Challenges

An organization enters into several contracts in its day to day operation. Contract with the vendors, suppliers, clients, employees, and other parties depending on the nature of the transaction. A contract exists because each party transacting should be aware of their obligations under their respective transaction. For instance, you enter in a contract with your supplier who is supposed to supply 200 pieces of nuts and bolts for your car manufacturing plant. Now without a contract, you have to trust the person's word that they will supply the requisite amount on the agreed date. Wait, it's verbal, and there is nothing to prove that the person is obligated to supply any units on such a date. The contract brings certainty, and one cannot rely on memory, which often confabulates, in commercial transactions.

As the business expands, they get into several contracts, and efficiently managing these contracts is a challenge. Contract management ensures that the productivity of the organization increases without increasing the number of employees. Several interdependent steps are involved in contract management.

Solutions

Contract management is the process through which an organization streamlines the process of entering into a contract and managing it until the end of its term. Many people view contract management as something necessary for getting into a contract and nothing beyond that. Although nothing can be as ludicrous as relegating contract management as a process required only for entering into an agreement, therefore we must understand all the steps that contract management entails to understand the pith of contract management.

Steps involved in contract management

Step 1

Identifying the requirements

Contracts are legally enforceable documents, and oversight at any stage can dearly cost the parties involved. This step entails spotting your requirements, aligning your objectives with the needs, setting a goal or expectation, and Risk mapping. Contract management assists in risk mapping, i.e., risks associated with a transaction in the different future scenarios. For example, if the other party goes bankrupt, sells the business to a third party, or any other contingencies that may arise.

Step 2

Drafting the Contract

Once you pass step one, the next step flows automatically from step one. While drafting, you should take into account factors such as:

the latest information about the project,
all the required clauses according to step one are incorporated,
terms must be stated unequivocally,
state and country laws, especially if parties are from different jurisdictions and other crucial factors.

Step 3

Negotiation

Negotiation ensues the First draft of a contract. Putting yourself in other party's shoes and viewing the Contract from that place ensures smooth and productive negotiation. Contract management makes redlining an effortless and trust-building process as both parties can view the document in realtime and can collaborate to sort any differences. Email and offline systems are tardy, and chances of a schism between the parties are high.

Step 4

Approval before finalizing the Contract

After the negotiations are complete, approval is required. The approval stage depends on the firms' established practices. If a firm has a specific approval process, the process needs to be complied with before the contract is approved.

Step 5

Signing

CLM incorporates digital signature, therefore making the execution of Contract effortless. It makes the execution of the contract faster, smoother, and efficient. As most jurisdictions recognize digital signatures, CLM leverages the universal recognition of digital signatures by incorporating them in the Contract management process.

Step 6

Amendments and Updation

Contracts are not static and need alterations according to the amendments introduced in the laws governing them. Monitoring the changes can be arduous and often baffling. Contract Management automatizes the process and records the changes or any edits so that there is no confusion among the parties involved.

Step 7

Management & Supervision after execution of the Contract

As earlier mentioned, contract management doesn't end with signing of the contract and is quite useful in the post-execution scenario. Contract management ensures parties don't miss any crucial deadlines concerning the contract, thereby guaranteeing the optimized functioning of the organization.

Benefits

Organization harnesses to its advantage the negotiated contract.

Reduction in costs as a part of the process is automated.

Business risk is mitigated by making suppliers responsible for maintaining compliance and providing clear reporting for audit purposes.

Processes are carefully designed and automated and consequently, reduce the amount of time specialist resource (such as your Legal team) spend doing non-specialist work (such as basic contract admin).

Our Services

We have lawyers who are adept at all the above stages of CLM. Our lawyers guide the client at each stage of CLM as to how they can employ CLM so that their business operates at maximum efficiency.