Using AI for Contract Negotiations

Nothing mentioned about 'smart contracts', but surely you can see the possibilities linking from this. ?   They say that Walmart has been a user of the idea. 

How Companies Use AI for Contract Negotiations

For foodies traveling the Baltics, you’ll find Lithuania has some of the best food hands down – kugelis, kapusta, and bundookie buns should be on your to-do list. In second place would be Latvia. Look no further than buffet food chain Lido for some seriously good Baltic fare. Then there’s the black sheep of the bunch, Estonia. Whoever thought putting peaches on pizza was a good idea should be taken out behind the kitchen and shot. This culinary faux pas could be because Estonians spend all their time honing their tech skills instead of messing around in the kitchen.

Another Estonian Startup Making Headlines

Prior to The Rona, our MBAs were scouting tech startups across the globe from Saudi Arabia to Russia. One country we visited last year was Estonia where we met with Skeleton Technologies (ultracapacitors) and Veriff (global identity verification). Recently, both companies raised sizable funding rounds – Veriff raised $65 million a few weeks ago and Skeleton $61 million last month. We also looked at 9 Artificial Intelligence Startups in Estonia, and one company not on that list was Pactum, an AI startup that’s been garnering some attention lately with their AI algorithms that negotiate contracts.

About Pactum AI:     https://pactum.com/

Estonia is often said to be one of the most digitally advanced countries in the world, and her e-residency program attracts tech talent from across the globe. The Founding Managing Director of that program, Kaspar Korjus, is renowned in Estonia for his technical prowess. He was one of three people that founded Pactum AI in 2019 to help companies “unlock value from thousands of suppliers by automatically negotiating contracts on a massive scale.” This foreign fintech firm has quietly snuck into the Silicon Valley Vatican and now sports a Mountain View address along with $15.2 million in funding and the best reference customer you could ask for – dividend growth champion Walmart (WMT) – the largest corporation by revenue globally, and one of Pactum’s most supportive customers.

Pactum’s most recent round of funding was an $11 million Series A which closed just days ago, putting them on the radar of investors and potential customers as they look to offer contract negotiation services to companies with $1 billion of revenues or more. The process starts with two weeks of discovery, after which the algorithms take over and start negotiating tail spend contracts. For most companies, around 80% of their commercial agreements are high volume and low value – tail spend. Pactum can unlock a significant amount of hidden value in tail-spend contracts, reducing spend by 2% to 11% per $100m of tail spend. As for pricing, they only charge for successful deals that add value, essentially guaranteeing an ROI for every project they’re working on. They also offer a “gain share” pricing model which takes 25% of the gain a renegotiation generates. We love AI companies that are so confident in their product they simply take a cut of all the money they’re saving their clients.  ... " 

Wal-Mart Automates Supplier Negotiations

Procurement and related supplier contracts and negotiations addressed with AI type methods:

Walmart automates supplier negotiations
By Dan Berthiaume - 03/26/2020 in ChainstoreAge

Walmart is leveraging artificial intelligence (AI) to negotiate more valuable supplier contracts at lower cost.

The discount giant is deploying the AI-based commercial negotiations platform from Pactum to automate negotiations with part of its global supplier network. 

Walmart is set to pilot the Pactum platform with some of the company’s long tail vendors who provide low-volume, niche products. 

Pactum’s team of analysts begins each project by mapping what they call the “value function” in a given set of negotiations. This is combined by the vendor’s negotiation chatbot, which is capable of autonomously conducting best practice negotiations. Once a negotiation is complete, all information will be updated automatically in Walmart’s relevant systems, such as ERP and CRM.  ... " 

Using AI for Legal Contracts

Was just reminded of this effort: NAnalyze

Using Artificial Intelligence for Legal Contracts

" ... We made our first dive into how artificial intelligence is changing law practices a couple of years ago. At the time we noted that the $437 billion U.S. legal services market and the 1.3 million attorneys in this country aren’t going away just because of artificial intelligence and a few handy chatbots. Instead, AI will pick up the slack – initially – in tedious, repetitive jobs where it can be more efficient than humans. That brings us to legal contracts.

In an excellent analysis in the Harvard Business Review on how AI is changing contracts, writer Beverly Rich notes that the main challenge is the sheer number of contracts that law firms must track, many of which “lack uniformity” and are “difficult to organize, manage, and update.” That sounds like a job for natural language processing (NLP), a field of AI that deals with how machines understand (NLU) and generate language (NLG). The combined technologies help AI extract and understand unstructured and structured data. Part of the goal is for the machine to recognize context, which is a very hard thing for a machine to get because of the subtleties of our different languages.

Rich goes on to spell out the use cases and applications in using artificial intelligence for legal contracts:

“It can let companies review contracts more rapidly, organize and locate large amounts of contract data more easily, decrease the potential for contract disputes (and antagonistic contract negotiations), and increase the volume of contracts it is able to negotiate and execute… The use of AI contracting software has the potential to improve how all firms contract – and it will do so in three ways: by changing the tools firms use to contract, influencing the content of contracts, and affecting the processes by which firms contract.”

Discovering Contracts

The idea of 'discovering' contracts struck me.   Take it further to discovering agreements embedded in text.   Does not have to be as complex as 'legal' contracts.   Takes it beyond to the  the discovery of the implications of these agreements.  Like risks, embedded predictions, regulations, governance needs ... and the interaction of these and related considerations.  Leads also to the need for  better process models.

DocuSign invests $15 million in AI contract discovery startup Seal Software  By Kyle Wiggers  @Kyle_L_Wiggers  in Venturebeat

DocuSign is investing heavily in AI. Literally. The San Francisco provider of electronic signature and digital transaction management services today announced that it’s putting $15 million toward Seal Software, a seal contract discovery and analytics startup that uses machine learning to find and parse contracts, building on an existing partnership between the two companies.

It follows DocuSign’s acquisition of intellectual property rights from machine learning startup Appuri in December 2017, and its purchase of text search and document indexing startup SpringCM last September. And it comes after Bay Area-based Seal — which was founded in 2010 by Kevin Gidney and Ulf Zetterberg, and which recently reported growth of more than 85 percent year-on-year — raised $30 million from Toba Capital, bringing its total raised to $43 million.  .... "

Digital Contracts : Addressing Legalese

A kind of smart contract, but with interpretive rather than governance goals.    This was an early goal of 'hypertext' within our enterprise.  You could define terms with a link as much as you wanted within a document.   But we soon understood that many definitions varied over time, requiring maintenance, had varying definitions in context, and in some cases needed pages of definitions and explanatory examples. 

When I click 'agree' now, I often wonder about the risk involved.   Never spelled out personally for me.   Or my organization in it's context.   I like Pinker's definition: " .. legal language often appears convoluted because it cannot assume the levels of trust and mutual understanding that inform most other types of communication ... " 

Fighting Legalese with Digital, Personalized Contracts   By William Pitt in the HBR

The cost of legalese in business contracts is high. Companies must hire expensive lawyers to write the stuff. Their customers often miss important information because — really — when was the last time you read every word of one of those privacy agreements before clicking “Agree”? And if those customers lose faith in those companies because they are surprised by what they missed, they can swiftly air their grievances on social media.

The problem is widespread, affecting a broad swath of industries and functions including real estate financing, content licensing, consumer finance, residential leases, consumer warranties, and insurance.

For some decades, the most commonly touted solution has been the conversion of legalese into plain English. Unfortunately the magic wand with which to achieve this conversion has proved elusive;  companies are understandably reluctant to sacrifice legal certainty for clarity.  And there’s a reason for the trade-off.  As the linguist and cognitive psychologist Steven Pinker wrote in The Language Instinct, legal language often appears convoluted because it cannot assume the levels of trust and mutual understanding that inform most other types of communication.  .... "