As lawyers, 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 have improved the different parts of the contract lifecycle.
The Contract Lifecycle - Then and Now
|Stage of Contracting||Then||Now|
|Drafting/Contract Creation||Repetitive and cumbersome, as done manually. No way to automate even standard-boilerplate contracts.||Pre-drafted templates and clause libraries make creating a contract as simple as flling a form.|
|Negotiation & Settlement/ Redlining||The lengthiest part of a contract lifecycle. Multiple versions were exchanged between parties with no way to compare drafts or find deviations.||A single platform to compare various versions of a document, add their comments, track deviations and reach consensus.|
|Signing & Execution||Immense paperwork, contract had to be sent to multiple parties for signing and stamping||Integrated system of e-signature ensures execution within minutes|
|Storage & Record Management||Numerous errors as there was no single standard for storage and management of records.||CLM tools offer cloud based storage, enabling easy access and management.|
|Search & Retrieval||No way to retrieve specific information- lawyers had to meticulously search across all documents and spend numerous hours.||Keyword and Meta-data search, custom- filters to ensure a thorough, multi-layered process of search and retrieval.|
|Audit & Reporting||Performed manually by professional auditors and specialized lawyers. Took weeks on an end as it was done manually.||With multi-system integrations, executed contracts can be automatically stored and analyzed for performance and contractual compliances.|
|Renewal/ Performance/ Discharge of obligations||Done manually by legal teams by resorting to memoranda, would often cause massive losses due to missed deadlines.||Razor365 offers integrated task management and dashboard updated in real time, sending reminders.|
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 lawyers to use pre-drafted contract templates which can be modified to create the perfect first draft. Intuitive products like Razor365 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.
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.
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- CLM solutions like RazorSign offer in-built functionalities for affixing e-signatures, enabling you to sign and execute legally binding contracts instantly, without delays.
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 which could easily be avoided.
Today, contract management tools enable legal teams to effortlessly store all contracts on premise 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. Offering the best-in-class features is PracticeLeague's Razor365 that has helped organizations automate contract management systems and align the organization's performance with those of the stakeholders' and internal teams.
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. Razor365 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.
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.
A well rounded CLM software like Razor365 has the ability to seamlessly integrate with various core business systems such as tools for Customer Relationship Management and Enterprise Resource Planning, so as to be able to provide timely reminders for contract fulfilment and compliance.
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 fee. 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 personnel with respect to renewal or compliance deadlines.
Task and obligation management becomes simpler with Razor365’s 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.
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.