Contract Summaries: The Ultimate Guide for Legal Professionals

In today's fast-paced business environment, legal professionals and business stakeholders need to grasp contracts quickly and accurately. Whether you're a lawyer reviewing a client agreement or a business executive assessing a vendor contract, having a clear and concise summary of the contract terms can save you time and mitigate risks.

Creating a basic summary of a contract using ChatGPT is an easy task. However, the real need is to have a system that can generate different types of summaries, on demand, contextual to your need, quickly and with a high level of accuracy.

At ContractKen, we've doubled down on deploying best in class AI to help our customers generate various types of contract summaries out of the box.

This is a follow up to our earlier article on this topic: https://www.contractken.com/post/contract-summaries

In this comprehensive guide, we'll explore everything you need to know about contract summaries:

1. What is a contract summary?
2. What are the essential features of a good contract summary?
3. What should be included in a contract summary?
4. What are the typical uses of contract summaries?
5. How to leverage AI to generate effective contract summaries?
6. How to evaluate the quality of contract summaries generated by AI?
7. What are the key considerations while using AI generated contract summaries?

Lets dive into each question in detail

What is a Contract Summary?

A contract summary serves as a concise representation of the contract, highlighting the most critical provisions, obligations, and rights governed by the contractual arrangement. An effective contract summary enables stakeholders to grasp the contractual essence without delving into the intricate legal details. It facilitates a clear understanding of the agreement's scope, objectives, and implications, empowering decision-makers to make informed choices based on the summarized information.

Fundamentally, there are two types of approaches in condensing a large document(s) into small summary:

1. Abstractive summarization: This is when AI analyzes the text and generates a summary that captures the main ideas and themes of the original contract, using natural language to express the essence of the agreement.
2. Extractive Summarization: This is when AI can identify the most important sentences or phrases in the contract and use them verbatim to create a condensed summary.

At ContractKen, we combine the strengths of abstractive and extractive approaches to produce comprehensive and reliable contract summaries tailored to your specific needs.

What are the essential features of a good contract summary?

A well-crafted contract summary should possess the following key features:

1. Captures Essential Information: The summary should highlight the most important concepts, key information, and critical issues outlined in the contract, enabling users to quickly identify and focus on the crucial elements.
2. Faithful to the Source Material: A reliable contract summary should accurately represent the ideas and provisions contained in the original contract, avoiding any misrepresentations or hallucinations.
3. Conciseness: By distilling the complex legalese into a concise format, a contract summary helps users save time and effort while still conveying the necessary information.

What should be included in a contract summary?

In order to decide what to include in your contract summaries, first consider its purpose - is it for a specific contractual query or a routine overview of key terms? Also, consider the intended audience - if external, more detail may be needed in a particular format; if internal, focus on essential terms.

In general, the most critical clauses to include are:

• Payment terms and triggers detailing when and how payments are obligated, like for affiliates, suppliers or software agreements
• Commercial protections relevant to the contract
• Contract duration / term

After covering these, summarize the main risks, data protection, and intellectual property terms.

Next, include indemnity clauses, warranties, and limitations of liability.

Finally, address confidentiality obligations, rights for contract variation or assignment, and the governing law and jurisdiction.

Customize the summary's scope and detail based on the specific purpose and audience. Leveraging past summaries or templates can provide an efficient model.

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What are the typical types of Contract Summaries

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Depending on the intended audience and purpose, contract summaries can take various forms:‍

1. ‍Call to action (CTA) for the Client / Internal Stakeholder: Imagine you have just received a contract draft from your / your client’s counterparty. One of the first things you could perhaps do is to immediately send your client / internal stakeholders a summary of key issues / clauses for them to review and respond. So, even before a full review of the contract (which can take hours), you have essentially kickstarted the review and negotiation process. ‍
2. Comprehensive Legal Summary: A legal summary provides a detailed analysis of the legal terms and provisions of the contract, written in technical and legalistic language. It is primarily intended for lawyers and legal professionals who need to understand the legal implications of the agreement.‍
3. Commercial Summary: A commercial summary focuses on the business terms of the agreement, such as the scope of services, pricing, payment terms, and deliverables. It also focuses on key clauses like liability, termination, indemnification, IP rights, etc. It is written in a user-friendly language accessible to non-legal professionals, like business executives or stakeholders.‍
4. Contract Abstracts: Many organizations have developed standardized templates or checklists for contract summaries, often combining important legal and commercial considerations. These templates can range from 2-5 pages, allowing busy executives to quickly review and approve contracts based on the summaries.

Customers of ContractKen can generate the following types of summary for every contract, right out of the box:

• ‍Executive Summary: A concise (approx 100 words) summary containing the crux of the agreement. It includes the business context, parties details and the most important clauses from the contract. This can be used to update senior executives who can spend very little time per contract.‍
• Key Terms Summary: A key terms summary contains all important commercial terms in the contract. These terms would typically be of two types:
  • Standard across all contract types: Key dates, parties names, Term, Termination, Governing Law, etc.
  • Terms specific to a contract type: These are business context specific commercial terms. For e.g.,a License Agreement will have very different list of commercial terms as compared to a Lease Agreement, etc. ContractKen’s knowledge layer ensures that terms that are contextual to the contract type, jurisdiction, etc. are extracted, summarized and referenced in the summary. ‍
• Key Issues / Risks / Red Flags Summary: A summary containing an ordered list of critical risks, red flags or issues that need immediate attention. These issues / risks are determined based on the type of contract, the party who you are representing, jurisdiction, etc. ‍
• Risk Assessment Summary: A risk assessment summary is typically created on the basis of the reviewing party’s playbook. AI models scan through the contract, identify the specific clauses, infer the position and provide a commentary whether it confirms with the reviewer’s preferred position or not. Such a summary is typically used in conjunction with a red-lining capability inside an AI tool‍
• Obligations Matrix: Contract Obligations Matrix is a summary table showing the key obligations of the two (or more) parties involved in the contract side by side. Such a summary is extremely helpful in managing a business relationship based on contractual obligations. Such a summary can also be created using best-in-class CLM (contract lifecycle management) tools.‍
• Regulatory Compliance Checklist: A checklist that identifies and summarizes all potential major and minor regulatory compliance issues existing in the draft. These typically depend upon the regulations governing the business sector / domain.‍
• Defined Terms Summary: A list of all terms defined in the contract, with specific reference to the definitions, etc. It also brings out terms which are capitalized or in “” but not defined in the contract. It can also highlight inconsistent or duplicate references to terms which are defined‍
• Formatting Summary: This is a clickable list of all formatting issues in the contract that does not comply with the user’s standards / preferences (which are captured beforehand). Such a list can be used before finalizing a contract draft and sending for signature.

What are the typical uses of a contract summary?

Contract summaries can be used in various ways depending on the audience:‍

1. ‍'Call to action' for a client or internal stakeholder: Imagine you have just received a contract draft from your client or their counterparty. To kick start the review and negotiations process, one of the first things you could perhaps do is to immediately email your client / internal stakeholders a summary of key issues / clauses. So, even before a full review of the contract (which can take hours) is done, you have helped your stakeholders get started. ‍
2. Accelerated contract review: A well written legal summary can provide a detailed analysis of the legal terms and provisions of the contract. It is primarily intended for lawyers who need to understand the legal implications of the agreement.‍
3. Accelerate commercial approvals: An effective commercial summary focuses on the business terms of the agreement, written in a language accessible to business executives. It focuses on the scope of services, pricing, payment terms, and deliverables. It also includes key business clauses like liability, termination, indemnification, IP rights, etc.
4. Contract Abstracts: Many organizations have developed standardized templates or checklists for contract summaries, often combining important legal and commercial considerations. These templates can range from 2-5 pages, allowing busy executives to quickly review and approve contracts based on the summaries.

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What is the difference between a contract summary and a contract abstract?

A contract abstract is a summary of specific key information from a contract, presented in a designed format. It is useful for consolidating contractual rights, obligations and liability triggers across many contracts, such as during M&A due diligence. In contrast, a contract summary is a concise overview of all the major provisions within a single contract. An abstract extracts and aggregates particular data points of interest across multiple contracts, while a summary condenses the overall content of an individual contract. Abstracts facilitate efficient review of contract populations by capturing targeted metadata. Summaries provide a time-saving synopsis for quickly understanding the substance of a given contract document. Both abstracts and summaries are tools for digesting contract information more efficiently, but serve distinct purposes based on whether reviewing individual contracts or a portfolio of agreements.

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How to leverage AI to generate effective contract summaries?

At ContractKen, we harness the power of Generative AI to assist in the creation of accurate and insightful contract summaries. Our AI models can generate both abstractive and extractive summaries. 

• ‍Context Context Context !: The most important aspect for a human or an AI tool creating a summary of a long text is to understand the context in which the summary will be used. A lawyer looking to send a quick summary of issues to its client will have a different contextual need than a xxx
• ‍Make it a tool for exploration: This is where a good AI tool can be super helpful. It should allow the user to expand on a specific topic inside the summary or get a shorter version overall. It should provide ideas to the user for further exploration of the contract. It should feel like traversing a tree where the user can choose to follow any branch, grow or prune that branch, and stop where they feel satisfied.
• ‍Enhance trust with traceability: Trust is an important element for AI generated summaries.  To build trust and confidence, ContractKen's summaries include hyperlinked references to the specific text in the contract that supports each assertion made in the summary. With a simple click, users can navigate to and browse the actual content from the contract, allowing them to verify the accuracy of the summary and gain a deeper understanding of the context behind each provision.

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How to evaluate the quality of contract summaries generated by AI?

Evaluation of quality of text summaries is a well researched topic in the field of NLP (Natural Language Processing). There are broadly two ways:

1. Against a reference summary: there are statistical measures like ROUGE, BLEU scores which show the goodness of a summary when measured against a (human generated) reference summary. 
2. Context / Reference Free metrics: This is usually achieved in one of the two ways:
   1. Comparing the summarized text against the original text
   2. Use a Strong LLM G-evals framework

An excellent analysis of evaluation of text summarization techniques is contained at: https://eugeneyan.com/writing/abstractive/

At ContractKen, we evaluate the quality of our AI-generated summaries using the following criteria:

1. Relevance: Evaluates if the summary includes only important information and excludes redundancies.
2. Coherence: Assesses the logical flow and organization of the summary.
3. Consistency: Checks if the summary aligns with the facts in the source contract document.
4. Fluency: Rates the grammar and readability of the summary.

By adhering to these criteria, we ensure that our contract summaries are accurate, concise, and easy to understand, enabling legal professionals and business stakeholders to make informed decisions with confidence.

What are key considerations while using AI generated contract summaries?

While AI-powered contract summaries offer significant benefits, it's important to be aware of limitations. Here are some key considerations:

1. Need human in the loop: While AI can be a powerful tool, it's crucial to remember that contract summaries generated by AI models should be reviewed and validated by legal professionals to ensure accuracy and completeness.
   
2. Confidentiality and Data Privacy: When using AI-powered contract summarization tools, it's essential to ensure that sensitive information and confidential data are properly protected and handled in compliance with relevant laws and regulations. At ContractKen, we have implemented robust measures to safeguard our  clients' information and maintain compliance with industry standards. We have deployed an industry leading “Moderation Layer” to preserve the privacy and confidentiality of contract data.
3. Potential biases: AI models can sometimes exhibit biases based on their training data or algorithms. While summarization algorithms rarely suffer from this challenge, it's essential to be aware of this possibility and mitigate bias in contract summaries.

In conclusion, contract summaries, if done right, can be a boon for business and legal teams. Key benefits include:

• Instant identification of legal and financial exposure using AI-powered summaries.
• Up to 70% faster contract reviews through automated clause detection and playbook implementation
• Seamless collaboration enabled by shareable, read-only summaries for internal and external stakeholders.

ContractKen AI copilot leverages human expertise and AI to automatically extract and abstract important information from contracts based on user-defined parameters, across all contract types. We are helping numerous businesses to quickly address contractual questions and accelerate revenue flows.