Combining Contract Playbooks With Generative AI: A Practical Tool For Smarter Contract Review

Whether your organization negotiates only a handful of significant agreements each year or manages a high volume of commercial contracts across multiple business lines, one of the most valuable investments you can make in your contracting process is the development of a comprehensive contract playbook. A well-prepared playbook can meaningfully reduce legal risk, improve negotiation consistency and accelerate the time it takes to move from a draft agreement to a finalized and signed contract.

What Is a contract playbook?

As discussed in this previous Insight, a contract playbook is a practical guide outlining preferred contract language, secondary positions and escalation points for frequently reviewed contracts. A well-designed playbook typically addresses:

• Your organization’s preferred contractual position and contractual requirements
• Acceptable alternatives or fallback positions
• Clear risk commentary to guide escalation decisions
• Sample contractual language that can be adapted to the specific transaction.

The scope of a playbook will depend on the nature of your organization’s business and the types of agreements you regularly negotiate. Common topics include scope of services, fees/invoicing, IP ownership, confidentiality, limitations of liability, indemnification, representations and warranties, privacy and data protection and termination rights, among others. Playbooks can be tailored for two distinct contexts:

1. Negotiating your own template or form of agreement and responding to a counterparty’s markup
2. Reviewing and responding to a counterparty’s template to assess whether proposed terms are acceptable or require further negotiation.

Contract playbooks and generative AI

One of the most significant recent developments in contract management has been the emergence of generative artificial intelligence (“AI”) tools capable of assisting with contract review. These tools offer the potential to meaningfully accelerate and assist in your review process. However, their value is often only as strong as the legal foundation upon which they operate. In other words, the concept of “garbage in, garbage out” continues to apply to the use of these tools. This is precisely where a well-developed contract playbook becomes essential.

When paired with a robust, lawyer-developed playbook, generative AI tools can greatly assist with the initial review of a contract by flagging provisions that deviate from the organization’s standard positions, identifying missing provisions or concepts and providing a preliminary risk assessment based on the guidance contained in the playbook.

However, without a comprehensive and legally sound playbook as the foundation, an AI-assisted review is likely to produce results that are generic, incomplete or potentially misleading. Generative AI tools do not inherently understand an organization’s specific business, risk tolerance or negotiation objectives. They may produce inconsistent results or fail to identify deviations that are in fact significant and they are known to occasionally generate inaccurate or fabricated outputs – otherwise known as hallucinations.

Furthermore, contract negotiations frequently involve nuanced, context-specific considerations (such as the acceptability of a particular limitation of liability structure or IP ownership regime) that an AI tool may not appreciate without explicit guidance. Your playbook, if well developed, should capture many of these nuances and provide the AI with a reliable, organization-specific reference point, reducing its reliance on general training data that may not be current or relevant.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.