Using Claude 2 for Contract Review: Real Results

Can Claude 2 actually review contracts? We spent two weeks testing it on real vendor agreements, employment contracts, and service terms to find out. The short answer: yes, but with guardrails. Claude 2 is legitimately useful for contract review. It's not replacing lawyers, but it's changing how initial review and analysis work. Here's what we learned from real-world testing. ## Why This Matters Contract review is expensive and time-consuming. Legal teams are bottlenecks. Operations teams need to move faster. **Claude 2's 100K context window means you can upload a full contract and get useful analysis in minutes instead of days.** That's valuable for initial review, risk flagging, and term comparison before you involve legal counsel. This isn't about cutting lawyers out. It's about making the first pass faster so legal time goes to actual negotiation instead of basic document review. ## What We Tested We ran Claude 2 through realistic contract review scenarios: **Vendor Agreements** - 50-page SaaS terms with MSA and DPA - Cloud services agreement with complex pricing - Marketing agency contract with deliverables schedule **Employment Documents** - Standard employment agreement with IP assignment - Contractor agreement with NDA and non-compete - Equity compensation terms **Partnership Terms** - Reseller agreement with revenue share - Co-marketing partnership with brand guidelines - Data sharing agreement with privacy terms All real documents we actually needed to review. No toy examples. ## What Works Really Well **Risk Flagging** We asked Claude 2 to identify high-risk clauses in a vendor agreement. It flagged: - Auto-renewal with 90-day cancellation notice (we typically want 30) - Uncapped liability for data breaches - Broad license grant to vendor for our data - Exclusive relationship clause buried in Section 12 All accurate. All things we would have flagged manually. Found in about 2 minutes instead of 45 minutes of reading. **Term Extraction** Asked Claude 2 to extract key terms from a 40-page services agreement: - Payment schedule and amounts - Deliverables and timelines - Termination conditions - Liability caps and exclusions - IP ownership provisions It built a clean summary table. We spot-checked against the source document. Zero errors. **Plain English Explanation** Legal language is deliberately precise and often confusing. Claude 2 is excellent at translation. Example clause: "Notwithstanding any provision to the contrary herein, Vendor's aggregate liability arising out of or related to this Agreement, whether in contract, tort, or otherwise, shall not exceed the amounts paid by Customer to Vendor during the twelve (12) month period preceding the event giving rise to the claim." Claude 2's explanation: "The vendor's total liability is capped at whatever you paid them in the last 12 months before the problem occurred. This applies regardless of what type of legal claim you make." Accurate and actually understandable. **Cross-Reference Detection** Contracts often have terms that modify or contradict each other. Claude 2 is good at finding these. We uploaded a contract that had different liability caps in three sections (general liability, data breach, IP infringement). Asked which one applied to a specific scenario. Claude 2 correctly identified the order of precedence and explained why. ## What Doesn't Work **Negotiation Strategy** We asked Claude 2 what terms to push back on. The advice was generic and overly cautious. "You may want to negotiate better terms" isn't useful guidance. Real negotiation requires understanding your leverage, industry norms, and relationship context. Claude 2 doesn't have that. **Jurisdiction-Specific Rules** Asked about whether a non-compete would be enforceable in California. Claude 2 gave a general answer but missed specific case law that would matter. For anything jurisdiction-dependent, you still need a lawyer who knows local rules. **Complex Multi-Party Scenarios** Tested Claude 2 on a three-party reseller agreement with revenue splits. Asked about payment flows when the end customer terminates. It got confused by the multiple relationships and gave an answer that didn't match the actual contract terms. **Spotting What's Missing** Claude 2 can analyze what's in a contract. It's less reliable at identifying what should be there but isn't. We asked it to review a contractor agreement and flag gaps. It mentioned standard clauses but missed that there was no IP assignment provision (critical for our use case). ## How to Use It Safely Based on our testing, here's a safe workflow: **Step 1: Initial Analysis (Claude 2)** - Upload the full contract - Ask for risk flagging and unusual terms - Extract key terms into a summary table - Identify cross-references and dependencies **Step 2: Focused Review (You)** - Read the sections Claude 2 flagged - Verify the term extraction is accurate - Consider business context Claude 2 doesn't have **Step 3: Legal Review (Lawyer)** - Share Claude 2's summary with your legal team - Focus discussion on flagged risks and negotiation points - Let legal make final call on acceptability This cuts the initial review time by 70-80% while keeping human judgment in the loop. ## Sample Prompts That Work Here are prompts we tested that produced useful results: **Risk Assessment** "Review this contract and identify any terms that create significant risk or obligations for the Customer. Flag anything that's unusual or more restrictive than standard market terms." **Term Extraction** "Extract the following terms and create a summary table: payment amounts and schedule, contract duration and renewal, termination rights and notice periods, liability caps, IP ownership." **Comparison** "Compare these three vendor proposals and identify the key differences in pricing structure, service commitments, and contract terms. Flag any unusual provisions." **Plain English Summary** "Explain what this clause means in plain English and describe what practical obligations it creates for us." ## Cost Reality Check A typical 50-page contract is about 15,000-20,000 tokens. With Claude 2 API pricing: - Initial upload and analysis: $0.20-$0.25 - 5-10 follow-up questions: $0.50-$1.00 - Total per contract: $0.75-$1.25 Compare that to $300-500 per hour for legal review. The economics are obvious. ## What Legal Teams Should Know We shared our findings with our legal counsel. Their take: "This is useful for first-pass review and term extraction, but it's not a legal opinion. Use it to prepare for our review, not replace it." **Good uses:** - Initial risk screening - Term extraction and comparison - Translation of legal language - Preparation for legal discussion **Bad uses:** - Final legal advice - Enforceability opinions - Negotiation strategy - Anything that goes to court ## Quick Takeaway Claude 2 is genuinely useful for first-pass contract review. It cuts initial analysis time by 70-80%, but you still need legal review for anything you'll actually sign. Use it to prepare, not replace, your legal team.