When ChatGPT first went live, many lawyers and in-house legal teams realized its potential in analyzing complex legal issues, reviewing extensive documents, and generating accurate legal content in a matter of seconds. 

But this raised questions about the future of in-house legal counsel. Will AI replace lawyers and render them obsolete?

There is indeed a strong case for a reduced demand for lawyers in the future. AI's tireless work ethic, cost-effectiveness, and ability to minimize errors make it an appealing option. It can translate intricate legal concepts into understandable language for the average person and even pass challenging exams like the US bar exam. It seems like the perfect replacement, right?

However, AI still faces unresolved issues, such as concerns surrounding confidentiality and security when data is stored and used across different contexts. Moreover, AI systems are not immune to producing nonsensical or unreliable results. 

The optimal solution? Legal professionals and AI work hand in hand. 

In-house legal departments before AI

In-house legal departments are the backbone of businesses and organizations. They’re the backbone that no one really pays attention to before it starts to ache. 

Without the legal department’s role in contract management, compliance, regulatory matters, litigation support, and legal advice, any organization is doomed to fail.

Despite their crucial role, in-house legal departments encounter numerous challenges, especially when it comes to contract management. The laborious and time-consuming processes, such as manual contract drafting, review, and tracking, are what slow legal down, not to mention the risks associated with not paying attention to detail.

Resource constraints further compound the challenges faced by in-house legal departments in contract management. With a broad range of legal matters to handle, you often struggle to dedicate sufficient time and attention to effective contract management. This becomes even more pronounced when confronted with a high volume of contracts, stretching resources to their limits.

This is exactly why modern legal demands call for streamlined and automated contract management processes that reduce reliance on manual tasks. 

To address these needs and overcome the limitations faced by in-house legal departments, many lawyers have started embracing innovative technologies, particularly AI-driven solutions. At the same time, there’s a fear of getting overpowered by these technologies. 

There’s this fear that lurks in every legal professional’s mind: AI will replace lawyers. But the reality is far from it.

“Generative AI will not replace lawyers. In fact, it needs humans to stay involved, especially when used for legal work. To start, the bar will not allow AI to replace us; the practice of law will require humans in some capacity no matter what. Second, you must validate everything it spits out, another reason why the bar won’t allow AI to replace lawyers (see below for more on the problems with ChatGPT and ethical obligations). Third, ChatGPT does not understand context, nor can it discern whether it is being used to come up with the answer the user wants vs. the correct legal answer (i.e., right vs. wrong, but also, as Charles Spurgeon said, right vs. almost right). Only people can do that.”

~ Sterling Miller, CEO of Hilgers Graben PLLC
Ten Things: ChatGPT and Generative AI (What In-House Counsel Need to Know)

The current perception of AI in legal departments

The perception of AI in legal varies widely among corporate counsel. Some are positive about its potential, while others are skeptical or simply unaware of its capabilities. 

When it comes to the adoption of AI tools, larger legal departments appear to be more receptive than the smaller ones (with fewer than 6 attorneys in their team). In fact, only 26% of respondents from departments with over 11 attorneys believed that their teams weren't interested in AI. 

What many attorneys may not realize is that they are already using AI technology in their daily lives, even outside of the legal realm. 

For instance, popular devices like Amazon's Alexa and Apple's Siri utilize natural language processing, a form of AI that enables computers to understand and respond to spoken or written words. In the legal field, natural language processing has been applied to improve legal research for over a decade.

It's important to note that many legal AI products build upon existing knowledge management technologies, such as text analytics and business process automation. What distinguishes them as AI products is their ability to incorporate intelligence into their functionality. They can learn from data and process natural language inquiries, which empowers legal professionals to work more effectively and make informed decisions.

The rise of AI in contract management

AI, with its unlimited capabilities, is unleashing a new era of efficiency and effectiveness in contract management processes. Its ability to analyze and interpret vast amounts of data, extract relevant information, and make intelligent decisions has the potential to transform the landscape of contract management. 

“AI has the potential to solve two huge problems all legal departments face: 1) lack of budget and 2) lack of manpower. If the use of AI can provide less expensive legal services (either used internally or purchased through a law firm), the value is immediately apparent. If the use of AI can free up current staff from spending time on transactional-tasks, the value (if not immediately apparent) is exponentially greater than merely paying less for legal services. Freeing up attorney time gives you and your business clients more access to better and more involved legal services (i.e., attorneys who can dedicate more time to thinking through problems and advising clients). The combination of these benefits will allow in-house legal departments to actually deliver on the old CEO/CFO demand of ‘doing more with less.’”

~ Sterling Miller, CEO of Hilgers Graben PLLC
Ten Things: Artificial Intelligence – What Every Legal Department Really Needs to Know

With AI, legal teams can automate routine tasks, gain insights from contract data, and streamline the entire contract lifecycle. And there’s more!

#1 Enhanced speed and efficiency in contract analysis and review

AI-powered contract analysis tools can quickly review and analyze contracts, extracting key terms and clauses with remarkable accuracy. This saves significant time and effort compared to manual review, enabling legal teams to focus on higher-value tasks. AI algorithms can identify potential risks, inconsistencies, or non-compliance issues, allowing legal professionals to address them proactively.

#2 Advanced contract drafting and negotiation with AI-powered tools

AI can assist in the contract drafting and negotiation process by providing intelligent suggestions and recommendations based on pre-defined rules and historical data. AI-powered tools can analyze existing contracts, identify standard clauses, and propose revisions or alternative language. This accelerates the negotiation process, reduces errors, and enhances the quality of the final contract.

#3 Real-time contract monitoring and risk assessment

AI enables real-time contract monitoring and risk assessment by continuously monitoring contract performance, obligations, and key dates. It can provide alerts for critical events, such as renewal dates or termination clauses, ensuring that legal teams stay on top of their contractual obligations. AI-powered risk assessment algorithms can analyze contracts to identify potential legal, financial, or reputational risks, allowing legal departments to mitigate them proactively.

Also read: How AI Is Changing Contract Management for Legal Teams

Also read: Generative AI for Contract Management: Best Practices to Ensure Safety

AI as a strategic partner

Rather than being threatened by the rise of AI, legal teams have the opportunity to embrace it and evolve alongside this transformative technology. 

Instead of AI replacing lawyers, it can augment their capabilities, allowing them to focus on strategic and high-value tasks that require their expertise and judgment. 

To truly maximize the benefits of AI in the legal field, it is crucial to foster a symbiotic relationship between AI and legal expertise. AI excels in processing and analyzing data, while legal professionals bring their nuanced understanding of the law, context, and ethical considerations. By combining the strengths of both, a powerful synergy can be achieved.

“AI can be a tool in your toolbox that can help support decision making, but it shouldn't make the decisions. “

~ Cory Lamz, VP Legal, Buoy Health
Building relationships with a problem-solving mindset

Legal professionals can provide the necessary guidance and oversight to ensure that AI systems are aligned with legal requirements, ethical standards, and business objectives. You can train AI models, validate results, and ensure fairness and transparency in AI-driven decision-making. 

In turn, AI can support legal professionals by automating repetitive tasks, uncovering insights from vast data sets, and assisting in complex legal analyses.

Despite the benefits, AI adoption for legal teams has many hurdles.

#1 Cost

“The ROI of AI will be heavily fact-dependent for each organization based on what AI tools the department wants to utilize, the amount of customization needed, the number of users, and so forth. But of course, over time, as adoption increases and Moore’s Law takes over, the power of AI will increase and the costs will come down, probably dramatically within the near future.”

~ Sterling Miller, CEO of Hilgers Graben PLLC
Ten Things: Artificial Intelligence – What Every Legal Department Really Needs to Know

Implementing AI technologies, such as sophisticated contract management systems or AI-powered legal research tools, often requires a significant financial investment. These costs include not only the initial purchase or licensing fees but also ongoing maintenance, training, and integration with existing systems.

#2 Ethical considerations

AI technologies rely on algorithms and data to make decisions, which raises concerns about bias, fairness, and the potential for discrimination. Legal professionals have an ethical duty to ensure that AI systems are transparent, unbiased, and comply with legal and ethical standards.

#3 Change management

The introduction of AI into legal teams requires a significant shift in mindset and working practices. Change management becomes a crucial hurdle to overcome to ensure successful AI adoption. Resistance to change, fear of job displacement, and unfamiliarity with AI technologies can hinder the adoption process.

You need to showcase the benefits of AI adoption transparently, emphasizing how AI technologies can enhance your team’s work rather than replace them. 

Also read: Go Beyond Contracting with Intelligent Contract Management

Embracing the AI revolution

When it comes to implementing AI technology, there’s often apprehension among legal professionals may fear that AI will replace lawyers or disrupt established workflows. 

“When you implement new technology or processes and tell your team that you’re going to take 40% of what they do and do it in a way that's way faster and more effective, the automatic reaction is, ‘You're taking my job.’ In that case, I help my team understand that we’re just doing this to become the creative and innovative in-house lawyers we can be while co-leading business. The simplest piece of advice I could give to anybody, in business or otherwise, is to create that headspace; Take a step back, open your mind to the possibility of doing things in a more modern and effective way.” 

~ David Lancelot, ex-VP Global Head of Legal, eBay Classifieds
Embracing Legal’s Role as Business Co-Leaders

Creating a culture of innovation involves encouraging experimentation and rewarding creative thinking. 

You must empower your teams to explore AI tools and technologies, test their applicability, and share their findings with colleagues. By fostering a supportive and collaborative environment where ideas are valued and experimentation is encouraged, legal teams can embrace the AI revolution with enthusiasm.

Integrating AI into contract management processes requires a systematic approach. Here are some practical steps that in-house legal teams can take to successfully incorporate AI:

#1 Assess needs and identify opportunities

Begin by assessing the specific pain points and challenges in contract management that AI can address. This could include tasks such as contract analysis, review, due diligence, and risk assessment. Identify the areas where AI can add the most value and prioritize them for implementation.

#2 Research and select AI solutions

Conduct thorough research to identify AI solutions that align with the identified needs and goals. Consider factors such as functionality, ease of integration, scalability, and vendor reputation. Engage in demos, trials, and pilot projects to evaluate the effectiveness and suitability of different AI tools.

For instance, SpotDraft AI helps you unlock a new level of productivity and gain valuable insights from your contracts while using the platform for contract drafting or information extraction.

With SpotDraft, you can:

• Generate contract templates instantly
• Conduct comprehensive due diligence on multiple contracts at once, and review contracts 7x faster with AI clause match
• Extract critical insights from your contracts, empowering better decisions across your organization
• Compare clauses with past versions side by side, and make quick changes
• Generate precise contract summaries to identify data trends and facilitate decision-making

Moreover, using our Microsoft Word plugin, Draftmate AI, you can turn any document into a SpotDraft contract template in under 5 minutes.

#3 Pilot and refine

Start with small-scale pilot projects to test the selected AI solution within the contract management process. Monitor its performance, gather feedback, and make adjustments as needed. This iterative approach allows for continuous improvement and ensures that the AI solution aligns with the team's requirements.

#4 Provide training and support

Offer comprehensive training to your team on how to effectively use the AI tools integrated into the contract management processes. Ensure that they understand the capabilities, limitations, and best practices associated with AI technology. 

“I do not see AI replacing an attorney. Clients hire an attorney for the attorney’s knowledge, experience, and ability to interpret and apply legal precedent. While AI may be able to identify relevant statutes, regulations, and case law, there is a human aspect of law practice that provides guidance to clients that AI is not likely to replace. If properly developed, AI can be another means by which attorneys can increase their productivity and obtain optimal results for clients.”

~ Joel Murray, Attorney, McKean Smith LLC
Generative AI and the Law

Also read: How Are CLMs Useful for CFOs & Finance Teams?

Human expertise + AI technology = High-functioning legal team

Legal expertise is essential in interpreting nuanced legal concepts, understanding complex business contexts, and making strategic decisions. AI can provide data-driven insights and process large volumes of information, but it is the legal professionals who bring critical thinking, ethical judgment, and contextual understanding to the table.

As awareness grows and understanding deepens, perceptions of AI in legal departments are likely to evolve. Regardless of the size of the legal department, embracing AI technology can bring numerous benefits, including improved efficiency, streamlined processes, and valuable insights for decision-making. 

It is important to foster an environment where lawyers can actively contribute to the development and improvement of AI systems. This collaboration ensures that AI technologies align with legal requirements, ethical standards, and the unique needs of the organization.

If you want to see firsthand how AI can contribute to your contract management process, request a personalized demo with SpotDraft. Try it before you buy it!