How to reduce conflict in contracting using AI contract review and psychology

Contracting can be considered the starting point of any conflict. You have two or more parties that have agreed in principle to an outcome. You then cement the understanding with a contract. But what if, in creating that contract, you have conflicts?  

Conflict in contracting can rear its head before, during, and after contract negotiations. There are three different ways to handle contract negotiations in each of those instances. Prior to negotiations, the use of psychology can establish the understanding between the two parties. During contract negotiations, rely on artificial intelligence (AI) capabilities like AI contract review to do the heavy lifting for you. And after the contract has been drawn up and conflicts inevitably arise, you may need to go to the last end of the spectrum: litigation.  

Psychology in pre-contract negotiations 

Using psychology in conflict resolution is a well-known solvent for many types of conflict Luckily, both parties can come to a mutual understanding more quickly when utilizing these steps:  

1. Active listening – If you aren’t trying to remember what you’re going to say or ask and, instead, truly pay attention to what the other party is communicating, active listening can be very powerful. 
2. Empathy – Try walking in your counterparties’ shoes. If you show that you are willing to understand their side of things, they will be more willing to understand yours. 
3. Building rapport – It’s always nice to deal with friends, even “frenemies,” versus a hostile counterparty. If you can build rapport, you are more likely to come from a place of trust on both sides. 
4. Reframing – Reframing can be used to turn something negative into a helpful statement, which can lower defenses and enhance collaboration. 

There are more psychological tools for conflict resolution, but these are a few of the top contenders to create less friction before you even start the contract negotiations. 

Once the arrangement is agreed upon in principle, it’s time to put it on paper. This is where the details matter and both sides can become a bit pricklier than the previous stage of the overall agreement.  

AI during contract negotiations  

First, begin with an automated AI contract review. Regardless of the size of the contract, AI can automatically identify any language that differs from your standard language or any previously approved contracts, quickly identifying where you need to concentrate your review efforts.  

So, you have taken advantage of AI pointing out discrepancies and now comes the manual part – right? You have to go through each point to understand where the language differs from the current contract to your historically accepted language. That is not the case, however, if you have AI capabilities in your contracting workflow. Redlining functionality with AI contract review can provide a synopsis of exactly how each highlighted point differs from your parameters. No more searching for correct language and doing a manual comparison. Quickly get pinpointed details of what’s different to the edition.  

Now, you may be thinking to yourself, “the AI redlining demos I’ve seen simply swap out the clause language without any real review.” Well, that isn’t a negotiation.  

True AI capabilities that redline contracts help you create new clauses that consider both your and your counterparty’s requirements to create a mutually beneficial redline. This not only helps to streamline the negotiation process, but also sets you up to be a preferred partner in the future.  

But what if there is new language to consider? What if you don’t have a clause library to rely on? This is where advanced AI capabilities are at their best. For example, the GenAI models included in Agiloft’s AI Platform allow you to prompt well-trained GPTs to generate brand-new canonical language based on the requirements you’ve laid out.  

Leveraging available technology during contract negotiations can significantly expedite the process to signature, set you up with a mutually beneficial contract, and creates a new business partner that sees you working for the betterment of both of you, ensuring that the relationship will stand on solid ground for a long time to come. 

Legal in post-contract negotiations  

Well, a long-term relationship would certainly be the happy ending that we all hope for. But sometimes things don’t work out as planned, and people get cranky or feel as if they’ve been wronged or misunderstood. This is where various levels of litigation should be considered, and just as in psychology and AI, there are different levels for different needs.  

1. Negotiation – If you’re still on good terms with the counterparty, you can begin with negotiation to see if you can peacefully come to an understanding. Open and honest communication in business can happen, you just have to believe. 
2. Mediation – If the dealings are running into sticking points that neither party can agree to, it may be time to call in a mediator. A neutral third party facilitates the discussion and keeps things moving toward resolution. Many businesses include mediation as a part of many of their standard contract language.  
3. Arbitration – If things still aren’t going well, you can have a third–party step in and decide after hearing from both sides. This is a binding decision and similar to our next, escalated step, except arbitration is typically less formal and much quicker.  
4. Litigation – If things have broken down to the point of “talk to the lawyers,” you’re now headed to litigation where the court will decide who’s right, who’s wrong, and what needs to be done about it.  

Conclusion

Litigation is pretty much the end to the friendly business relationship we started with at the beginning of our story, but you don’t need to end up here, in litigation, if you follow all the previous steps. Beginning with psychology before the contract process even starts and trusting the acceleration and impact that AI can have on your contracting process can lead to many healthy and long-term business relationships. 

Watch our on-demand webinar to learn more about the redlining capabilities of Agiloft’s AI Platform.