How AI based contract analytics software helps automate contract reviews?
Contract review with in-house legal teams or external legal firms is common and, in most cases, organizations use standard vetted templates while entering a business relationship with customers or suppliers.
Organizations will use only the standard legally vetted contract templates when signing up with any vendor or customer but it is possible that standard contract templates of your organization are not accepted by the other party and in turn expect you to agree to their standard template. This is called as “accepting third-party paper”. When you accept third party agreements here are some of the issues you are expected to encounter
Introduction of new clauses that you do not expect to see
Minor to major changes in the language across the contract clauses
Termination terms not in line with your expectations
Contract is set to renew automatically after the completion of initial term
Not just the above listed issues, depending on the contract you accept there could be many other deviations from your standard legally vetted templates.
What is the common process followed to understand these deviations?
In most organizations whenever a third party paper is accepted, your internal legal department or the external general counsel comes into picture and performs a full manual review of all the clauses to see what are the differences in terms of language in each of the clauses, the level of deviations and determine if there is any language that is unacceptable and potentially cause risk to your organization. This process of manual review can take up lot of time and efforts especially when the contract is huge (with lot of clauses and addendum). Not only the time and efforts there is also the possibility of human oversight. Also according to the Harvard business review, organizations can lose up to 40% of value on any given deal because of how laborious the contract process is.
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Last Update : Jul 02, 2020
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