7 Best Practices to Employ NLP for Contract Review

Maruti Techlabs
4 min readApr 29, 2024


Discover best practices to employ NLP in the legal sphere to expedite contract drafting and review.

NLP for Contract


Contract agreements are believed to be the backbone of any business transaction. They represent a company’s prior success, current commitments, and future opportunities. It’s in a firm’s best interest to create agreements that establish trust, mitigate risks, and enhance overall profitability.

Yet, handling large volumes of contract analysis and creation is one of organizations’ most significant challenges. As per a study by Ernst & Young, 89% of organizations find managing high volumes of low-complexity contracts challenging. At the same time, 54% believe that it consumes their essential time that could be spent on other high-value tasks.

Research from World Commerce and Contracting suggests that the average cost of creating a contract with traditional practices is approximately $7000. Large organizations manage up to 350 contracts a week. Therefore, more and more organizations are planning to use automation to reduce the cost of contracting.

This is where automation technologies such as Natural Language Processing (NLP) emerge as game changers. Today, NLP is transforming the legal sphere by expediting the contract drafting and review process.

Below, we unveil the potential NLP holds with AI contract review and analysis while exploring its benefits, use cases, and implementation in contract review workflow. Let’s understand how intelligent AI supports legal teams in the contract management process.

Understanding NLP In Contract Review

NLP has emerged as a transformative force in contract analysis, revolutionizing how legal professionals navigate and interpret complex agreements. To grasp its impact, let’s delve into NLP's essence.

What is Natural Language Processing (NLP)?

NLP is a part of artificial intelligence that allows machines to comprehend text and spoken language meaningfully and helpfully.

NLP is introducing significant transformations across numerous industries. But it has made remarkable contributions to the legal realm, particularly with contract analysis.

NLP’s Potential to Revolutionize Contract Analysis

Legal firms can automate and enhance their contract lifecycle by incorporating NLP in contract analysis from drafting and negotiation to execution and renewal. NLP can efficiently process and comprehend the intricate language used in legal documents, extracting critical information and identifying relevant clauses with unprecedented accuracy.

Leveraging NLP-driven tools, solicitors can save significant time and resources, minimize risks, and streamline contract processing.

How Can You Use NLP for Contracts?

NLP can process massive data sets from various sources, such as emails, social media, and reviews, giving businesses valuable insights. This empowers businesses to make informed decisions, helps enhance customer engagement, tailor their strategies to customer needs, and stay competitive in the ever-evolving market landscape.

Benefits Of NLP In Contract Review

Benefits Of NLP In Contract Review

The use of NLP in contract analysis extends beyond the legal department, significantly benefiting other departments like finance and sales. Combining NLP with contract analysis aids risk management while increasing efficiency and effectiveness.

Additionally, it assists with drafting legal documents, identifying similar contract phrasing, summarizing legal clauses and data, and organizing data systematically based on clauses, ranges, and agreement terms.

Here’s a list of several advantages of employing AI-powered contract analysis.

1. Efficient Contract Drafting and Reducing Repetitive Tasks

NLP promotes coherent contract drafting by offering language suggestions and ensures document consistency. On average, it takes a lawyer 92 minutes to review a single contract as opposed to AI, which does it in 26 seconds.

With thousands of contracts to review, the human process is time-consuming and prone to oversight. Moreover, NLP in contract analysis accelerates document assembly while reducing production costs, ensuring thorough vetting of agreement terms.

SpotDraft is a legal technology startup that has created an AI-based contract management and drafting software. SoftDraft’s CEO and Co-founder, Shashank Bijapur, remarked that SpotDraft “enables law firms to do more for their clients in a shorter period of time.”

2. Streamlined Contract Analysis

NLP tools can detect errors and discrepancies, automating the contract review process. An NLP tool can analyze contracts by adhering to your criteria and suggest corrective actions for clauses that don’t meet expected standards. It can also offer answers to open-ended queries.

3. Accuracy and Compliance

NLP tools are trained to offer precision and compliance with legal standards. They reduce the possibility of errors while maintaining consistency concerning language and phrases across multiple contracts.

4. Enhanced Decision-Making

NLP-powered tools yield invaluable insights by scrutinizing contracts and retrieving structured data from contracts. These insights are fundamental to informed decision-making, allowing legal teams to comprehend contractual obligations, risks, and trends.

5. Managing Complex Contractual Data Sets

AI-driven contract management utilizes NLP to support efficient search and comprehension of legal terminology, preventing misinterpretations and saving time. The extracted data can readily be used due to the contextual analysis conducted in real-time, accelerating agreement analysis.

An NLP algorithm primarily retains knowledge by extracting knowledge from hundreds of thousands of contracts and applying insights from them to new agreements. This distinguishes them as the ultimate contract expert, eliminating biases and disputes over contracting authority.

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