Contracts are at the core of every business. Contracts in business provide better visibility to fulfil the obligations and achieve the goals agreed in the agreement. This serves as excellent support for building a good relationship with the client or the desired party. Failure to comply with a business contract or keep them in order is a sign of poor contract management and can prove expensive in the long run, causing permanent damage to your business. According to the International Association for Contract and Commercial Management, organisations lose 9.2% of revenue each year due to poor contract management and controls.
Why Contracts Are Important-
1. Proof of Details
This provides a final understanding of the agreement between the company's owners or its investors about the services provided by the third party, or the payment obligations you need to comply with the employees. These details will serve as legal evidence and are very important in the contract.
2. Avoid Misunderstanding
Misunderstanding is a common problem antagonised in any business for several reasons. To avoid such cases, it is important to draft a contract and is necessary for both the parties to read the complied rules and follow them.
3. Provides Security
A contract can provide security and peace of mind to all parties involved in the transaction as it clearly defines the duration of the contract and set of responsibilities. This gives adequate protection to the parties if the agreed terms or conditions are not met or breached.
4. Provide Confidentiality
A confidentiality clause may be added to the contract. Concerned parties are not allowed to disclose the business and financial transactions between them to any third party. If the information is disclosed, either can be made to suffer in accordance with the rules of the contract, which are enforced by law.
Therefore, in order to protect the business and its legal entity, it is necessary to follow the contract rules as to conduct business smoothly. This will prevent, and in some cases, minimize business fraud.
Now, managing the contract is essential for the negotiation, formal drafting, revision, and continuous monitoring of a particular contract. But the task of managing the contract portfolio is difficult - especially as the contract repository grows and the number of contracts increases. The poor management of these contracts can lead to:
- Lost Annual Revenue
- Inefficiency and Disorganization
- Missed Deadlines
- Failure in Compliance
- Poor Approval Workflow
Role of Legaltech in Contract Management
Turning to traditional law firms to help you negotiate legal agreements can be time-consuming and expensive. Hours spent on drafting, discussing terms, reading and re-reading documents, sending documents back and forth, managing changes to different versions of contracts, etc. Legal counsel can charge companies up to $2,000-$5,000 for relatively standard agreements.
This put businesses in a difficult predicament. They can either go about their business without proper legally binding contracts, risking huge losses, or waste time and money trying to find a traditional lawyer to draft the proper legal documents. For many start-ups and small and medium-sized enterprises, the latter is simply too expensive.
Technology is standardizing, automating, and "manufacturing" what were once time-consuming tasks performed by lawyers. It has made life easier by reducing the time spent on time-consuming logistical tasks in contract management, freeing up professionals to focus on the business at hand. Recent technological advancements like artificial intelligence (AI) are now helping companies conquer many of the challenges to contracting.
How is the Legal Technology Benefiting?
There are plenty of artificial intelligence (AI) tools in the LegalTech market but few of them really deliver the service promised/ actually use AI. SpeedLegal is one of those that can be used to simplify some relevant legal tasks. For Example-
- Clause identification & extraction: Specific clauses can be identified and extracted more precisely by legal software.
- Contract review: Contract review tools has made it easier to complete the task in less time.
- Contract management: the software can be used to analyse the contract against the standard.
Let’s now get into details of how legal technology benefits the enterprises.
1. Contract Drafting
The AI-powered software uses several standardized contract templates to create contracts, ensuring that the latest and most accurate language is used. There are also tools integrated with artificial intelligence and machine learning (ML) technologies that can be used to evaluate language, especially when adding new contracts to the system and checking existing contracts for sensitive data.
2. Contract Review
Given the need for highly secure systems for contracts, many organizations are implementing new technologies to minimize their workload. Otherwise, because the contract consists of various important documents, many businesses depend on an outside consultant, which can be expensive.
The entire contract review process can be automated by the LegalTech tools:
Finding key information
Summarizing the information in a specific way so that it can be easily read and understood.
3. Contract Management
Contract management is a complex and time-consuming task that requires them to keep track of the terms, conditions, obligations, and deadlines for each contract they manage. However, with new technology, businesses can upload contracts to a central location where AI software automatically tags each document according to a pre-defined set of criteria like contract start and end dates, participants, contract type, etc. It allows users to monitor important dates and deadlines, making one of the most difficult tasks associated with contract management easier than before.
4. Efficiency Enhancement & Time-Saving
Automation-powered systems offer several great features, including:
- online redlining,
- approval cycle,
- alerts, etc.
The systems are very easy to use. Such tools are best suited for companies dealing with a large number of contracts at once, as they help increase efficiency and improve the entire process. All this leads to fewer errors and helps save time.
Contracts are inevitable for small businesses, to keep their information safe and protect them from fraudulent investors, it is necessary to follow the rules of the contract to run a smooth business. This will prevent and in some cases minimize business fraud. Also, to deal with legal matters and manage these contracts by companies, it is better to adopt legal technology than a human lawyer because it is cheaper, faster, and easier.
With solutions like SpeedLegal, it won't be long before automated contract management technologies are adopted "en masse".