Contracts are at the core of every business, demanding prompt and efficient review. Legal professionals, central to this process, face a balancing act between quick contract turnaround, managing intricate risks, and adhering to strategic priorities. In-house legal teams spend much of their time reviewing and managing contracts, safeguarding the interests of the business, ensuring compliance, and setting the trajectory of long-term business relationships. In fact, the average in-house attorney spends 4.5 hours daily manually reviewing and managing contracts, according to the 2023 Enterprise Legal Management Report. And one in four in the United States spends six to eight hours daily on contracts.Yet despite the time they spend in contract review – many legal professionals still struggle with contract delays.
Of 100 corporate legal departments surveyed by Gartner, 40% admit that managing contract risk is too slow. This comes at a significant cost to in-house legal teams, who spend countless hours and dollars reviewing contracts while balancing strategic legal work and other business priorities. As companies look to cut costs, legal teams are facing stagnant headcount and budget, forcing them to do more work with the same, if not fewer, resources. To that end, LegalOn Technologies partnered with In-House Connect to conduct a survey on the state of contract review in December 2023. With more than 150 respondents, we collected data on contract volumes reviewed by legal teams, the hours spent in reviewing each contract, and the usage of AI and automation tools such as digital playbooks.The data point to a clear picture: contract review is time consuming and legal teams lack the tools and technology to help them review routine contracts faster.
In-house legal teams have a myriad of duties–from serving as the company’s counsel to advising the business on risk and aiding in compliance–and reviewing contracts is a critical function to the broader business. In fact, in our survey, we found that half of respondents spend 3 hours or more reviewing a single contract. At 200 contracts a year, a volume most legal departments far exceed, this translates to 600 hours (or 75 business days) of manual contract review. This significant time investment underscores the need for efficient contract review technology to optimize the use of valuable working hours.Even as a conservative estimate, that is an inordinate amount of time spent on solely reviewing contracts, and can often necessitate hiring a dedicated contracts specialist, counsel, or team member, a difficult scenario in an economy where legal teams are facing tightening budgets and frozen headcount. But it doesn’t need to be this way.
This is where AI contract review software offers incredible value. Artificial Intelligence assists in examining, analyzing, and reviewing contracts before signature. Instead of manually sifting through pages of contractual documents, this software can quickly identify critical clauses and potential risks and suggest revisions.
Its key benefits include:
Efficiency: by drastically reducing the time required to review and finalize contracts.
Accuracy: through reducing human errors by providing consistent and automated reviews.
Scalability: it can handle large volumes of contracts without additional resource demands.
Cost savings: reducing the need for extensive manual review leads to financial savings in the long run.
In fact, 98% of users report significant time savings by utilizing LegalOn’s AI contract review platform. You can read our buyer’s guide for more information on how this software is transforming the review ofroutine contracts.
Playbooks, or predefined guidelines and rules outlining the step-by-step process for reviewing contracts, assist legal and business teams in ensuring agreements meet company standards before they are. When paired with the right contract review platform, AI-powered playbooks help reviewers instantly check agreements against a company’s preferred positions. Playbooks can take on a variety of forms – early playbooks begin as general clause libraries that contain the company’s preferred clauses. They grow more advanced as they become tailored to specific contract types. Fully comprehensive playbooks are not only tailored to contract type but also include fallback positions for all contracts, including those on third-party paper. Our survey found that most legal teams – 60% – do not have any playbooks at all or merely have a general clause library. Only 25% have some form of comprehensive playbook. Building out playbooks is a heavy investment of time and resources that many legal departments cannot afford.
Considering the resources needed for developing and managing playbooks, their limited adoption is understandable. That’s why LegalOn offers ready-to-use playbooks featuring industry-standard positions tailored for legal teams. Whether you have a fully developed playbook or just a clause library, LegalOn offers a seamless way to incorporate your positions within the platform. You can find more information on LegalOn Playbooks here.
We’re at an inflection point for harnessing the power of AI to speed the review of routine contracts, and the legal profession acknowledges this as well. While there is a substantial interest and openness to AI adoption (over 70% actively considering or open to considering its usage), its actual current adoption is minimal (8%). Very few in-house attorneys expressed disinterest in AI for contract review. This gap indicates a significant opportunity for growth and market penetration among in-house teams.
The benefits of the right AI contract review tool are enormous. It can significantly reduce the time required to review and finalize contracts and enhance accuracy by consistently reviewing contracts, thereby reducing human errors. These allow legal teams to spend more time on strategic legal work and business priorities while maintaining high quality contract review. Learn more about AI contract review tools and solutions in our buyer’s guide here.
Nearly everyone we surveyed is involved in reviewing contracts in their organizations – either by reviewing contracts themselves (80%), overseeing others who review contracts (11%) or assisting with contract review (9%). These individuals understand the depth and expertise that contract review requires and are perfectly positioned to share their insights on how AI can help them review routine contracts faster.
Those involved in contract review have a wide array of contracts volumes – 28% of our respondents told us that they review between 200 to 500 contracts every year, and 42% review between 500 to 10,000 contracts annually.
Our survey respondents came from a diverse set of in-house legal professionals, from contract managers (9%),to legal operations professionals (10%), in-house counsel such as Commercial Counsel or Associate General Counsel (47%), and General Counsel (29%).
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