Best Contract Management System Software in 2025 | CLM 365

December 30, 2025

7 min read

If you’re struggling to manage contracts efficiently and need more accuracy in your daily legal work, you’re in the right place. Contract management is not merely a matter of paperwork anymore, it is a matter of speed, clarity and control.

This is where AI is transforming the game. The use of AI has transformed the way organizations handle contract lifecycle, and it is getting better each day.

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Quick Read

Summary generated by AI, reviewed for accuracy.

This blog will take you through the definition of AI-based contract management, its most important characteristics and advantages, and how to make it a part of your daily contract process.

With AI-powered contract management, the entire contract lifecycle becomes simpler for any industry, benefiting not just legal teams but also sales, procurement, finance, and operations.

Infact, Thomson Reuters reports that almost 47% of law firm professionals report that their firms are already experiencing at least one obvious advantage of AI use in their processes.

What Is AI Contract Management Software?

AI contract management software is a digital system that extracts, understands, and organizes contracts using artificial intelligence. Unlike traditional contract tools that only store documents, AI-driven systems read the content inside contracts. They identify clauses, obligations, risks, dates, and responsibilities. They present this information in a way teams can act on.

The AI helps summarize contract information to get precise understanding of clauses. They recognize clauses, obligations, risks, dates, and responsibilities.

Clear visibility into contract obligations
Early identification of legal and commercial risks
Quick comparison against standard contract terms
Real-time insight into pending actions and next steps

This simplifies the process of contract reviewing, sharing and managing contracts within teams.

How Does AI Contract Management Software Work in Real Time?

AI Contract Management Software works step by step. Each action builds clarity rather than adding complexity.

Uploading the Contract
Users’ needs to upload the contract file, typically in PDF format. The AI then analyzes the whole contract with AI that is trained to comprehend legal language. It reads the contract, detects important areas and prepares the document to be reviewed without any human input.
Obligation Identification
The AI contract management software reads the contract and finds the obligations. These are contractual responsibilities, deadlines, outputs, fines and renewal conditions. In case of AI integration, the user can click Next to view obligations automatically fetched in the uploaded file.
All obligations extracted are shown in a special Obligations section. This enables easy access without having to read the entire contract.

Template Editing
After reviewing the extracted obligations, the chosen contract template is opened to be edited. Within the system, teams can update and modify contracts. It is easy to modify the terms of the contract without losing anything and making them consistent.
Alternative Clause Search
On the right panel, the admins can Search Alternative Clause(s). Any text highlighted on the template could be compared with clauses stored in the internal clause library. This assists teams to substitute non-standard language with approved ones.
AI Clause Suggestions
Once if AI integration option is selected, users may click Get from AI. The system provides suggestions of the contract clauses depending on the context, the type of contract and the internal standards. Once options have been reviewed the user clicks Select to apply the selected clause.
Risk Detection
When users click Risk within a contract, the system scans the document and highlights possible legal or commercial risks. This includes missing protections, unusual terms, or clauses that fall outside internal guidelines.

Long Contract Intelligence
After clicking on Risk option in a contract, the AI contract management software searches for the document and identifies potential contract risks. This involves omission of protection, odd terms or clauses that are beyond internal guidelines.In contracts of 100–200 pages or more, AI highlights the overview, key sections, critical clauses, risks, compliance points, and actionable items for faster review.

Why Businesses Are Moving from Manual Contracts to AI-Driven Systems?

Trends do not dictate the shift. It is driven by results. According to McKinsey, 80% of companies say improving efficiency is a key objective behind their AI adoption. Here is a short comparison between manual and AI contract management software.

Aspects	Manual Contract Handling	AI Contract Management Software
Review Time	Long reading cycles	Fast clause-level insights
Risk Visibility	Depends on reviewer	Highlights risks in seconds
Obligation Tracking	Spreadsheet based	Auto-Tracked in system
Clause Standardization	Manual comparison	AI-assisted matching
Scalability	Limited by people	Handles high volumes

Manual processes struggle as contract volumes grows. AI systems scale without increasing workload.

Benefits of AI Contract Management Software

Technology is not something that is embraced by legal teams. They embrace it in the name of material benefits. Recent industry knowledge is in favour of this direction. According to HSF Kramer, 59% of law firms already believe generative AI should be used in legal work.

1. Saves Time and Money
Reviewing of contracts can consume hours of reading and rechecking. A lot of this time is spent to such clauses in various agreements.

AI contract management software can alleviate this effort by scanning documents and displaying important information in the first place.

The shorter the review time, the shorter the contract cycles. This assists teams to seal deals in less time and save on legal expenses that are associated with protracted reviews.

2. Acts Like a Real Colleague
There are details that must be taken into consideration before a contract is presented to a legal or business reviewer.

The AI contract management software presents this information beforehand and indicates areas that are of the more priority.

In all decisions, human judgment is still involved. The system merely assists individuals in working with more understandable inputs and improved preparation.

3. Helps Minimize Risks
A lot of the contract risks are concealed within non-standard language or odd terms. These sections are likely to take longer and need to be reviewed more thoroughly.

According to research conducted by University of Texas at San Antonio, the high-risk, non-standard contracts may require up to four months to transition between request and signature.

AI-based contract management software enables teams to deal with issues earlier by recognizing such clauses early.

4. Eliminates Human Errors
Manual contract reading depends on focus and time, long contracts cause one to miss crucial parts.

AI contract management software does not get tired or change and reads all the clauses in the same manner.

This uniform reading assists teams to pick up information that otherwise would be overlooked in the busy review periods.

5. Operational Cost Reduction
AI contract management reduces operational costs by speeding up contract approvals.

It lowers the workload on legal teams and minimizes the need for repeated checks or external support.

Over time, this leads to more efficient operations and reduced legal expenses.

6. Handles Repetitive Tasks
There are numerous contract activities that are similar in contracts. Such activities as renewal monitoring, deadline notification and clause summaries.

The AI contract management software that is powered by AI handles these activities automatically.

This will enable the teams to spend additional time for building contract negotiation strategies, reviews, and human-based business decisions.

7. Complete Visibility
AI contract management software integrates all contract data into a single system.

Contracts are usually distributed in emails, folders and shared drives. This complicates the process of monitoring obligations, risks, and deadlines.

All agreements, action items, and risks are transparent, which keep teams in track and informed during the contract lifecycle.

Features of AI Driven Contract Management System

AI Contract Management Software combines intelligence with structure. Each feature supports a specific stage of the contract lifecycle.

1. AI Obligation Tracking
Contracts often include multiple actions spread across different sections. These activities can include approvals, payments, renewals or compliance procedures.

AI based contract management software recognizes such obligations and distributes them to the appropriate team or owner.

For example, a procurement team can easily view a milestone payment that is due in 30 days, whereas legal teams are doing the same with compliance-related activities.

2. Industry-Relevant Clauses
All contracts are not of the same structure and standards. Various industries use various forms of clauses and language.

The AI-driven contract management software generates suggestions of clauses in real-time depending on the type of contract and industry practices.

These recommendations are also internal policy based, and they keep the teams in line with accepted standards. For instance, technology agreement can present data protection terms that are not applicable in a vendor supply contract.

3. Risk Monitoring
Contract risks do not remain constant after writing and negotiation may bring about new exposure.

A best ai contract management software examines the language of the contract in real time and points out areas that require consideration.

This enables the teams to manage contract risks promptly, particularly when a clause that has been approved is changed in the review process.

4. Clause Suggestions
It is time consuming and challenging to write clauses at the outset.

AI-driven contract management software provides teams with choices that are already in line with internal standards.

The teams can discuss, compare and choose the most appropriate clause. This method will ensure uniformity in contracts without the need to rewrite them manually.

5. Clause Summary
Certain clauses are lengthy and hard to comprehend particularly by non-legal departments.

AI contract management software assists users to see the summary of a clause without having to read the entire legal text.

For example, a sales team can easily comprehend a termination requirement or payment without having to interpret the law.

Steps to Enhance Your Contract Lifecycle with AI

These are the best practices that you can apply in practice to enhance your contract lifecycle with AI and introduce more structure, visibility, and control at each point.

1. Contract Intake Control
The lifecycle of the contract begins when a document is received into the system. It is hard to keep track of the contracts when they are sent via emails or shared folders, or chats.

Scan contracts only through the AI system
Tag contracts by type, department, and purpose
Apply intake rules to handle urgent or high-value contracts first

2. Automated Clause Identification
Contracts usually contain hundreds of clauses, some of which have legal or business implications. Rather than having to read the contract manually, AI does it as soon as the contract is uploaded. The system scans the entire document and finds clauses in a few seconds.

Enable clause detection while uploading contracts
Automatically mark non-standard or absent clauses
Organize the identified clauses in a way that they are easy to access and review

3. Obligation Assignment
Critical responsibilities can be hidden within the text of a contract. AI extracts these obligations and transforms them into systematic activities. All obligations are associated with the owner, a due date and status.

Monitor deadline in the system
Auto-assign the responsibilities to the right owners
Keep a clear perspective of all obligations in existence

4. Risk Review Layer
Risk does not appear only at the final stage. It may be added at any stage in the process of adding or modifying clauses. AI tracks the language of contracts in real time and assesses risk.

Review clauses with high risk
Turn on risk scanning of all contract edits
Only items that qualify as risky should be escalated

5. Approval Path Structuring
Approvals should follow logic based on contract impact, not fixed hierarchies. The rules that AI uses to calculate approval paths include contract value, risk level and contract type.

Risk score approvals of routes
Leverage history of record approval to track and audit
Establish approval regulations according to contract value

6. Post-Signature Tracking
After the contract review has been done and the agreement signed, it is time to move on to the execution and monitoring. During the period of active operation, AI still operates the contract by monitoring important dates, obligations, and activities.

Automatically track renewals and expiration dates
Follow up on the current obligation with the contract signed
Keep a full audit trail of reference and compliance

7. Continuous Learning Loop
Each contract that has been finalized will provide new data that enhances future clause recommendations, risk identification, and obligation management. The AI contract management software learns from outcomes and adapts to changing contract patterns.

Update clause libraries on a regular basis
Feed contract outcomes back into the system
Review performance metrics every quarter

Why CLM 365 Is a Better Choice for Managing Contract Lifecycle?

CLM 365 is designed to support teams that are already operating within Microsoft tools. It is directly integrated with Teams, Outlook, SharePoint, Word, and Copilot, which means that contracts remain in the same place as teams already work. AI assists in contract review, obligation tracking, clause proposals, and risk visibility that allow teams to accelerate their work without modifying the current workflows.

How to Implement it Effectively

The best way to implement AI contract management solution is to introduce it with specific objectives, ownership, and realistic actions that can be integrated into the current contract processes.

Step 1: Enable Azure OpenAI
CLM365 integrates with Azure OpenAI to offer smart recommendations and smarter interactions with contracts. The first step is to enable the Azure OpenAI option in the AI integration settings.

Step 2: Enter Azure AI Configuration Details
Once the Azure OpenAI and Azure AI settings are enabled, CLM365 can access your deployed AI model safely. Click on save settings to implement the connection.

Step 3: Review and Save AI Integration Settings
After adding the details, review the configuration and save it in order to make sure that the AI integration is successfully enabled in the application.

Step 4: Enable Copilot Integration
With Azure AI enabled, users can enable Copilot to guide users through intelligent automation and contextual guidance through the entire contract workflows. Turn on Copilot button on the integration panel.

Step 5: Create or Select a Copilot Agent
The next step is to open Copilot Studio and create a new Copilot agent or choose an existing agent. Set up the agent according to your business and contract processes.

Step 6: Add a Knowledge Base to Copilot
To assist Copilot in providing correct and pertinent responses, include a Knowledge Base to the agent. This will enable Copilot to know your contract information and will be more helpful.

Step 7: Configure Security and Automation Flow
Once the agent is installed, perform the security setup and integrate the agent to the necessary automation flow. This would be to provide safe communication and smooth execution.

Step 8: Complete the Copilot Setup in CLM365
Finally, go back to CLM365, turn on the Copilot integration, and finish the configuration. After being saved, Copilot will be active and begin assisting users throughout the contract lifecycle.

Future of AI Contract Management Software

The future does not lie in replacing legal teams. It is about closing gaps. Data in the industry favors this trend. According to a study by Icertis, over 56% of CEOs believe that AI will bring more competition by reducing the performance gap. A significant portion also thinks that AI will affect financial performance in the next five years.

For AI contract management software, this means.

Risk visibility is expected
Quickened contract cycles are the norm
Exceptional reviews are performed manually
Structural benefits are enjoyed by those organizations that adapt early

Conclusion

Contracts shape business outcomes, and how they are managed matters more than ever. Teams require improved mechanisms of staying in control as the volume of contracts rises and the time schedules become shorter.

AI contract management software assists teams to comprehend contracts quicker, act sooner and handle obligations clearer.

It helps in legal expertise as it takes care of work that is time-consuming as individuals concentrate on informed decision-making and with CLM 365, teams can enjoy this practice in a 14-day free trial.

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Frequently Asked Questions

Can AI summarize an entire contract into key points?

Yes. AI reads the entire contract and produces clear summaries of main provisions, duties, risks and significant dates. This assists teams to comprehend long or complex contracts within a short time without reading each page.

How does AI assess risk in contracts?

AI analyses the language of contracts and contrasts it with internal standards and legal regulations. It indicates non-standard terms, absent protections, and risky clauses, and automatically updates risk signals as the contract alters.

Is AI contract management suitable for all business sizes and industries?

Yes. AI contract management serves small, medium, and large organizations in industries. It can also be adapted to various contract volumes, workflows and industry-specific needs without complexity.

How long does it take to deploy CLM 365?

It only requires a few minutes to deploy. CLM 365 is built on Microsoft applications, which enables teams to begin managing contracts without complicated configuration.

How does AI simplify the review of lengthy and complex contract documents?

AI scans the whole contract and points out the main aspects of it including an overview, significant sections, essential clauses, risks, compliance considerations, actionable insights, and key findings. This simplifies the process of going through even 100-200+ page contracts in a brief time and with precision.

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