital contract photo? - Tiro from Lexical Labs takes a 3 dimensional photo in 3 layers.

‍Layer 1 Here is the first level of the photo in Tiro from Lexical Labs, shown in a dashboard alongside all the contracts under review.  The contract has been risk scored and key data is visualized. 

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Layer 2 summarises key data and analysis extracted from the contract.

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Layer 3 contains a full summary data and risk guidance.  The report is automated but editable. 

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The benefits of using ACR for contract triage include:

• Time and cost savings in contract review.  Accelerated new sales and revenue from faster contract negotiations.  This is because the machine both reviews the contract and assigns it to the right person.  Some studies have shown that ACR technologies can reduce review time by up to 75% and when incorporated into an effective triage system can reduce contract negotiations time by 50%.
• Empowering business units  - Business units can often be empowered to finalise contracts which don’t require specialist contract review because they are lower value, lower risk or simpler.   By reducing the need for specialist contract review, friction is reduced and the process accelerated.  On the other hand, contract specialists are freed up to attend to more complex and important contracts and other tasks.
• Inbound contracts are digitised and key information is extracted upfront   -  Some ACR technologies will create digital issues lists at the time of triage.  These can be instantly used by the business units to start negotiating and resolving the issues.  A full legal review can proceed in parallel; meaning a quicker outcome.  This digital issues list can be adapted and used throughout both the pre and post signature phase of a contract.   
• Visibility - It takes a few seconds and gives instant visibility over all contracts in the pipeline
• Better risk outcomes - High value or problematic contracts and clauses can be spotted early - meaning legal resources can be automatically deployed to these contracts.   Informed decisions can be taken over what risks to take on and how they will be managed.  Effective risk management is not about eliminating risk but quantifying and evaluating it and identifying the means to manage those risks.
• Promotion of staff wellbeing as it is performing a mundane but important task.  Business managers and contract specialists want to be negotiating and resolving issues, not spotting them.
• It cannot be ‘gamed’ - one large enterprise we work with reported that an audit of its contract approval system showed that many contracts that should have been reviewed by the Legal department were in fact being sent to business units for negotiation and approval because the initial review was under reporting the contract values.    An ACR technology will perform consistently to the rules set by the company.
• The process can be repeated before contract signing - Triage and pre-screening is the first pair of eyes on the contract.  Make it also the last pair before approval and signing!

Information on Tiro from Lexical Labs

Tiro, from Lexical Labs, is the most advanced AI based automated contract review system available.  Tiro reviews contracts - using both deep learning and logic based algorithms - just like a lawyer or specialist contract reviewer would.