Byline: Andi Stark

Many businesses are turning to artificial intelligence to streamline contract management. According to the AI Adaptation in Contracting Report by World Commerce & Contracting (WorldCC), 42 percent of businesses actively use AI in contract-related processes, up from 30 percent in early 2024. The report, developed in collaboration with Icertis, provides an in-depth analysis of how AI changes contract drafting, compliance monitoring, and risk management.

While AI adoption is increasing, WorldCC’s findings indicate that organizations face significant challenges. Issues such as data security (63 percent), trust in AI-generated contracts (46 percent), and workforce adaptation (39 percent) remain barriers to widespread implementation. Tim Cummins, founder of WorldCC, notes that AI must be integrated with caution, stating, “Businesses need to ensure that AI is deployed responsibly, with clear oversight and governance frameworks in place.”

Automating Contract Drafting and Review

According to the WorldCC report, AI reduces contract drafting time by 76 percent. Companies using AI-powered tools can analyze past agreements, suggest optimal clauses, and flag potential risks before contracts are finalized. AI also enhances contract standardization by ensuring language consistency across an organization’s agreements.

The report states that contract automation leads to fewer human errors and reduced negotiation times. However, many businesses remain hesitant to rely solely on AI-generated contracts. Sally Guyer, Global CEO of WorldCC, highlights this concern. “Organizations recognize AI’s efficiency in contract drafting, but human oversight is still needed, particularly in high-risk or complex agreements.”

Predictive Analytics and Risk Management

WorldCC’s research indicates that 64 percent of organizations using AI in contract management report fewer disputes. AI-driven risk assessment tools analyze historical contract data, supplier performance, and regulatory trends to predict potential issues before they escalate. AI allows businesses to adjust their agreements proactively by identifying problematic clauses or high-risk counterparties.

Additionally, AI is proving to be effective in tracking regulatory compliance. 65 percent of organizations using AI-powered contract management tools report improved oversight of changing laws and regulations. Companies with international supply chains benefit the most, as AI enables them to monitor legal shifts across multiple jurisdictions.

Ethical and Legal Challenges in AI Adoption

Despite AI’s potential, organizations remain cautious. The WorldCC report states that 46 percent of businesses express concerns about trusting AI-generated contracts, citing risks of bias, inaccurate clause selection, and legal misinterpretation. Many legal teams worry that AI may not fully account for industry-specific regulations or the nuances of contract language.

To address these concerns, WorldCC’s findings suggest that businesses adopt a phased approach to AI implementation, integrating AI tools gradually while maintaining human oversight. Cummins emphasizes the need for a balance, saying, “AI should support contract professionals, not replace them. Organizations must establish clear accountability measures for AI-generated content.”

Impact on the Workforce and Legal Teams

The WorldCC report highlights a shift in skill requirements for contract professionals. As AI automates routine tasks, legal and contract management teams are evolving to focus on strategic decision-making, negotiations, and governance. However, the research also finds that 35 percent of organizations cite a lack of AI training among employees as a significant challenge in adoption.

Companies are now investing in AI education programs to help legal teams adapt. Guyer sees AI as a tool for efficiency rather than replacement, explaining, “AI is taking over repetitive tasks, but contract professionals remain essential for ethical considerations, strategic planning, and dispute resolution.”

AI’s Role in Compliance and Regulatory Oversight

Ensuring regulatory compliance remains a significant challenge for businesses operating across multiple jurisdictions. WorldCC’s findings indicate that AI enhances regulatory tracking capabilities, allowing businesses to monitor evolving legal requirements in real-time. The report states that companies using AI for compliance tracking have reduced regulatory penalties by 32 percent.

AI’s ability to generate detailed audit trails and compliance reports is particularly beneficial for heavily regulated industries such as finance, healthcare, and public procurement. AI helps organizations avoid penalties and maintain transparency in their trading relationships by providing automated contract monitoring.

AI’s Continued Role in Contract Management

The WorldCC AI Adaptation in Contracting Report concludes that AI fundamentally changes how organizations create, manage, and enforce contracts. However, it also highlights that businesses must navigate ethical challenges, workforce transitions, and regulatory considerations as AI adoption continues.

Moving forward, companies must refine their AI governance models, ensuring that contract automation is used responsibly and aligned with legal and ethical standards. Cummins underscores this point, stating, “AI is revolutionizing contract management, but its success depends on responsible deployment, human oversight, and continuous refinement of best practices.”

Find out more by downloading the report or signing up to WorldCC’s AI Contracting Week.