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Legal Document / Contract Automation in 2024: In-depth Guide

The increasing volume of clients and competition is forcing legal departments to provide fast and affordable services. Creating, managing, and reviewing legal documents is labor-intensive. Today’s businesses need to reduce these costs and accelerate document-related processes. Legal document automation handles document-based legal tasks for legal departments and enables them to spend more time on more value-adding activities. It also accelerates legal document generation processes significantly and reduces human-made errors.

How does it work?

Most common legal document automation solutions have a simple process. As legal departments mostly focus on automated legal document generation, the main focus is to save time drafting documents. Thus, the common approach is to collect customer information by sending out a form and automatically putting the data in that form into legal documents. A more modern approach is to retire forms and use data extraction solutions to capture data from existing documents or other data sources, however, this approach is not commonly used yet.

Here is how legal document automation works step by step:

Solutions like Lagwood 1 provide legal contract text vetted by lawyers that covers common areas to minimize research to draft agreements.

  • The legal department first creates templates for different types of documents. These templates will include where the client information will be embedded in the document.
  • Some documents might consist of separate statements based on client information. For example, there can be different lines for clients from France and the ones from Belgium. Legal departments should also set these possibilities before starting automated document generation.
The visual shows how an agreement can be updated based on country specific requirements by set up templates.
Figure 1:Legal document samples, Source: Radiant Law
  • Similarly, client information can be used to calculate legal rates and charges, which will be added to the pre-defined part of the legal document.

Collecting data for document generation

  • When a new client comes, the legal department sends out a form to collect all the relevant information needed to generate legal contracts.
  • The data collected will automatically be embedded in the legal document. As the data is kept in the database, it can also be used to create different kinds of documents.
The visual shows that customer has filled one document and this knowledge is transferred to the agreement.
Figure 2: Collecting data for legal documents, Source: Radiant Law

Checking for errors / parts to improve

  • As the client information is filled directly by the customer, document automation tools are used to identify misspellings and missing information. They can also scan through the other legal documents of the same client to prevent any contradictions.
  • Document automation tools can also look for any errors in the template and offer recommendations in the statement for more optimized content.

To learn more about how document automation works, feel free to read the related section of our in-depth document automation guide

Why is it relevant now?

Legal departments traditionally use existing templates while generating documents for their clients. For that, they need to collect relevant information from clients like legal name, address, company number, and put that information into legal contracts manually, which is a time-consuming and error-prone task.

Automation technologies can accelerate these processes and prevent any missing or erroneous client information while preparing legal documents. As the process does not require human intervention, it can save around 70% of document generation time for legal departments.2 

Today, legal document automation solutions become more critical due to the following reasons:

Increasing number of transactions leads to the increasing volume of documents

The size of incoming business information increases fast.3 The growth of the incoming business will also increase the need for legal services, which would also increase the volume of legal documents generated. While creating these documents manually was already a challenge, creating more will be a harder one. This is likely to further motivate legal departments to implement automated solutions.

Staff need to focus on higher value-adding activities

Legal document automation will reduce a significant amount of time for legal departments and help employees work on higher value-adding activities instead of manually adding customer information to legal document templates.

The increasing importance of economic stability

Mistakes in legal documents can cause high amounts of unexpected costs and put companies in difficult positions. Considering today’s unstable economic environment, companies need to be more careful, especially in legal activities, to avoid issues due lack of compliance.

The interest in legal document automation was fluctuating until around 2018, however we observe an increase in interest. This is not surprising since companies are showing increased interest in automation solutions in the past few years.

The trends show that google search interest for legal document automation has been fluctuating since 2013. Yet, it received a substantial increase in 2018.
Figure 3: Google Trends for legal document automation, Source: Google Trends

Different kinds of legal documents can be generated with legal document automation tools. Once the client information is collected, legal departments can automatically create the following documents for the same client instantly:

  • Bills of Sale
  • Operating Agreements
  • Business Contracts
  • Business Proposals
  • Financial Declarations
  • Loan Agreements
  • Mortgages
  • Regulatory Agreements
  • Non-Disclosure Agreements
  • Wills and Trusts

The main benefits include:

  • Faster processes: Document automation significantly speeds up creating new legal documents and provides faster services while interacting with clients.
  • Reduced errors: While manual document creation is prone to errors, legal document automation enters client information without mistakes and can detect contradictions based on previous deal documents with the client.
  • Optimized contracts: Template agreements can be too wordy, and specific statements added later might cause documents to be longer. Document automation tools can optimize the content and continue to keep the focus on the key issues to offer secure but shorter, simpler contracts.
  • Improved customer satisfaction: Handling legal documents faster and with fewer errors would positively impact customer satisfaction.

Many document processing vendors can provide legal document automation solutions. However, some of them are specialized under processing legal documents, so you might want to check them out if you are planning to use this technology for legal purposes. Here is a list of those vendors that provide legal document automation services:

  • Knackly
  • LawboxPRO
  • LawLift
  • Leap
  • LegalUp
  • Radiant Law

Further reading

If you want to read more about document automation, these articles can also interest you:

If you have questions on legal document automation tools, feel free to contact us:

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Cem Dilmegani
Principal Analyst
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Cem Dilmegani
Principal Analyst

Cem has been the principal analyst at AIMultiple since 2017. AIMultiple informs hundreds of thousands of businesses (as per similarWeb) including 60% of Fortune 500 every month.

Cem's work has been cited by leading global publications including Business Insider, Forbes, Washington Post, global firms like Deloitte, HPE, NGOs like World Economic Forum and supranational organizations like European Commission. You can see more reputable companies and media that referenced AIMultiple.

Throughout his career, Cem served as a tech consultant, tech buyer and tech entrepreneur. He advised businesses on their enterprise software, automation, cloud, AI / ML and other technology related decisions at McKinsey & Company and Altman Solon for more than a decade. He also published a McKinsey report on digitalization.

He led technology strategy and procurement of a telco while reporting to the CEO. He has also led commercial growth of deep tech company Hypatos that reached a 7 digit annual recurring revenue and a 9 digit valuation from 0 within 2 years. Cem's work in Hypatos was covered by leading technology publications like TechCrunch and Business Insider.

Cem regularly speaks at international technology conferences. He graduated from Bogazici University as a computer engineer and holds an MBA from Columbia Business School.

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