Legal Contract Management – Industry Benchmark for Firms

The legal sector has become a hotspot for widespread contract and workflow automation, for good reason. According to the 2019 ACC Benchmark Survey, 80.8% of in-house lawyers had to participate in contract management by simply reviewing and drafting documents, two tasks that can easily be digitized and automated. Legal firms are now adopting legal contract management technology at massive rates to improve efficiency and streamline mundane legal processes.

According to reports, around half of legal firms in the United States reported utilizing technology, especially legal contract management software to replace human resources, a proportion that has remained consistent over the previous three years.

The same is true of in-house legal staff, with slightly over half of US corporations reporting using technology-assisted document reviews in a 2018 poll, and over 30% reporting automating legal procedures. Furthermore, industry reactions to technology appear to be beneficial. An overwhelming majority of top attorneys in Singapore agreed in a 2018 that legal technology enhances service delivery, lowers costs, and is critical to the industry’s future.

What is a Legal Contract Management? 

A legal contract is a legally enforceable, binding agreement between two or more parties. It outlines the obligations i.e., terms and conditions, and specifies the rights of each party involved in the contract.

The obligations can be a promise to perform a specific action in the future or the exchange of goods, services, or money. 

Types of Legal Contract Management – An Overview  

Presented in either a textual or a verbal manner, legal contracts are binding agreements between two or more people.

Legal contracts are broadly divided into two types:

In this type of contract, the deal is agreed upon so that both parties commit something to each other to get their work done. The promise of one party acts as consideration for the promise of the other.

A unilateral contract generally involves a deal where one party asks to pay after the other party completes performing the clauses in the contract. Usually, unilateral contracts are most commonly used when a purchaser has a public payment offering for a specific activity.

Contract Challenges Faced by Legal Firms 

Legal firms undergo a lot of challenges when it comes to dealing with contracts and managing them until their execution. Let us have a look at what are the major challenges as far as legal contracts are concerned:

    • Business Growth Overburdens Teams Using Contracts:

 Even with a mid-sized legal team of 7–10 people with varying areas of expertise, receiving different types of contract requests in various areas, the lack of a contract management system results in ad-hoc management of crucial legacy contracts.

    • Lack of Transparency:

Legal contracts are often misplaced, and there are instances of mismanagement. Inter-vertical collaboration between sales, legal, and finance teams is also constricted due to a lack of contract visibility and access. The status of the contracts remains unchecked, ultimately hampers the whole process.

    • Updates and Renewals:

When working with suppliers who demand continuous services, businesses must be informed when a contract ends. This is done to prevent the contract from automatically renewing. Instead, a balanced judgment may be made on whether the contract should be reviewed. Businesses that deal with various contracts frequently experience auto-renewal troubles and may even fail to renew crucial contracts.

    • Compliance Issues:

Contract managers may find it difficult to keep track of contract term compliance when managing large volumes of contracts. After all, knowing the status of a contract 24×7 might be difficult for a single legal contract agreement. Furthermore, firms must evaluate the ratings and reputation of the providers they are considering.

Legal Contract Management – What Is It & What Does It Involve? 

Contract Lifecycle Management is the high-level management of a contract’s journey from drafting & negotiation through to execution & performance, following every stage of the contract’s lifecycle.

The contract lifecycle starts with the submission of a contract request and includes contract execution, tracking, contract intelligence, and renewal.

To elaborate, the steps involved in contract lifecycle management are as follows:

Legal Contract Management

 

    • Initiation –

Regarded as the first stage, this contract management stage involves discussing the contract details that are supposed to be drafted, executed, and tracked.

    • Drafting –

After getting hold of the contract details, the parties involved in the contract start writing the skeleton of the contract from the details that they gathered during the initiation stage.

    • Approvals  –

The drafted agreement is approved internally by organizational stakeholders and then shared with the other parties. 

    • Negotiation –

This usually involves negotiations about the major data between the parties and involves a lot of contact and interaction, which contract management systems can help conduct in real-time.

    • Signing and Storage-

After approval, the parties finally pen a signature to initiate the contract.

    • Performance –

Parties agree on and adhere to the extra requirements and the previously indicated rules, guidelines, and practices to avoid late payments and litigation and further block the process.

    • Extension and Renewals –

If the contracts expire, the parties can visit the repository, look at the contract details, and either renew or extend the contract as per their needs.

How to Solve Contract Inefficiency with Legal Contract Management?

With Contract Lifecycle Management, legal teams can oversee and manage every stage a legal contract goes through.

Here’s how legal firms can solve contracting challenges using legal contract software:

  • Reduce manual tasks & dependencies involved in contract processing using pre-configured templates, clause libraries, AI-enabled clause suggestions, and pre-defined contract workflows.
  • Streamline pre and post-signature phases by leveraging automated renewals, performance tracking, and improved contract status visibility.
  • Shorten and expedite the review and negotiation cycle by improving collaboration between legal and sales teams using digital negotiation features like change tracking, redlining, and content suggestions.
  • Make the contract process more efficient by leveraging centralized contract storage, contract analytics, and clause tagging.
  • Expedite contract execution using eSignature integrations, scalable upload & eSign workflows, and a virtual audit trail.

How Does Smart Contract Management Automate Legal Contracts?

Smart contract management actually helps the parties in reviewing, sorting, and getting hold of the contract if and when required. The benefits of legal contract management software are as follows:

  • Reduced Negotiation Cycles and Turnaround Times: Businesses normally do not want a contract cycle that takes too much time. With a proper legal document management system, organizations can speed up negotiation cycles, enabling them to go to market faster than their competitors. Smart CLM software helps in this faster internal and regulatory approval routes.
  • Risk Mitigation: Smart contract management keeps all the records of a contract signed between the parties. It furthermore helps reduce the risk and control liability factors as it allows for monitoring the risk factors before any contract is signed between the parties. 
  • Better Analysis and Reports: Every contract requires reports for improved visibility and analysis that follows. An ideal legal file management software comes up with follow-ups and detailed reports of analysis and insights about the existing contracts.
  • Transparency and Compliance: Legal department management software helps in gaining more visibility into contractual obligations and commitments. Also, it provides transparency to compliance duties and milestones to guarantee ethical product procurement and adherence to packing and delivery timelines.
  • Access-Controlled Repository: The contracts are stored in a centralized contract repository for easy access and collaboration. Signed contracts are automatically sent to the repository for visibility and easy retrieval.

    While some CLM solutions will assist customers at every stage, some solely concentrate on the post-signature phase which involves the contract repository, post-signature administration, and analytics.

    But the finest cloud CLM solutions must provide a range of alternatives to adapt to your immediate demands and allow you to grow as you further organize your company operations.

    SignDesk’s Legal Contract Management Solution

    SignDesk’s end-to-end contract management tool – Contr.act – allows you to draft contracts and negotiate provisions in real-time including handling addendums and amendments when it comes to legal contract software. Regarded as one of the best legal document management software, Contr.act also offers simple eSignature and eStamping connections for executing contracts quickly and securely.

    SignDesk helps and allows one to pull off any legal contract within minutes if one undergoes the processes.

    Manage bulk contracts and provide a streamlined processing procedure while cutting TAT by 90%. Contract automation has resulted in considerable cost savings for our clients who intended to use the legal matter management software, thereby reducing the risk of breach of contract.

    Talk to our product experts to learn more about how our legal contract management works.

    Get a free demo now!