Use Case | Contract and Policy Segmentation for Efficient Management

Use Case: Contract and Policy Segmentation for Efficient Management

Overview:

Contract and policy segmentation allows for organizing key terms, such as warranties, returns, and delivery times, into specific categories that facilitate their review and analysis. A model that segments, organizes, and uses semantic search transforms contract management, improving efficiency and ensuring that critical terms are accessible for decision-making, audits, or negotiations. This approach is ideal for legal departments, purchasing and sales teams, and companies managing multiple contractual agreements.

How It Works:

1. Uploading Contracts in PDF Format: Users upload contracts, service policies, Service Level Agreements (SLAs), and commercial terms.
2. Automatic Segmentation by Categories: The model automatically organizes the information into sections such as:

• Warranties: Coverage, duration, exclusions.
• Returns: Conditions, deadlines, associated costs.
• Delivery Times: Specific dates, penalties for delays, average times.
• Additional Clauses: Dispute resolution, subcontracting, audit rights.

1. Semantic Search: Users perform specific queries such as:

• “What are the return conditions in this contract?”
• “Identify penalty clauses for delivery delays.”
• “Find contracts with warranties over two years.”

1. Summary Generation: The model produces summaries that highlight:

• The most relevant terms by category.
• Discrepancies or potential risks in contract terms.
• Recommendations based on established policies.

1. Storage in Vector Database: Processed contracts are stored in an organized manner, enabling fast searches and future comparisons.

Practical Example Scenario: A legal team at a retail company needs to review 100 supplier contracts to ensure compliance with company policies. Process with the Model:

1. Uploading Contracts: The 100 contracts in PDF format are uploaded to the system.
2. Model Segmentation: The system organizes the information into:

• Warranties: Coverage for defective products for a minimum of 12 months.
• Returns: Deadlines for penalty-free returns.
• Delivery Times: Compliance dates and consequences for delays.

1. Semantic Search: The team queries:

• “Contracts with penalties for delivery non-compliance.” The system responds with:
• Contract 1: 5% penalty per week of delay.
• Contract 2: Immediate contract termination for delays exceeding 30 days.

1. Generating Comparative Summaries: The model generates a report that includes:

• Specific return and warranty conditions for each contract.
• Contracts that do not meet internal policies.
• Recommendations for renegotiations or adjustments.

1. Output of the Report: The team receives a consolidated analysis that helps prioritize actions for contracts needing attention.

Benefits of the Model in Contract and Policy Segmentation

1. Clear and Precise Organization:

• Automatically segments key contract terms into specific categories.

1. Context-Based Search:

• Quickly locates relevant terms, even if they are worded differently in contracts.

1. Fast Comparisons:

• Efficiently identifies discrepancies between contracts and internal policies.

1. Summary Generation:

• Provides a clear analysis of the most relevant terms for informed decision-making.

1. Efficient Storage and Retrieval:

• Centralizes contract management, allowing fast searches and future reviews.

Additional Applications

1. Contract Audits:

• Verifies compliance with contract terms against organizational policies.

1. Renegotiating Agreements:

• Identifies unfavorable or risky terms that require adjustments.

1. Regulatory Compliance:

• Ensures contract clauses meet local and international regulations.

1. Risk Management:

• Highlights potential risks in warranties, returns, and penalties.

1. Legal Consulting:

• Facilitates the review and assessment of contracts in legal or commercial processes.

Practical Example Additional Scenario: A purchasing team needs to assess agreements with logistics providers to optimize delivery times and return conditions. Without the model:

• Analysts manually review each contract, which takes weeks and increases the risk of missing important terms. With the model:
• The system automatically segments the contracts and generates a report that highlights:
  • Warranties: Average coverage of 18 months, with exclusions in some providers.
  • Returns: Inconsistent terms in deadlines and return costs.
  • Delivery Times: Some contracts do not include clear penalties for delays.
  • Recommendation: Renegotiate return conditions with key suppliers.

Conclusion The automated segmentation of contracts and policies using semantic searches and summary generation allows organizations to efficiently and accurately manage large volumes of contractual information. This model facilitates compliance, risk identification, and optimization of business agreements, making it ideal for legal teams, purchasing, and audit functions.