AI Agent for Contracting

29% of an organization's workforce will get involved in contracting at some point,  according to Sally Guyer from World CC. However in the realm of procurement it's even more critical, serving as a core control mechanism  that enforces negotiated value and keeps the purchasing function legally and financially compliant.  

Due to the prevalence of contracts in procurement, AI agents are now being adopted for drafting contracts using pre-approved templates, auto-populating supplier data and even flagging legal risks. So, what does this mean for your organization? We explore this topic in further detail below.

How is AI Used in Contract Management?

AI is revolutionizing contract management by automating repetitive tasks and extracting valuable insights from unstructured legal language. Natural Language Processing (NLP) allows AI tools to analyze large volumes of contracts quickly, flagging risks, identifying key clauses, and even suggesting redlines. AI also supports contract lifecycle management (CLM) by triggering automated workflows, deadline alerts, and compliance checks based on contract terms. For instance, AI can scan a supplier contract to highlight non-standard indemnity clauses or detect missing elements like termination rights. It can also analyze negotiation history to inform better future decisions or benchmark contracts against industry norms.

How AI Agents Streamline Contracting

AI agents take contract automation a step further. Instead of acting as passive tools, they operate as proactive digital teammates. AI agents can initiate contract creation based on procurement or legal intake forms, pre-fill terms using organizational templates, and route contracts to the right approvers based on predefined logic.

They also monitor contract performance in real time. For example, an AI agent can track deliverables, trigger alerts when a milestone is missed, and even recommend action based on past vendor behaviour. This level of orchestration and intelligence frees up legal and procurement teams to focus on high-value strategic work.

What are the 5 Types of Agents in AI?

Understanding the types of AI agents helps clarify how they function in contracting:

1. Simple Reflex Agents – Operate based on predefined rules or conditions (e.g., flag contracts missing a termination clause).
2. Model-Based Reflex Agents – Use internal models to maintain awareness of the contract state (e.g., tracking version history).
3. Goal-Based Agents – Make decisions to achieve specific goals (e.g., accelerate contract approvals while maintaining compliance).
4. Utility-Based Agents – Weigh different actions based on expected utility (e.g., prioritize contracts that minimize legal risk).
5. Learning Agents – Improve over time through feedback (e.g., adapting to preferred negotiation terms based on historical outcomes).

Contracting AI agents often combine multiple types, especially goal-based and learning agents, to continuously improve outcomes.

Will AI Replace Contracting Officers?

Not quite, but it will change their roles significantly.

Rather than replacing contracting officers, AI agents serve as force multipliers. They take over repetitive, error-prone tasks like data entry, compliance checks, and document routing, allowing professionals to focus on judgment calls, relationship-building, and strategic negotiations. Contracting officers become AI supervisors and decision-makers rather than paper-pushers.

That said, organizations that don’t adopt AI risk falling behind. As AI becomes embedded in procurement and legal operations, human roles will shift toward oversight, ethics, and governance—ensuring that the AI serves the organization's best interests.

Use Cases: Where AI Agents Deliver the Most Value

AI agents can support various contract scenarios, such as:

• Procurement Contracting – Auto-generating vendor contracts based on approved purchase requests.
• Legal Intake – Triaging contract requests and routing them to the appropriate legal team.
• Compliance Monitoring – Identifying deviations from corporate standards and suggesting remediations.
• Contract Renewal – Surfacing expiring contracts with underperforming vendors and recommending renegotiation or termination.
• Post-Signature Analytics – Analyzing executed contracts for obligations and risk exposure.
  
  

Challenges to Consider

While the potential is huge, implementing AI agents in contracting comes with challenges:

• Data Quality – Garbage in, garbage out. Poorly structured legacy contracts can hinder AI training.
• Change Management – Legal teams may resist automation without clear benefits and training.
• Integration – AI agents need access to contract repositories, ERP systems, and workflow tools to be effective.

Organizations need a strong foundation in digital processes before layering in AI.

The Future of Contracting Is Intelligent

AI agents are reshaping how contracts are created, managed, and monitored. They bring speed, precision, and consistency, qualities that are critical in today’s complex business environment. Rather than replacing human expertise, they amplify it.

Despite AI Agents for contracting taking over the procurement world, several companies have further levelled up their efforts with digital team members like Rio, who become an interactive level between employees and their ERP backend. To see how Rio might fit within your procurement strategy, we encourage you to fill in the form below.