This article at a glance:

What is AI-powered contract review?

When to use AI for contract review

Step-by-step: how to review contracts with legal AI

Why legal teams use AI for contract review

How teams are using legal AI for contract review

Best practices for using legal AI effectively

Contract review involves sifting through dozens of pages to find the details that matter. For in-house legal, product, risk, and compliance teams, this challenge is compounded by rising contract volumes, increasing regulatory scrutiny, and limited resources.

Whether you're assessing coverage terms, negotiating vendor agreements, or checking regulatory clauses, finding the right details in 50+ page documents can be tedious. AI changes that.

This guide shows how to use AI for contract review – what it does, when to use it, and how LEGALFLY helps legal teams and the wider business review contracts faster, with fewer errors, and greater confidence. You can find our guide to the best AI contract review software tools for 2025 here.

What is AI-powered contract review?

AI-powered contract review uses natural language processing and machine learning to analyse legal documents. It automates tasks like:

• Clause detection and classification
• Compliance and risk analysis
• Identifying missing or conflicting terms
• Drafting summaries and suggested edits

AI can scan thousands of pages in minutes, identify what’s there (and what’s missing), and help teams make faster decisions with structured outputs.

Platforms like LEGALFLY go further, combining generative AI with built-in legal logic, contract comparison agents, and anonymisation for secure processing. The result is a reliable, scalable approach to contract analysis that integrates into your existing tools, including Microsoft Word.

Read more: Everything you need to know about agentic AI for legal work

When to use AI for contract review

AI is most useful when:

You’re reviewing large volumes of contracts or long documents with technical or dense language

• Whether you’re focused on NDAs, broker agreements, or supplier Ts&Cs, AI handles scale without losing focus.

You need to spot risks or inconsistencies quickly

• AI flags redlines, non-standard clauses, and missing provisions.

You’re tracking regulatory obligations

• From DORA to GDPR, AI identifies clauses that fall short and suggests compliant alternatives.

You’re under pressure to move fast

• AI helps legal and business teams avoid bottlenecks and accelerate reviews without adding headcount.

Common use cases across teams

Legal: Clause review, compliance flagging, NDA standardisation

Risk: Contract risk scoring, regulatory alignment checks

Insurance claims: Policy version validation, exclusion tracking

Procurement: Supplier contract analysis, term benchmarking

Sales: Commercial term validation, NDA checks

IT: Data protection clause checks, security obligation mapping

HR: Employment contract review, termination clause tracking

Step-by-step: reviewing contracts with LEGALFLY

1. Open the contract in Microsoft Word

With LEGALFLY's plugin, there's no need to upload files. Just open the document and start.

2. Set review focus

Choose from pre-set playbooks aligned with your internal standards. These can be used for risk identification, compliance checks, clause-by-clause analysis, and more.

2. Let the AI do the work

LEGALFLY scans the document, highlights clause-level issues, suggests edits, and anonymises sensitive data before processing.

4. Redraft

LEGALFLY proposes redraft clauses with tracked changes, so you can review, accept, or adjust each one.

5. Summarise and report

Generate a concise summary of the key findings, risks, and suggested changes, ready to download as a review report.

6. Review and finalise

Check the results, customise outputs, and export clean versions for stakeholder review or signature.

What is the Compare Agent?

LEGALFLY’s Compare Agent goes beyond basic redlining. It compares documents at the clause level, even if wording or formatting differs, highlighting what’s added, changed, or missing. This helps teams benchmark policies, align templates, and reduce negotiation cycles. 

Why legal teams use AI for contract review

Example legal AI use cases for contract review

1. Tech company accelerating SaaS contract approvals

A growing B2B SaaS company uses legal AI to review and standardise third-party SaaS agreements. They reduce internal review time by 70% and created a clause library to ensure all terms aligned with their data privacy and liability standards.

2. Bank managing third-party risk under DORA

A European bank uses legal AI to prepare for the Digital Operational Resilience Act (DORA). The legal and procurement teams are able to easily review hundreds of vendor contracts, flag non-compliant terms, and track remediation progress across departments.

3. Healthcare group automating BAAs and regulatory checks

A healthcare provider with multiple clinics used legal AI to automate review of Business Associate Agreements (BAAs) and vendor contracts. It flags missing GDPR-related terms, ensuring compliance and reducing external counsel review costs.

4. Energy firm aligning contracts with ESG obligations

An energy company uses legal AI to audit environmental clauses across supplier contracts to align with its ESG strategy. It helps the legal and sustainability teams identify gaps and standardise wording across jurisdictions.

5. Retail group managing global supplier terms

A global retail company uses legal AI to compare supplier contracts across regions. It highlights discrepancies in payment terms, liability, and force majeure clauses, allowing procurement to unify standards and reduce negotiation time.