However, AI-assisted contract review is not without risk. While AI can improve efficiency and consistency, it cannot replicate legal judgement or commercial decision-making.
Without appropriate oversight, it can create false confidence, overlook material issues and expose organisations to avoidable legal, commercial and regulatory risk.
For in-house legal teams, the principle is straightforward: AI should support the contract review process, not replace the expertise and judgement of experienced lawyers.
1. AI Cannot Assess Commercial Context or Risk Appetite
Effective contract review is about more than spotting unusual wording.
It requires an understanding of the organisation’s commercial objectives, risk appetite, approval processes and internal policies.
A clause that appears acceptable to an AI tool may be inappropriate for a strategic customer, a high-value deal, a regulated sector or a business with a low tolerance for certain risks.
For example, AI may flag a broad indemnity, a liability cap, or a one-sided termination right, but it cannot decide whether the business is willing to accept that risk, whether there is negotiating leverage, or whether an exception has already been approved internally.
Those calls require legal and commercial judgement.
2. Outputs Can Be Confident But Wrong
Generative AI can produce responses that are clear, confident and convincing.
The problem is that confidence does not always mean correctness.
In contract review, small drafting differences can have significant legal consequences.
A single word, exception or qualification can materially change the allocation of risk between the parties.
An AI tool may describe a liability cap as “market standard”, but a single qualification can completely change its effect.
For example, a clause might state that liability is capped at the fees paid under the contract, but then exclude claims for breach of confidentiality, data protection breaches, intellectual property infringement, and indemnity claims from that cap.
In practice, those exclusions may cover some of the highest-risk claims under the agreement, leaving a party exposed to potentially unlimited liability despite the liability cap.
These details are critical.
AI can highlight potential issues, but the contract wording must always be reviewed and assessed by a lawyer.
3. Confidentiality and Data Protection Cannot be an Afterthought
In-house legal teams routinely handle commercially sensitive contracts, confidential negotiations, personal data and privileged information.
Before uploading contracts to an AI platform, legal teams should understand:
- Where the data is stored
- Whether it is used to train the AI model
- Who can access it
- Whether the provider meets the organisation’s information security, confidentiality and data protection requirements
Failing to conduct appropriate due diligence may create unnecessary confidentiality, privilege, and regulatory risks.
4. It Can Weaken Review Discipline
One of the greatest risks is not the technology itself, but how it is used.
If AI becomes a shortcut rather than a support tool, reviewers may rely on summaries, risk scores or issue lists without properly reviewing the contract.
Important drafting nuances and commercial considerations can easily be overlooked.
AI is well-suited to triaging contracts and highlighting areas for review. It should not become the review itself.
5. Accountability Remains with the Legal Team
If an AI tool fails to identify a problematic clause, the business is unlikely to see it as a software issue.
It will see it as a failure of the legal review process.
Professional obligations relating to competence, confidentiality, supervision and acting in the client’s best interests continue to apply when AI is used.
Responsibility for the advice ultimately remains with the legal team.
Organisations should therefore have clear policies covering when AI may be used, who can use it, what level of human review is required and when matters must be escalated.
How In-House Legal Teams Can Use AI Safely
AI can be a valuable addition to the contract review process when used appropriately. Good practice includes:
- Using AI for first-pass reviews, clause extraction and document triage rather than final sign-off
- Checking AI-generated outputs against the contract wording
- Ensuring experienced lawyers review high-value, high-risk and strategically important agreements
- Configuring AI tools to reflect internal contract playbooks and approval processes wherever possible
- Carrying out appropriate due diligence before uploading confidential or personal data
- Implementing an internal AI policy for the legal team
- Keeping an audit trail of when AI has been used and what human review has taken place
AI does not carry legal responsibility for the advice it generates, nor can it understand an organisation’s commercial priorities without appropriate guidance.
Conclusion
AI has significant potential to improve the speed and efficiency of contract reviews, and for many in-house legal teams, it is already becoming part of everyday practice.
However, the most effective legal functions will be those that use AI to enhance, rather than replace, their lawyers' expertise.
Technology can identify patterns and highlight potential issues, but only experienced legal professionals can weigh legal risk against commercial objectives, apply organisational judgement and make the final decision.
For in-house lawyers, AI should be viewed as a powerful assistant, not the decision-maker.
Need Advice on AI and Contract Reviews?
AI can speed up contract reviews, but it shouldn't make legal decisions. The right balance between technology and human expertise is key.
If you'd like to discuss how AI can be implemented safely within your legal team, contact our In-House Counsel Support Lawyers for a conversation.
0161 941 4000
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Alexia Dirgau
Trainee Solicitor
Alexia joined Myerson in 2022 as a Solicitor Apprentice and has been developing her legal knowledge and practical experience alongside her studies at BPP University. Her apprenticeship has provided her with a unique opportunity to learn through hands-on experience, working closely with colleagues across the firm while progressing towards qualification as a solicitor.
Alexia spent her first year in the Business Services team, where she gained valuable insight into how a law firm operates and developed a strong understanding of the importance of collaboration and client service. This experience provided an excellent foundation for her legal career and helped her build skills that she continues to apply in her work today.
Since then, Alexia has completed seats in Commercial Property, Commercial Litigation and Corporate, giving her exposure to a broad range of legal matters and allowing her to develop experience across both transactional and contentious work. These seats have helped her build a well-rounded understanding of the legal and commercial issues faced by individuals and businesses.
Alexia is currently undertaking a seat in the Probate Litigation team, assisting on a variety of contentious trusts and estates matters, including inheritance disputes and challenges relating to wills and estates. She particularly enjoys the variety of the work and the opportunity to help clients navigate what are often complex and sensitive situations.
One of the aspects Alexia enjoys most about her role is the collaborative nature of legal practice. She enjoys working closely with colleagues across different teams, drawing on a range of expertise to provide practical solutions for clients. Working alongside talented lawyers in a supportive environment has enabled her to develop both professionally and personally throughout her apprenticeship.
About Alexia Dirgau