Legal Contract Management: The Definitive Guide with best practices
Have you ever taken the time to decipher the legalese of a contract? How about a dozen? Every day lawyers are left trying to complete contracts without a standardised process, which raises the importance of efficient legal contract management.
In the digital economy, clients of law firms and employees in corporations expect better service, including a rapid and accurate provision of various documents and agreements. Luckily, the mismanagement of contracts is a legal liability that you can avoid with the right administrative procedures.
Now, let’s look at the ways legal professionals working in law firms, in-house legal departments, and real estate companies can use contract management to deliver superior business results.
What is Legal Contract Management?
Legal contract management - is the process of managing the flows of contracts held between a company and its clients/a legal department and other divisions in a corporation.
Elements of contract management include contract creation, negotiation, adherence, service level agreements, and documentation.
Some of the most popular types of contracts that legal professionals use are:
- Deed of trust
- Rental lease agreement
- Service agreement
- Commercial agreements
- Litigation documents
"The effective contract management process acts as a safeguard against all sorts of legal actions by successfully and timely fulfilling all the requirements."
Legal project management and contract management are now critical to managing various legal processes and satisfying clients at scale. Without a streamlined administrative process, it is almost impossible for legal teams to complete all their arrangements successfully.
What is Contract Lifecycle Management?
The Contract Lifecycle Management (CLM) deals with managing contracts from creation to expiration and is aimed at reaching the biggest cost savings and highest efficiency.
Some of the key stages in this lifecycle are as follows:
- Template authoring
- Contract creation
- Contract review
- Contract approval
- Contract execution
- Contract performance
- Contract expiration
Each phase of the contract lifecycle has to be carefully managed to ensure successful completion and regulatory compliance.
Nowadays, many clients are beginning to expect legal firms to use contract lifecycle management tools. The reason is that these tools enable you to draft complete templates, review contracts, and deliver the agreed terms of a contract more efficiently than a firm that doesn’t use them.
The role of Contract Management for legal professionals
Contract management has become a central component of the legal industry.
"For example, according to the General Counsel’s Technology Report by Forbes Insights and K&L Gates, 35% of legal professionals feel contract management is a legal responsibility, with 45% feeling it’s a business responsibility."
Larger firms that produce thousands of contracts rely on software products to oversee the completion of hundreds of existing agreements and documents. For these firms, it wouldn’t be cost-effective or financially viable to attempt to manage their flows of paperwork with manual processes.
The 2018 Gartner Market Guide for Contract Lifecycle Management reaffirmed this, finding that: “procurement, sales, and legal teams are always pressured by the business to speed up contract development and execution. Without a CLM solution, contract negotiators struggle to execute contracts within the expectations of the business.”
In other words, efficient administrative processes are a business necessity.
Now that more law firms are incorporating all sorts of innovative legal technology solutions, expect better customer experience throughout their lifecycle.
In the end, a streamlined contract management process is necessary to compete at a business level. Firms that provide an excellent customer experience throughout the contract lifecycle differentiate themselves from those that don’t. This is also true for the legal departments that drive efficiency in the entire company.
From theory to practice: best strategies
Now, let’s see what are the tricks and tips to master legal project management:
1. Store all your documents in a contract management system
Firstly, you should store all your legal contracts in one place; a centralised cloud service. This will not only make them accessible but also reduce the likelihood of you losing any important information and documents.
A central hub of documents means that multiple lawyers or departments still have access to the information they need when working on a case (whether in the office or remotely). For instance, any lawyer with the necessary permissions can view a contract without having to search through a filing system.
2. Measure contract approval time
Keeping contract approval time down is key to getting your agreements off the ground quickly. The faster the contract is approved, the sooner the client receives the expected service, and the better is their experience with your service.
Locking down the terms of an agreement early also ensures that you don’t waste time going back and forth with the client over changes.
3. Use contract templates (and update them regularly!)
It is highly advisable to use contract templates to cut down on administrative overhead. For example, Bigle Legal enables you to create a template once and that you can amend individually rather than editing dozens of individual documents.
A good rule of thumb is to update templates every 3-4 months to stay updated.
By using a template, you will make sure there aren’t any loopholes in your contracts and minimize your legal vulnerabilities. Without it, you are relying on memory to build the contract!
4. Add compliance management to your administrative tasks
Incorporating a check or multiple checks of compliance regulations throughout the contract lifecycle is a great way to make sure that you aren’t left open to any legal risks. Go through compliance requirements with a fine tooth comb.
Any mistake you make can have a devastating impact on your business. Therefore it is essential to have a detailed compliance management strategy that your organisation is prepared to deliver.
5. Build a standardised contract negotiation process
Develop a specific process for negotiating contracts. By doing this, you will enable non-lawyers such as accountants and other professionals, to specify the contract conditions with clients.
The main benefit of this comes in the form of cost-effectiveness. Rather than wasting the time of a lawyer on a non-essential task, you can work more effectively by giving non-lawyers a negotiation blueprint to use.
It is in the best interest of both the client and the firm that the contract negotiation process is kept short. This will make sure you have the necessary information to move forward without wasting time and resources.
6. Route contract requests to the right person
When implementing a new administrative solution, it is crucial to make sure you forward contract requests to the correct individual. Most software platforms will have this option integrated by default.
You should also make sure that employees are aware of the information they need to provide with the contract request. By doing this, you will ensure that the lawyer can act on the information they need without having to chase up additional details.
7. Train your team to adopt new software
Your ability to onboard new technology is dependent upon your staff training. If staff aren’t trained how to use new software, they aren’t going to be comfortable using it! Create guides and tutorials to show employees how to use new tools.
Using a digital adoption platform is also a great option for speeding up software on-boarding. Digital adoption platforms have onscreen instructions and contextual guidance to show the employee how to use a software platform.
8. Determine how contracts are signed
Setting out a process for how contracts are signed is important for minimising disruption throughout a contract. If you are digitising the contract management process using e-Signatures is a necessity. e-Signatures are legally binding like written signatures but you can often integrate them straight into your contract automation platform.
Contract and document automation platforms like Bigle Legal will offer you e-signing already incorporated in the software.
Making employees familiar with how to submit e-Signatures will ensure that contracts can be signed off on efficiently. The more streamlined your signing process is, the less time it will take to complete your contracts.
Traditional vs Digital Approaches to Contract Management
For legal contract management, there are two roads legal enterprises can take; manual or digital. Traditional approaches rely on manual processes, paperwork, and email to manage contracts.
The digital route uses software platforms which automate the process of managing documents and contracts. The traditional approach is an outdated and inefficient way of managing contracts (particularly for firms that manage hundreds of different agreements).
The digital approach is preferable because it automates document management and stores contracts on a cloud service that can be accessed by the necessary lawyers. Using digital tools reduces administrative overhead and lowers the risk of errors throughout the contract lifecycle.
Contract Management Tools You Should be Using
A large factor in determining the success or failure of your contract management solution is the contract management tool that you use.
Some widely used products are as follows:
- Bigle Legal - document automation software
- LawGeex - contract review automation software
- Tray.io - contract renewal automation software
Automation software allows you to create documents, and templates to store in the cloud. In effect, you can create a contract and store it in a centralised location for easy access. Your lawyers can log in and interact with their cases and share with other team members.
Document automation tools like Bigle Legal also offer digital signature functionality so that you can sign contracts without going through the hassle of printing contracts out and scanning them. Paper-free management of contracts is beneficial because it eliminates manual processes and decreases costs.
The type of lifecycle management tool that you use should be dependent upon your goals and existing processes. The most important thing is to store your contracts in a centralised location so that you can have the visibility you need to serve clients effectively.
Streamlined Contract Management is the Future
Legal contract management is vital for completing contracts efficiently and meeting the required terms. Managing documents from a top-down perspective gives you the visibility you need to deliver the experience that clients are seeking. Trying to use paper-based measures for managing contracts is an outdated approach that opens up financial liabilities.
However, contract management alone isn’t enough if the lawyers using it aren’t using it correctly. Making lawyers aware of how to use the software and best practices makes sure that you can deliver contracts cleanly.