How Artificial Intelligence relieves lawyers of standard tasks
Whether due diligence procedures, the analysis of rental contracts or the examination of leasing contracts in accordance with IFRS 16 – lawyers and auditors often have to work through and examine a large number of legal documents under great time pressure. Artificial Intelligence can relieve lawyers of standard tasks.
When it comes to artificial intelligence, most of us think of sci-fi robots, automatic face recognition, or smart home gadgets like the Amazon Echo speaker. Many people initially have their eyes on the hardware rather than the software. Most importantly, thanks to machine learning, software is able to learn to recognize patterns in the data or to draw conclusions from them without receiving a separate programming instruction.
Industries such as IT and medicine have long benefited from artificial intelligence and machine learning. But also lawyers and specialist lawyers can use this technology for themselves. According to Gartner, 15 percent of simple legal work will be done by smart machines by 2020. McKinsey estimates that artificial intelligence and legal tech software could automate 22 percent of the work of attorneys and 35 percent of the tasks of counsel.
This does not mean that lawyers will have less to do in the future: AI-based software does not replace expertise, but relieves specialized lawyers of often boring standard tasks.
Reading aid for due diligence and IFRS 16 audits
Example: If a company is up for sale, the due diligence process examines the value of the company and the risks associated with ongoing legal proceedings, employee contracts or purchase contracts. Corporate lawyers and auditors often have to read through hundreds or thousands of pages of master agreements and track down clauses with risk potential. All this is done manually and under great time pressure. There is a high risk that relevant clauses will be overlooked, leading to errors with massive consequences and liability risks.
Contract analysis software such as the Contract Analyzer, which is based on artificial intelligence, helps to capture and prepare relevant contract contents. The specialist lawyer no longer has to read each page of the contract individually – the software does this for him, extracts the most important information such as clauses, contract values, contractual partners or contract terms and lists them clearly. This allows unfavorable clauses to be identified more quickly and marked as Red Flag. This not only saves valuable working time, but also minimizes the risk of overlooking unfavorable clauses.
Recognizing and comparing clauses thanks to Artificial Intelligence
A second scenario in which auditors benefit from AI-based software is, for example, the examination of leasing contracts in accordance with IFRS 16 The new accounting standard forces companies from January 1, 2019 to value leasing transactions in accordance with the new accounting guideline. As a result, companies sometimes have to review and value large volumes of existing and future leases.
The Contract Analyzer also provides support here: Instead of having to laboriously check a thousand legal documents, consultants can use the software dashboard to identify at a glance which contracts are subject to the IFRS 16 accounting standard.
Using clause-based passage recognition, the software recognizes individual clauses across multiple contracts. This is particularly advantageous if a clause appears several times in different contracts. In this way, the specialist lawyer gets a clear list of the clauses and can also compare them intelligently.
Arranging contracts through machine learning procedures
Often contracts or legal documents are also available in an unstructured form. Machine learning procedures help to classify unstructured data and its contents such as documents, notes, applications, legal texts or contracts and to assign them to the right topic or field of law and to sort them into a defined filing structure. The software is also able to provide contracts with the right keywords or to fill in entire keyword masks so that they can be stored and managed correctly in a contract management system, for example.
Artificial Intelligence does not spare the lawyer the examination and interpretation of paragraphs and clauses. AI-based contract analysis software only relieves them of standard tasks such as reading page-long contracts and manually marking relevant clauses. As a result, the lawyer gains valuable time, can focus entirely on his core competencies and act more competitively in an increasingly price-sensitive market.