How to Use AI for Contract Review: Detect Risks, Ambiguities, and Hidden Clauses

AI contract review helps identify ambiguous terms, hidden obligations, unfavorable conditions, and potential financial risks before signing a document. Neural networks can analyze text, highlight key clauses, and explain complex legal language in straightforward terms.

This approach is useful for reviewing lease agreements, service contracts, work contracts, supply agreements, and other types of deals. However, AI does not replace a lawyer: its findings must be cross-checked with the original document and relevant laws.

How AI Reviews Contracts and What It Can Detect

AI contract analysis relies on language models' ability to process large volumes of text, compare document provisions, and spot wording that requires extra attention.

For instance, a neural network may find a clause allowing a contractor to change service prices without consent from the client. It will highlight the relevant section and explain the potential consequences.

• Detection of contentious terms. Finds ambiguous wording that can be interpreted differently by each party.
• Financial risk analysis. Highlights penalties, fines, additional payments, and refund conditions.
• Obligation check. Helps define what actions each party must take and within what timeframes.
• Identifying contradictions. Compares contract provisions and flags potentially incompatible requirements.
• Simplifying legal language. Explains complex clauses in plain language so you don't have to decipher legal jargon yourself.

Automated contract review is especially helpful for lengthy documents with many sections, annexes, and additional terms.

Yet, AI does not always correctly interpret legal meaning. It might miss contradictions between annexes, misinterpret laws, or flag standard terms as risky without sufficient grounds. Therefore, any risks found should be treated as topics for further review, not as a final legal opinion.

Risks and Contentious Terms to Look For in a Contract

Even a brief contract may include clauses that lead to extra costs, restrict one party's rights, or let the counterparty avoid obligations. Analyzing for risks using AI helps uncover these before signing.

Penalties, Fines, and Hidden Payments

Start by checking financial obligations. Beyond the basic price of goods or services, the contract may require extra fees, reimbursements, or penalties for late fulfillment.

For example, you might see:

"For each day of delayed payment, the client pays a penalty equal to 1% of the outstanding amount."

If the debt is 100,000 rubles, a 30-day delay could result in a 30,000 ruble penalty if the contract does not set a cap. AI can highlight this clause, estimate potential costs, and draw attention to the size of penalties. The actual amount recoverable depends on applicable law and dispute circumstances.

Be sure to look for terms about automatic renewal of paid services, non-refundable advances, and extra payments with undefined amounts in advance.

Unilateral Changes and Contract Termination

Pay special attention to clauses that let one party amend the contract without the other's approval.

For example:

"The contractor may unilaterally change the service price, notifying the client three calendar days in advance."

This wording potentially allows the contractor to increase the client's costs after signing. AI may flag the lack of limits on price increases and suggest clarifying the adjustment process.

Termination clauses are also important. Risk arises when one party can end the agreement almost without restriction, while the other must give advance notice or pay substantial compensation.

However, unilateral termination rights aren't necessarily a violation. Their admissibility depends on contract type, party status, and applicable law.

Party Responsibility, Deadlines, and Extra Obligations

Some contracts detail one party's duties but set little or no responsibility for the other.

For instance:

"The contractor undertakes to complete the work within a reasonable period."

Such wording lacks a specific deadline, which can lead to disputes over acceptable completion times.

When analyzing these terms, ask AI to check:

• Deadlines: Are there set dates, work stages, and rules for rescheduling?
• Liability: Are consequences for breaches defined for both parties?
• Acceptance of results: When is work considered complete, and how can the client report deficiencies?
• Additional duties: Are there requirements triggered automatically or solely by the counterparty's decision?

Also review references to annexes, tariffs, service rules, and other documents. They may contain essential terms absent from the contract's main text. If the AI does not have access to such materials, it cannot assess related risks.

Step-by-Step Guide: How to Check a Contract with AI

You don't need a law degree or special software to review contracts with AI. Just prepare your document and upload it to a neural network that can analyze text files.

1. Prepare the contract. Ensure all pages, annexes, and addenda are included. If it's a scan, use OCR to recognize text. Afterward, verify amounts, dates, and wording for accuracy.
2. Remove confidential data like passport numbers, addresses, or banking details unless specifically allowed. For commercial secrets, use a corporate solution with proper data processing or a local model.
3. Upload the document to the neural network. Use tools like ChatGPT, Claude, or other services that support document analysis. Usually, uploading a PDF or DOCX is sufficient. Upload options depend on your chosen service and plan.
4. State your task clearly. Instead of a generic "Check this contract," specify the agreement type, your role, and the risks you're interested in.
   For example:

   "Analyze the attached service contract from the client's perspective. Find financial risks, unfavorable terms, ambiguous wording, and restrictions on my rights. List clause numbers and explain possible consequences. Relevant law: Russian. Do not invent non-existent terms."

   The more precise the prompt, the more useful the result. You can also request checks of penalties, deadlines, or termination rules separately.
5. Review the results. AI may present findings in a table with potential risks and recommendations. Cross-check each point with the original contract, especially clause numbers, amounts, and dates.
6. Verify legal references. If AI cites laws, check their existence and accuracy using official sources. If you find significant risks, discuss them with the counterparty or consult a lawyer.

Ready-Made Prompts for Contract Review

The quality of analysis depends largely on how precisely you set the task. A ready-made prompt for contract review lets you immediately set risk search criteria and get a structured answer rather than a general summary.

Below are three sample prompts for different scenarios. They work in ChatGPT and other neural networks that support document analysis.

Universal Prompt for Contract Analysis

Suitable for initial review of most civil agreements: leases, services, supply, or works.

Prompt for general analysis:

Analyze the attached contract from the perspective of [client/contractor/tenant/landlord]. Applicable law: [country].
Identify contentious terms, financial risks, contradictions, and ambiguous phrasing.
Present findings in a table: clause number, contract excerpt, possible risk, risk level (low, medium, high), and recommendation.
Consider interconnected clauses. Do not invent non-existent points or legal norms. If information is insufficient, state this directly.

This request helps quickly spot which terms need attention first. The risk assessment is preliminary and depends on the deal's context.

Prompt for Detecting Unfavorable Terms

Use this when you need to check financial obligations, penalties, and clauses giving one party extra advantages.

Prompt for detecting risks:

Review the attached contract from the perspective of [specify party].
Find clauses on penalties, fines, hidden payments, automatic renewals, unilateral price changes, and early termination.
Identify terms that create disproportionate obligations or restrict my rights.
For each risk, specify the exact clause, possible consequences, and a suggested revision for negotiation.
Do not present potential risks as proven legal violations.

AI's suggested changes can serve as a basis for negotiations, but you must verify them before adding to the contract.

Prompt for Final Review Before Signing

Ideal for the final stage to ensure key issues are addressed and important obligations are not overlooked.

Prompt for pre-signing review:

Conduct a preliminary review of the attached contract before signing. My role: [specify party].
Check terms essential for this deal type: price, payment procedure, deadlines, liability, termination, and dispute resolution.
Identify missing or ambiguous provisions.
List questions to ask the counterparty before signing.
Highlight terms that should be reviewed with a lawyer.
Do not state that the contract is completely safe or draw conclusions without textual support.

For more accurate results, specify the subject of the deal, its value, applicable law, and which terms matter most to you. This helps AI assess contract terms in your specific context rather than only by general criteria.

Can AI Be Trusted for Legal Document Review?

AI can speed up contract analysis, but it does not guarantee detection of all risks. Neural networks assess text based on patterns and available context, not by conducting a full legal review. Even confidently worded answers can contain mistakes.

Main limitations include:

• Misinterpretation of terms. AI might flag standard clauses as risky or miss critical restrictions affecting party rights.
• Invented legal norms. Sometimes neural networks reference non-existent law articles or misstate current provisions.
• Lack of context. Without details about the parties, deal context, and relevant law, conclusions may be inaccurate.
• Missing key details. When dealing with large documents, AI can overlook annexes or fail to account for interrelated clauses.

Mistakes are especially dangerous when AI confidently claims a clause is illegal, even if the law allows it. For more on this topic, see the article "Why Neural Networks Hallucinate: Understanding and Preventing AI Falsehoods".

To reduce mistakes, ask AI to provide exact contract quotes, clause numbers, and to separate confirmed facts from assumptions. Always check legal references yourself using up-to-date sources.

For simple contracts, neural networks can be a handy tool for preliminary review. However, for major deals, significant financial obligations, IP transfers, or complex liability terms, final review should be done by a qualified lawyer.

Conclusion

Using AI for contract review helps quickly spot contentious terms, assess potential financial risks, and prepare questions for your counterparty. The most useful results come when you specify the contract type, your role, and exact review criteria to the AI from the start.

The optimal approach is to conduct an automatic analysis first, then verify the AI's findings against the original document and discuss major risks with a lawyer. This saves time on the preliminary review without relying solely on the neural network's conclusions.