Contract Management Before And After Legal Tech Assimilation

As general counsels, we understand that contracts are essential for the smallest of transactions, from something as simple as a parking slip, to a transaction as massive as a corporate merger worth millions of dollars. For as long as memory serves, contracts have formed the hinge that holds together the parties to a transaction, ensuring the smooth running of any business.

Contracts, however, can be tiresome. As legally binding documents, each contract comes ingrained with a set of rights and obligations that are enforceable and missing a deadline can mean having to pay a substantial amount of money in damages due to breach or non-performance.

Thanks to the integration of technology-driven automation into the delivery of legal services, today’s intuitive contract lifecycle management tools have transformed the entire universe of contracts. In this post, we discuss how end-to-end CLM tools has improved the different parts of the contract lifecycle.

Contract creation

Once parties decide to enter into a legally binding relationship, the next step is to solidify the rights and obligations of both parties on paper. Traditionally, this meant that lawyers had to draft each contract from scratch, a task that was highly time-consuming and repetitive in nature. With no method of reducing duplication of work, an increase in the volume of business translated directly into an increase in the workload for the legal department.

Legal tech companies understood that while all contracts are different in nature, there are certain essential clauses that must be present in every contract, and that this information could easily be templatized. Today, tools for contract lifecycle management enable legal departments to use pre-drafted contract templates which can be modified to create the perfect first draft. Intuitive products like RazorSign enable legal teams to create contracts in a few simple steps with the help of their contract template manager and exhaustive clause library. Creating a non-disclosure agreement is as simple as filling in the details of the party to a pre-drafted template.

Negotiation & settlement

Traditionally, the process of negotiation and finalization would entail comparing multiple drafts and redlining of documents that ran into many volumes. The negotiation of a multiparty commercial contract meant large legal teams spending days and weeks, going over each and every clause, trying to find a potential loophole or a potential risk. As electronic communication became the norm, this practice improved only slightly, with legal teams sending each other multiple versions of a single contract, often leading to chaos.

One of the ways in which contract lifecycle management tools have been able to substantially reduce the time taken in contracting is by cutting down on the time taken during negotiation and finalization of contracts. Today, legal teams can make use of a single platform to compare various versions of a document, add their comments, collaborate with multiple stakeholders, compare and track deviations, create risk heatmaps and reach consensus, all in less than a week.

Signing & execution

The traditional method of execution of a contract meant that it had to be sent to each party by registered post, signed, stamped and then stored in cabinets or lockers. Needless to say, not only was this process highly time-consuming, it also made the execution of a contract with multiple parties an extremely tedious task.

A turning point in the process of contract automation was the advent of electronic signatures, which enabled the paperless signing of documents. eSignature tools could be used to securely execute contracts, thus reducing not just paperwork, but also effectively cutting down the time spent in the execution of the contract. Robust end-to-end CLM solutions like RazorSign offer in-built functionalities for affixing e-signatures, enabling you to sign and execute legally binding contracts instantly, without delays.

Storage & record management

Traditionally, there existed no specific standard for the storage of contracts. Legal teams would often struggle with multiple versions of the same contract saved in a single folder, leading to numerous errors that could easily be avoided.

Today, contract management tools enable legal teams to effortlessly store all contracts on-premises or on a secure cloud, making sure that these documents are safe from the threat of loss due to fire, theft, flood, or any other such natural calamity. More importantly, all information is easily accessible within minutes as it is stored at a central location.

Bearing these in mind, essentially, the relevance of a prompt contract management tool is pronounced all the more during recent times and going forward. RazorSign has helped organizations helped organizations automate contract management systems and align the organization's performance with those of the stakeholders' and internal teams.

Search & retrieval

Imagine having to search manually for a simple detail through a document that runs into several pages. In the era of paper contracts, armies of junior lawyers and interns were tasked with the monotonous job of tagging, highlighting and flagging the important information present in a contract. Sadly, this was a problem that continued even with the electronic storage of contracts, with no way to collectively search all related documents using a specific keyword, or by setting up filters.

In the age of CLM-powered automation, the time spent on search and retrieval of information has been reduced to a fraction of the original time by employing comprehensive techniques of search and filtration. As they are stored at a central location, all documents communication, and relevant information of a party are inter-connected, ensuring that an important document or detail never gets missed. RazorSign offers integrated meta-data search and custom criteria filtering functionalities, making retrieval of information possible within minutes. Thus, looking for an essential detail like the date of renewal becomes as simple as typing a keyword.

Audit & reporting

Auditing contracts refers to the process of evaluating and verifying the accuracy of the contractor's policies, controls, and systems by completing a close inspection of documents such as transaction records, operations logs, and account books. It serves as a check on the parties, to ensure that there is due compliance with regulatory standards and prevention of fraud. In absence of an integrated platform, contractual audit and reporting was performed manually.

Contract management simplifies this process by connecting executed contracts with various compliance mechanisms and creating an efficient system of checks in the form of timely reminders, notifications and risk heatmaps once a contract has been executed, relevant portions can be earmarked and assigned to the correct stakeholders according to performance obligations.

Renewal & performance

The execution of a contract isn’t the end of its lifecycle - a live contract requires continuous performance, whether in the form of monthly or quarterly payments, or the performance of any other obligations. In terms of contracts of high commercial value, a missed deadline translates into the loss of thousands of dollars in penalty or renewal fees. As the volume of business increases, it becomes increasingly difficult to keep track of all this information manually.

This is where contract management tools are able to help companies save substantial amounts of money, effort and time. By allowing companies to track key terms, dates and deadlines of any contract, CLM tools are able to send reminders in real-time to the concerned person with respect to renewal or compliance deadlines.

Task and obligation management becomes simpler with RazorSigns’ integrated Task Management, as different parts of an executed document containing performance obligations are identified and assigned to personnel in the respective departments. Timely alerts and reminders, combined with real-time updates on an active workflow dashboard ensure that you never miss a deadline.

Conclusion

From creating the initial draft, to the final execution of the contract, automation in the field of contract lifecycle management has streamlined and optimized each step of the process of commercial contracting. The right CLM tool has the potential to enable a company to execute hundreds of contracts simultaneously, adding exponential growth to every department and ultimately leading the company to greater profitability. With contracts forming an integral part of every commercial transaction, it is time that enterprises make the switch from manual contract management to efficient CLM automation.