There are 10 steps for upgrading model contracts and building a clause library, to maximise the benefits from contract automation software, it is ‘helpful’ to upgrade your model contracts:

Step 1: Selecting model contracts and scoping your contract automation projevct
Step 2: Establish a best practice group
Step 3: Collecting and stripping model contracts and precedents
Step 4: Prioritise the model contracts
Step 5: Establish the procedure and set the agenda
Step 6: Prepare handsome proposals for discussion
Step 7: Discussing and establishing the contract building blocks
Step 8: Determining your organisation’s contract house style
Step 9: Identifying approval requirements and business access
Step 10: Automating the contracts and implementing the workflow

Undertaking these steps in a structured manner will save a lot of time and vouch for the success of implementing contract automation software.

Large organisations. In large legal organisations, the analysis and the upgrading of model contracts should anyhow be undertaken by best practice groups. It is crucial for the progress and success of upgrading contracts that the general counsel, and preferably also the executive management of the company, expressly support the work of the best practice group.

Leadership should be explicit and prioritise action (actions speak louder than words). Efforts by best practice members should be rewarded amply within the entire organisation.

Step 1: Select contracts and define scope of contract automation

A legal department should of course decide which type of contract templates will be tailored first through contract automation in the Weagree Wizard. Those contracts may typically require an ‘upgrade’ (or quality review) if only to make them consistent. The selection of the commercial contracts that will be upgraded is largely coupled with the decision which selection automated contract creation will be delegated to the business and staff (see step 9 below). Whilst broadly identifying the various categories of users (e.g. in-house counsel and business line managers), the selection of the contracts to be upgraded may be expanded.

As a first step, the ordinary course commercial contracts would be included in the Weagree Wizard: these are all the contracts negotiated on a regular basis by the company’s relevant businesses or departments. Typically, the selection of contracts would cover the most important and the most frequently used contracts:

• sales agreements (i.e. general sales agreements, service contracts and licenses),
• purchasing and supply chain contracts (i.e. purchasing contracts, strategic and non-product-related, one-off transactions and long-term supply, warehousing, transportation, waste treatment and subcontracting contracts),
• contracts related to intellectual property (incl. confidentiality agreements),
• HR (employment contracts, termination settlement agreements, secondment agreements), and
• in some cases, M&A-related documents (incl. for portfolio investments in innovative start-ups and growth-stage companies).

Also corporate housekeeping (i.e. resolutions and powers of attorney) can be managed through the Weagree Wizard.

The selection of contracts should not distinguish for different levels of complexity and possible not even for types of underlying product or services. Only if the complexity or nature of products or services demands a significantly different contractual approach, adjusting the selection would be appropriate. For example, a purchaser-friendly contract does imply significant other contractual devices as opposed to seller-friendly sales contract. However, the distinction for the complexity of a transaction or the nature of the contracted products or services should be made by the end-user (as part of the Q&A): such distinction would rather result in contract clauses not being included (or the inclusion of mere high level principles) than in completely different building blocks. In making the selection, the identification of required building blocks should be leading.

Step 2: Establish a best practice group: a contracts and contracting commission

Contract automation and contracts commission. The best practice working group will manage the entire process of upgrading model contracts, implementing the Weagree Wizard and further developing the quality of the model contracts and model clauses.

In order to be effective and efficient, a best practice group (or groups) should be composed of:

1. legal experts representing the legal cultures relevant for the company (e.g. common law, civil law, Arabic tradition) and important other jurisdictions (e.g. China, Brazil). The legal expert should not only have a good knowledge of the law, but also know what matters in the business. It may well be that the team of legal experts consists of different personalities: flexible and pragmatic persons as well as precise and formalistic individuals.
2. a contract drafter, someone who is able to draft crisp contracts (note that legal experts are not necessarily excellent draftspersons). Contract drafting, or reviewing and marking up draft model contracts, is a service offered by Weagree.
3. a contract template developer, someone who should have a basic understanding of and intuition for computers and computer programs (i.e. the future administrator of the Weagree Wizard). This is a function that Weagree can fulfil for you.
4. a project manager who will monitor progress, coordinate meetings and is able to address disagreements. The project manager may well be someone from outside the legal department. Also, the required sense of urgency for developing and upgrading the model contracts is promulgated by the head of the legal department, in order for the project manager to be effective.

Of course, the above functions may well be combined in one or a few persons. Altogether, the composition of the working group should reflect the main businesses and geographic presence of the organisation. The level of seniority should be such that the end-result can be supported by the entire legal department.

Furthermore, the working group have should seek access to expertise in other corporate disciplines such as taxation, treasury, IP-departments, regulatory departments and business-specific expertise. It might be undesirable to have those disciplines represented in the best practice groups (although practice may prove that the contrary works better).

Step 3: Collecting and stripping the model contracts and precedents

From the contract automation and model contracts working group, the project manager, explicitly supported by the general counsel, should collect the existing ‘model’ contracts, ‘templates’ and ‘standard form precedents’ (SFP’s) from amongst all in-house lawyers. This collection of models should include the sets of general terms and conditions used by the company’s businesses. If only a limited set of model contracts is selected, the best practice group should make sure that also any contracts of the same kind are collected. Further, individual contract clauses can be submitted. Depending on the type of contract (and the way they are used by the business) important negotiated agreements may prove to be helpful as well.

Once everyone’s ‘templates’ and ‘model contracts’ have been collected, they all need to be stripped: the various building blocks within each contract should be brought together in separate collection documents and be arranged subject-by-subject. Text formatting (e.g. font, alignment, line and paragraph spacing, automatic cross references) should be removed in order to improve the visual comparability of the collected clauses.

During this stage, the modular character of contracts becomes visible. You’re more or less building your clause library of boilerplates. Stripping the ‘model’ contracts and ‘standard form precedents’ could probably be done by only one or two persons (e.g. paralegals). One of them could be the anticipated contract drafter (who should otherwise supervise the contract stripping process).

You will see that the stripped clauses and defined terms (‘definitions’) may be classified as follows:

1. Truly boilerplate: contract clauses and definitions appearing in many contracts, notably the miscellaneous provisions (i.e. applicable law, dispute resolution, notices, confidentiality, term and termination).
2. business-specific boilerplates: several normally-unrelated contracts contain the same clauses (e.g. forecasting, ordering, pricing, VAT and payment term, product acceptance procedures, force majeure, regulatory compliance, warranties, limitation of liability). They may randomly appear in several contracts but usually in a different subset.
3. there are relatively little business-specific, tailored clauses (e.g. sale, license, provision of services).
4. only a few contracts are almost entirely composed of template-specifics (e.g. confidentiality agreements, powers of attorney, corporate resolutions).

It is probably most efficient to upgrade (and discuss) the contract clauses subject-by-subject (as opposed to contract-by-contract, as you might intuitively do). The arrangement and allocation over the collection documents should therefore reflect the above ‘classification’.

Thus reducing the entire work to manageable bits and pieces will greatly improve the efficiency and effectiveness of the decision-making process by the best practice group. For instance, if the first contract-to-upgrade would be a general purchase agreement, one would probably catch 80 percent of all disagreeable issues in one single document. The best practice group that faces too many issues, may then start compromising in order to achieve a result and find itself dispirited when a subsequent model contract is tabled.

Contract upgrading projects should be subdivided in small sub-projects and therefore be reduced to manageable sets of contract clauses. When starting with the general purchase agreement, it is recommended to subdivide and start with the miscellaneous, the quasi-miscellaneous (confidentiality, force majeure, ordering and forecasting) before proceeding to the articles with key obligations. So start with the clauses identified under 1. above and end with those under 4.

Step 4: Prioritise the model contracts

Contract automation starts with the contract building blocks, definitions and contract clauses. Once they are collected in a document, it is time to prioritise the model contracts. The best practice group needs to decide which building blocks, definitions and contract clauses it will address first. In prioritising, several matters may be considered.

Documents the automation of which result in the highest added value should get priority over other documents. This suggests the following prioritisation: high-volume contracts first, followed by high-profit-margin documents. Also, the best practice group may need to warm up a bit or seek its most efficient yet effective way of working. In order to create a good spirit, it may be desirable to aim at a quick success (and therefore the first milestone should be ‘small’).

A nice starter would be the set of miscellaneous provisions. These provisions are often the most neglected part in a contract, which suggests an easy success. A distinction might be made between the true miscellaneous provisions (e.g. assignment, amendments, waivers, entire agreement) and the larger miscellaneous provisions (e.g. term and termination). In parallel, efforts can be made to upgrade one of the class (d) contracts (e.g. the model confidentiality agreement or power of attorney). By prioritising like this, two goals are met: first, a convenient way of working is established and the performance of the individual best practice group members can be assessed smoothly. Also, the contracts in relation to which the greatest value increase would be achieved are addressed first.

Step 5: Establish procedure and set the agenda

Contract automation requires preparation. That was the focus of the first five steps. Especially in case of large legal departments, it is important to establish an efficient and effective way of working. The best practice group should determine how and how often it will discuss the milestones. Depending on the multinational character of the company (or rather the international spread of its in-house counsel), the discussions are concentrated in physical meetings or conference calls (or a combination of both).

The best practice group needs to establish an agenda: the milestones, as well as the dates on which conference calls or meetings will be held to discuss them. The milestones would consist of both the preliminary results and the proposed end-results for the various sets of model building blocks.

An appropriate way of structuring the work is again to allocate the work to sub-groups of the best practice group. Each sub-group consists of legal experts. The contract drafter of the contract automation and contracts best practice group (or the project manager, if he or she is a lawyer – see step 2) should participate in all sub-group meetings. The sub-groups should discuss what the contract drafter prepared and address points for improvement. With the input of the legal experts in the sub-group (ideally in the form of a mark-up), the texts will be further upgraded. The result will be submitted to the rest of the best practice group for their review.

During a plenary meeting or conference call, the sub-groups report their findings. The best practice group should decide on open issues, convey general comments and share observations relevant for the other sub-groups. The contract drafter (or the project manager) should be keen that matters affecting consistency of the deliverables of sub-groups are all addressed and decided upon.

If no further changes would be required on the basis of the plenary discussions, the individual members should review the work delivered by the sub-groups (in which they did not participate). The aim of these reviews should be to improve the milestone deliverables, not to introduce new elements. Likewise, the end-result will be scrutinised by all members and a broader support is created.

Step 6: Prepare handsome proposals for discussion

After establishing the procedures and setting the agenda the contract drafter (or a paralegal) should further split the subject-by-subject collection documents into individual clauses and extract proposals for the best practice clauses out of that. The second step would be for the contract drafter to improve (i.e. to ‘upgrade’) the contract clauses and to identify points for initial discussion. After that, the sub-groups of the best practice group will kick off their work.

You may find it helpful to bring the clauses together in Word-tables (each clause to fill one row), with the anticipated end-result contract clause in the first row (using a different font size or bold print). The issues somewhat arbitrarily included in the end-result should be highlighted. Similarly, subject matters, which are not taken over from the precedents a little arbitrarily as well, should also be highlighted in the rows underneath. Accordingly, the discussions can be structured efficiently: the mainstream proposed text is clear; words and phrases for discussion are identified both in the proposed text and in the text that did not reach the end-result and altogether surveyable documents are produced. By structuring the ‘model’ clauses and proposed texts in this way, the contract drafter ascertains that in the end-result, all relevant and less relevant subject matters will have been considered.

Whilst drafting or reviewing the preliminary results, question-triggering parts (during the Wizard’s Q&A) should be put between square brackets. This may apply to entire contract clauses, sentences, phrases or values (i.e. dates, text and amounts). For more complicated Q&A-elements (e.g. the availability of an option depends on the answer to another question) the drafter might prefer to insert footnotes explaining the inter-dependency. Later on, the marked text can be further prioritised in the context of the template questionnaire for the Weagree Wizard.

The contract drafter should deliver to the best practice sub-group both the document with ‘tabled contract clauses’ and a compilation document containing the proposed first draft.

Step 7: Discuss and establish the model building blocks

As described in Step 5, the sub-group should review the contract drafter’s proposal, identify issues for decision-making by the best practice group, provide feedback to the contract drafter who will combine everything into a final proposal. The same applies mutatis mutandis for any further review by other best practice members. A pitfall at this stage would be that an individual member of the best practice group ignores (part of) the contract drafter’s work and starts reviewing on the basis of his (or her) personal ‘model’ contract. In such case, the project manager must interfere.

The contract drafter (supported by the project manager) should prevent that various drafting styles are introduced during the discussions in the sub-groups and best practice groups. This may be achieved by referring to best practice rules suggested in a contract drafting manual and by creating summary Contract Drafting Conventions that should be respected by all in-house counsel. A best practice group should not light-heartedly compromise on the drafting quality.

As part of the discussions on the model building blocks, the permitted contract variables, main optional answers and default answers should be agreed as well. The best practice group (or the sub-group responsible for preparing the main initial draft building blocks) should formulate them together with the text of the Q&A questions and explanatory notes.

Where a contract phrase is supposedly filled in only on a case-by-case basis, the best practice group may provide for the most common optional answers.

For example, the ‘Purpose’ as is often defined in the context of a non-disclosure agreement may take different forms depending on the context of the NDA; however, the best practice group may well provide for basic text phrases covering contexts such as R&D-related disclosures, M&A-related due diligence, product assessments or discussions in anticipation of a commercial relationship.

Eventually, the best practice group will formally approve the final text of the model building blocks (and hence of the model contracts based on those building blocks). The best support for actually using the Weagree Wizard is achieved when the model building blocks and model contracts are the result of comprehensive review and consensus amongst the members of the best practice group. The approved text may be made subject to a final review by the contract drafter for consistency and to dot the i’s and cross the t’s.

Step 8: Determine the company’s contract house style

Contract automation brings a professionalisation of an organisation’s contracting practice inclusing a consistent ‘look & feel’ of all contracts. A distinction may be made for local law requirements, as well as between US-styled contracts vs. a European style. (The Weagree Wizard does so; which makes its automated contract assembly application unique.)

The best practice group should determine which typographic characteristics will constitute the company’s future contracting house style. The main typographic elements upon which a decision should be made are: font, font size, line spacing, paragraph alignment, indentation, white spaces between paragraphs, numbering style, document margins and cover page layout.

Other aspects of the contracting house style are the content and structure of the headers and footers, as well as the various phrases used throughout the contract. Should they contain confidentiality notices, whether (and how) it is subject to approval, and must a contract number, title and party names appear in footers?

Will the company initiate the signature by the old-fashioned words ‘In witness whereof‘ (which are completely out of context in contracts governed by a non common law jurisdiction)? Will the words of agreement ‘Now therefore, the Parties agree as follows‘ be extended to confirm that there is (common law required) ‘consideration’? Finally, the best practice group may wish to establish a policy on the use of cover pages, tables of contents and captions. (A caption is the lead-in of a contract clause and consists of only a few summary words (often underlined.) If captions are used, they should be drafted as part of the deliverables and be presented in a uniform manner.

For the indentation, paper size, document margins and the presentation of the party blocks and preamble distinguishing between ‘US-contracts’ and ‘European contracts’ is appropriate. Nevertheless, the company should preferably apply both styles consistently.

The best practice group should establish guidelines for the contracting house style. The Weagree Wizard allows the user to adjust all these preferred house style settings. Of you can continue using any personalised dotx-template (specifying font, font size, styles, clause numbering, indentation etc.).

Step 9: Identify approval requirements and business access

Contract automation permits a high level of delegation of contract creation to the business (or a law firm’s clients). Making the Weagree Wizard available to business managers and others within the organisation implies that also a workflow would be introduced. In such case, a company may need to establish contract approval rules as well. Such rules would require that an approval (by legal counsel) is given before entering into contracts, except if the contract is entirely based on pre-approved templates (i.e. those made available in the Wizard).

In connection with the establishment of contract approval rules, a company should categorise the various company-internal types of clients and determine which authorisations may be attributed to individuals within the categories. Categories are for example: sales department, purchasing/sourcing department, IP-department, manufacturing and planning. Also within the legal department, distinctions can be made between junior lawyers (being granted a limited freedom to modify the contracts in the Wizard) and senior lawyers (who will have the opportunity to modify all elements of the contract, but may also opt for a high level review).

Each category of users will get authorisation to access its own set of contract templates and each user category will have its own contract approvers. Normally, the contract approvers would be the legal counsel. However, each company may create its own approval structure (i.e. providing for multiple approvers or approvers for subsequent stages of the contract). A workflow of approvers should anyhow be tailored for each customer’s needs.

The workflow functionality of the Weagree Wizard is extremely powerful. It can be customised to a very high extent. Such customisation may include that transactions are initiated and assigned to particular business managers even before the other party is contacted or any contract information is available. The workflow (and internal notification function) may extend far beyond the first draft contract, to also cover post-transaction period.

Step 10: Automate your contracts and implement approval workflows

Automating your contracts requires a review of the Q&A questions. This part of the work must not be underestimated – a good questionnaire increases your chances of success in implementing it in the organisation’s workflow. Once the questions (and explanations and default answers) for the questionnaire have been formulated in connection with the model building blocks, it is time to insert it all into the Weagree Wizard. This is a job for the administrator who has access to Weagree’s template creation tool. You can follow our Weagree admin training (free). Also Weagree offers such administrator services.

Weagree’s entity management and corporate housekeeping can be filled with your company’s database with details of all group companies, as part of the implementation but also by regular patches. Further, subject to personal data protection legislation, information about other companies and contact persons can be uploaded to further accelerate the creation of contracts.

The Weagree Wizard can be API-integrated (connected externally, exchange user-inserted data) with your company’s document management system (DMS), contract lifecycle management solution (CLM), CRM, and other solutions such as e-signature and solutions such as Sharepoint. The integration will be customised such that all necessary data entered during the questionnaire (e.g. contract type, duration, price revision deadlines) are transferred together with a generated contract.