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Role of Generative AI in Contract Lifecycle Management

May 29, 2024
Robotics hand writing contracts

Contracts are one of the core lifelines of any business.  They ensure clarity in business deals and safeguard the interests of all parties involved.

Contract lifecycle management demands greater efficiency and accuracy in studying various clauses and legal terms that are essential to ensuring streamlined business operations and risk mitigation.

According to World Commerce & Contracting research, poor contract management continues to cost companies 9% of their bottom line.

But with the digital landscape changing at an unprecedented level as new Generative AI technologies are getting introduced in the market, this futuristic technology is also changing the dynamics of the entire Contract Lifecycle Management (CLM).

Evolution of Generative AI

One of the core technologies powering Generative AI tools is the large language model (LLM), which leverages complex machine learning algorithms and techniques to identify and learn from patterns in the training content, which can include text, code, voice, videos, and images, to generate a new form of content.

From analyzing medical images and reports to uncovering vital patterns that aid doctors in treating patients to predicting the optimized route in logistics based on the learning derived from imperial data, the applications of Generative AI are immense.

Generative AI tools with underlying LLMs can generate various types of content and hold immense potential to rapidly transform the legacy contract management landscape, from contract drafting to analyzing various complex clauses.

How Generative AI is redefining Contract Lifecycle Management (CLM)?

Leveraging the innate capability to generate contextually coherent legal content, Generative AI can be used across various stages of contract lifecycle management, including contract drafting, editing, review, analysis, negotiations, risk mitigation, and much more.

When integrated with standard playbooks and clause libraries with Retrieval Augmented Generation (RAG), it can expedite and offer users a seamless, engaging experience of the entire CLM.

Contract Drafting

Contract drafting is a tedious process handled by a legal expert. Generative AI models can train on huge volumes of legacy contract data, playbooks, and clause libraries to accurately identify data patterns and generate customized contracts based on specific client needs. With automated contract drafting, organizations can utilize their valuable legal resources in productive core legal operations.

Contract Negotiation

During the complex contract negotiation process, Generative AI proves beneficial by surfacing risky clauses that do not adhere to company standards. With this, the negotiators find it easy to point out the specific sections of the contract that require redlining, thus mitigating risks in contracts.

Trained Generative AI can analyze and learn from past negotiation outcomes and agreements and surface relevant clauses, giving negotiators intelligent insights that are helpful during negotiations.

Contract Renewal

Inefficient renewal strategies, due to the lack of a mechanism to send automated alerts reminding about contract renewal dates, result in missed opportunities to renegotiate the contracts based on favorable terms or terminate certain contracts.

Having trained on legacy negotiation outcomes, playbooks, and huge volumes of contracts, Generative AI automates the renewal alerts and notifies the negotiators in advance to prepare for negotiations.

Contract Review and Summarization

Generative AI expedites the contract review process by quickly identifying the relevant clauses and areas of potential risks.

Trained AI models extract vital details and key attributes of contracts, such as dates, termination provisions, clauses, obligations, names, and much more.

Generative AI, through its capability to render human-like responses in an interactive environment, can provide instant summarization of lengthy contract documents that foster informed decision-making.

Risk Mitigation and Compliance Analysis

Failure to monitor various industry standards and regulatory compliances mentioned in the signed contracts can lead to hefty financial losses. Generative AI, through its trained model, helps properly identify non-compliance conditions and flag potential risks clauses.

Why should you be wary while using Generative AI?

Although it seems that the benefits offered by Generative AI are overarching it also has its own set of limitations. It is necessary that legal teams or organizations judiciously undertake utmost caution before moving ahead with this technology. Some of the risks posed include:

Data Privacy

Maintaining the integrity of client data is of prime importance. Legal teams must ensure that the Generative AI tool being used does not use contract-related data containing critical information for any training purpose.

Hallucinations and inaccurate results

Since Generative AI technology is in its nascent stage, it can produce inaccurate results. AI models tend to fabricate information or “hallucinate” and generate results on their own. Trained to recognize patterns in the data and predict the outcome, they often generate random content that can be false or inaccurate.

Lacks human expertise

Contract management is a crucial process and requires in-depth attention by a legal expert. Any inadvertent lapse in contract matters involving significant legal stakes can have immense backlash and financial losses. Generative AI’s output can sometimes be inaccurate or unreliable and, thereby, cannot replace human expertise and judgement entirely. It can be considered as ‘legal assistant’ that aids legal experts in making decisions considering various legal factors.


This disruptive technology has the potential to revolutionize contract lifecycle management by bringing greater efficiency to CLM processes, providing better risk management, and improving workforce productivity by freeing up valuable legal resources to focus on core legal work.

Embracing a Retrieval-Augmented Generation (RAG)- based generative AI model integrated into a contract lifecycle management solution is a legal team’s most secure and practical option. With Knovos experts, explore the scope of AI adoption in your contract management workflow.


Vishwarup Dhagat
Vishwarup Dhagat, Senior Manager of Customer Success at Knovos, has over 16 years of experience serving and tailoring solutions to Knovos customers as per their unique needs. Vishwarup contributes his knowledge and experience across the customer lifecycle, from requirement analysis to implementation and beyond. Knovos clients endorse his expertise in Enterprise Data Management, Risk Mitigation, Process Management, Information Governance, eDiscovery, etc.