We are considering using AI to run preliminary reviews on standard vendor contracts to save on legal fees. How do we manage the operational and legal risks of this workflow without paying a steep dumb tax?

Question

Tyler Smith · Accepted Answer

Using AI to review vendor contracts can save you thousands in legal fees, but it can also expose you to massive liability if you do not manage the risk properly. To avoid paying a painful dumb tax, you must establish clear, non-negotiable operational guardrails for this workflow.

Run a Thinking Time session and ask: how might we use AI as our first line of defense in contract reviews so that we only send complex, high-risk clauses to our actual attorney?

Never allow an AI to make the final decision on a legal document. Instead, build a standardized contract checklist based on your business guidelines. Program the AI to scan incoming contracts specifically for these clauses, such as indemnification, payment terms, or intellectual property rights. The AI should flag any deviations from your standard requirements.

Once the AI has flagged the potential issues, a qualified human must review the findings. If the contract involves a high financial threshold, it must still be reviewed by your legal counsel. Treat AI as an intelligent assistant that prepares the document, not as a replacement for professional legal judgment. This balanced approach gives you operational speed while keeping your risk profile low.