Table of contents

Drafting contracts

9.2 Advantages of contract assembly

The advantages of a document assembly (or contract automation or intelligent documents) software application are numerous.

Reducing response time. Document assembly solutions can reduce the transaction cycle in two ways. If the requested contract would contain small complexities or the merging of two or more sample contracts, such request is easily delayed. With contract assembly, this is unnecessary. Because business managers do preparatory drafting work themselves, legal counsel can respond much more expeditiously. Moreover, in advanced assembly applications, inserting contract-atypical building blocks requires just a click of a button. Whilst contract building blocks are aligned for the terminology and defined terms used, even the greatest complexities can be handled.

Three weeks down to one day. The availability of the first draft contract may be reduced from three or more weeks to one day only. A request for a contract with low priority or for a contract requiring more than a quick copy-paste exercise in a Word template can easily remain in your inbox for three weeks or more. If complexities in a contract can be overcome by document assembly, the response time of the legal department can be reduced to only one or two days. Moreover, if the first draft is of excellent quality, parties would reach an agreement one or two mark-ups earlier.

Improving productivity. Contract assembly applications also accelerate contract drafting by considerably reducing the effective drafting time. In other words, it improves the in-house counsel’s productivity. Business line managers fill in the business details (such as information about the other party and the principal business-driven choices), whilst the in-house counsel finishes the contract or approves the business manager’s choices. Saving time relieves budget pressure and saved time can be allocated to high-value interests.

Time-saving up to 90 percent. Companies report that document automation reduced the effective contract drafting time by up to 90 percent. This is even higher where the involvement of legal counsel is further minimised or even excluded, which can apply to contracts based on an approved template. It may also apply to contracts requiring the merging of two or three contracts, where most of the drafting time consists of collecting and inserting party details in various clauses, matching various defined terms, transposing the related definitions and taking out negotiated, compromised provisions. Furthermore, if know-how within the company is re used intelligently thanks to contract assembly, much drafting from scratch can be avoided. The effective time required to prepare a first draft contract can be reduced from 2 to 3 hours to only 10 minutes. (Count your blessings on an annual workload basis!)

Time-saving even up to 98 percent. If you can reuse the answers given during the Q&A of previous contract entry, you can probably copy those Q&A-results and merely change the contracting parties’ names. Accordingly, the drafting time can be reduced up to 98 percent! Particularly in the case of closing documentation for a major transaction, such functionality is very powerful.

Avoiding risk of human errors. A contract assembly application takes away the risk of human errors resulting from copy-paste practices or ‘search-replace contract drafting’.

Delegation of work. Standardised templates and pre-defined questionnaires permit the delegation of preparing a first draft contract to business line managers or junior lawyers; if desired, approval by authorised lawyers may be made compulsory in order to approve the release of the resulting contract. Examples of such ‘routine contracts’ include: powers of attorney, corporate resolutions (or board minutes), intra-company agreements, employment contracts, sales contracts, distribution or agency agreements, corporate loan agreements, basic licences, deeds of assignment and confidentiality agreements.

General quality improvement. The central availability of model contracts and individual model clauses in a contract assembly software application contributes to a higher quality of all contracts created by a legal department. The more advanced the contract assembly software is, the more comprehensive and robust the quality improvements may be. For example, Weagree’s contract assembly wizard makes contracts and contract building blocks created by a legal counsel (and approved by the best practices group) available in a structured and accessible manner. Such availability provides for continuity of know-how within the legal department and prevents relatively standard types of contract provisions from being drafted from scratch each time they are needed.

Contract assembly vs. lack of model contracts. Some people believe that the implementation of a contract assembly solution should not be started before a certain level of quality of the company’s or firm’s model contracts has been achieved. This is a great misconception, because the opposite is true; the implementation of contract assembly catalyses the further development of the model contracts. This is because a robust contract assembly solution permits quick changes (e.g. removal of typos) and does not force the lawyer into the greatest common denominator of a certain contract. Instead, a legal department has the freedom to provide for many commonly used options without losing oversight.

Shortened transaction cycle. Expediting the drafting process removes much frustration. More importantly, it also means that transactions can be closed faster. If the first draft contract is of a high drafting quality, the finalisation of a contract will likely reduce the number of mark-ups by one or two. This reduction comes on top of the decrease of the legal department’s response time. Such reductions potentially represent additional business.

Pre-approved text alternatives. A complication of developing adequate contract templates was that it forced contract drafters to make difficult one-size-fits-all choices. The Q&A functionality of an advanced contract assembly application will allow users to avoid such one-size-fits-all choices. They enable the inclusion in templates of alternative options to suit transaction-specific or business-unit-specific situations. Likewise, model contracts do not need to reflect only one or two of the most frequently required options, but may also include wording for less regular types of transactions. (Also, answers to Q&A questions may be layered to handle many alternatives.) If a legal system imposes specific requirements as regards the wording of a contract provision in order to be effective, the relevant alternatives can be included in the template (compare, for example, a ‘penalty’ clause under European legal systems with the ‘liquidated damages’ equivalent of the common law).

Incentive to make models and templates. Many lawyers believe that the implementation of a contract assembly solution requires that, first of all, their model contracts should be upgraded. Although the argument has some merit, the opposite is also true. Contract assembly software catalyses the development and maintenance of model contracts and best practice documents. The more contracts are processed through the assembly software (and its workflow), the more accessible and useful such application will be for a legal department. If its great advantages are recognised, legal counsel have a common interest to improve its success (and continue working on improving their models). Can the implementation of a contract assembly software application be done prematurely? Probably not, changes to contracts that have been inserted in the application’s database are in many cases very easy.

Compliance because of improved performance levels. By accelerating both the contract drafting time and the contracting transaction cycle, business managers will be inclined to adhere to internal contracting requirements for doing business. Often, contracting processes encounter delays because of a lack of responsiveness from the legal department. Document automation solutions will largely ‘debottleneck’ a legal department’s delays by automating routine contract work.

Compliance by quality improvement. Creating transparency of the contracting process by introducing contract templates, a tailored Q&A function and a complete workflow functionality enhances consistency and reduces risks of non-compliance. The consistency improves because the users of the application have an incentive to reuse existing definitions and defined terms as much as possible. The risks of non-compliance improve because the users have an incentive to make sure that what they introduce in the system is of good quality. (Companies and law firms may even provide that only approved texts are inserted and, because changing an inserted text is very simple and affects all templates in which it is used, the approver may be less reluctant to approve.)

One company, one house style. The document-formatting functionality in a contract assembly application facilitates a consistent house style.

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