A Legal contract is an agreement enforceable in law. Every business entity has to enter into contracts be it for supply or purchase, partnership or trade or employment or any business deals whatsoever on a day-to-day basis. No modern corporation can survive without contracts. Management of such contracts is the main agenda herein. Contracts must be managed over their entire lifecycle from their inception to anticipated termination or renewal. This entails creation, negotiation, storage, scheduling of important contractual ‘events,’ and enforcement, throughout all of which processes various business units of any corporation should collaborate and break down informational silos. To date this process has often been performed manually and painstakingly, giving rise to serious risks of error
A list of importance of Legal Contract Management is:-
- Compliance with law and various regulations
Publicly traded companies, especially in highly regulated environments, must comply with stringent legislation regarding the disclosure of corporate information. They must ensure that information disclosed to stakeholders accurately represents the company’s business. This requires an intimate knowledge of the enterprise’s contracts. How much money is due when and from whom? What sums does the firm owe? Do the firm’s contracts require third parties to represent and warrant that they comply with anti-corruption laws? What liabilities are triggered by a transaction or change in board structure? The list of relevant questions is endless. Moreover, various regulations(Companies Act, 2013) also require that public companies provide evidence that appropriate processes and control mechanisms are in place to manage that information.
- Co-ordination of contracts ‘within’ the enterprise
An enterprise may have a large number of people working for it under various departments. To ensure that the data regarding legal contracts is collected and stored in one single place, technically-advanced software is required. This makes sure that there is no confusion and those entering into a contract have a knowledge of contracts already entered into by the enterprise.
- Avoidance of higher Cost
Due to non-compliance or delay in renewal or payment or termination of a contract, huge litigation cases could follow. This nevertheless leads to higher costs for your business. Plus, with single software allowing you to store data in one place, it would help avoid double-tasking and there will be proper dissemination of information.
All Contracts are made in a single format and include all the critical details of a contract (Eg. Date, time, Name of concerned parties, termination clause, renewal clause, etc. This data is stored in a centralized database. Thus, to locate any date there is ease as there is uniformity and consistency.
- Consequences of not managing Legal Contracts
Most companies do not actually manage their contracts during the term of those agreements despite the fact that key provisions need to be monitored. There are deadlines that trigger penalties, milestones that result in bonuses that must be collected actively and even often ignored automatic renewals. Each of these has a significant impact on a firm’s bottom line. Add to this mix, there are legal and regulatory requirement that require extremely careful reporting of information. It becomes clear that corporations must implement sound legal contract management principles in order to ensure efficient working.
- Features of Legal Contract Managing Software
While there are obvious risks to managing contracts manually, the good news is there are options for managing them in a better way. The key goal of introducing automatic document comparison is to eliminate manual steps and provide a shortened revision cycle. This could be done by use of software.
Basic Contract Managing software offers following features:-
- Facility of Automatic email Alerts that inform your executives, managers and staff of contract due dates, expirations, renewals, escalations, payments and deliverables,
- Multi-layered security that ensures that only authorized users can see each contract by type, party, and security level,
- Avoid unexpected renewals, escalations and penalties through better contract deliverable management,
- Potentially realize savings by having better visibility into your contracts to improve negotiations,
- Access to Document Repository that supports full text search,
- Always know the status of your contracts,
- Be aware of when contract actions/deliverables are due,
- Know who is responsible for the contract item,
- Be able to avoid penalties and implement escalations on critical action dates,
- Always have key contract information and documents available,
- To comply with regulatory and audit requirements,
- Get Contract Approval Workflows (Designed as per customer request)