As per a study by the Institute for Supply Management, a typical Fortune 1000 company manages anywhere between 20,000 to 40,000 active contracts at any given time. Additionally, there are legacy contracts to add to the number. Keeping track of all of these contracts can be a nightmare if done manually. Using Natural language processing (NLP) technology for contract management can make it possible to complete the task at hand.

What is natural language processing?

First, let’s understand what is NLP and how it works. The ability of computer software to comprehend human language in its spoken and written forms is known as natural language processing (NLP). Some examples of NLP are chatbots, and smart assistants such as Siri, Alexa, and Cortana which have gradually integrated into our lives. However, the question arises as to how NLP can be utilized to extract and process contract data?

NLP is a technology initially used to make sensible translations of conversations between different languages in common use. It’s the ability to parse words, phrases, and sentences into meaningful text. The modern approach is a statistical soft approach rather than hard-wired rules so that as a document is processed through an NLP engine the statistical probability of interpretation improves


The uses are many and the NLP technologies are engaged in ensuring that there is sensible continuity, that the relationships make sense, and that ambiguities and errors can be largely corrected as the processing continues. It can take a chunk of text and break it into discrete words, where there are conflicts in ambiguities – for example where one word can have several meanings – it can largely address and rectify according to statistical probability. It is a perfect adjunct for the semantic extraction process because of the close overlay of capabilities and the ability to verify attributes in contracts and their documents automatically according to the sentiment expressed in surrounding text (sentences, phrases, and paragraphs).

NLP provides a real edge to the legal department

A good CLM system backed by AI technology allows you to choose, define, and track attributes, and associate them with the contractual documents or you can say it increases the searchability of contracts. The AI method used for this purpose is called natural language processing (NLP).

Leveraging AI and NLP assists to resolve contracting challenges by delivering efficient contract management and a seamless automated solution. The result is improved efficiency, faster turnaround times, more consistent language, and reduced risk of conflicts arising from ambiguous language.

  • Fast-track contract drafting:

At the very first stage of the contract lifecycle process i.e. drafting, having terms and obligations stated correctly is vital. A manual drawing up a contract leaves space for errors, especially when a lawyer starts from a given template the end could be terrible.

Having an ever-evolving clause library that tracks and adds clauses used in third-party papers and agreements with the assistance of AI technologies makes the process of drafting contracts go much more quickly.

  • Extract key information

A large volume of contracts pulls away lawyers and business associates from their core work. An automated contract data extraction process eliminates the headache of manually finding and storing legacy data reduces the cycle time and streamlines the contract management process.

With the contract data extraction process, an organization segregates a large volume of unstructured data into a structured format. For an effective extraction process, contracts are exported into a single repository. With the help of AI, these documents are then sorted and arranged as per the parent-child relation. The data is then passed through the AI-enabled system for prompt extraction. Here NLP models and libraries are used to train and advance the system for more accurate extraction results.

  • Real-time review and negotiation:

Not knowing what your company earlier agreed to can cost you dearly. Learning from the past can improve and expedite your negotiating stance. unlike the manual procedure, which requires going back and forth between various emails and documents, a real-time review enabled by a sophisticated technology can provide a fast review of previously agreed-upon conditions and clauses. The application of AI and NLP technology can expedite the review of real-time contractual data.

Learn how Brightleaf can be leveraged in streamlining your contract management processes.
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