Current contract management processes are lacking proper rules and controls. Why is that a bad thing? Well, serious consequences typically arise from lack of oversight during the negotiation phase or mismanagement of contract commitments after execution.
Poor time management or a simple manual error, either pre-or post-signature, could lead a business to miss a key deliverable and even risk being sued. This in turn could lead to significant legal expenses or even the loss of future business from a counterparty.
Having control over the entire contracting management process is essential. Stages of the contract management process include:
- contract drafting and re-drafting;
- internal sign-offs;
- counterparty negotiation; and
- contract execution
Not all aspects of the contract management process can be controlled. How a counterparty may behave, for example. However, a good contract manager (whether legal counsel or a business professional) can do the following to add control throughout - even with a manual contracting process:
Contract drafting and re-drafting
#1. Categorize the types of contracts - for example, insurance contracts, contracts with customers of various profiles, contracts with businesses for essential services;
#2. Keep a list of any standard contract terms that must be met for each category of contract;
#3. Keep a list of any statutes or laws under which each category of contract falls so that legal updates can be followed and templates amended accordingly;
#4. Identify contractual forms or templates that may be used without prior approval. This improves efficiency and ensures those forms or templates that do require approval still obtain it;
#5. Establish and follow policies for when reviews of standard contracts should occur. This decreases the likelihood of missing legal amendments that require changes to be made to standard contracts;
#6. Maintain a record of all the persons with appropriate authority or delegations for sign-offs and update this at regular intervals. This reduces the chances of someone approving something over which they have no authority. It also increases efficiency as if someone with authority is absent a alternative person with authority can be found quickly;
#7. Create a workflow diagram of the sign-off process that needs to be followed. This way those involved can see visually where they are in the process at any time, giving them a greater sense of control over the whole process;
#8. For each negotiation maintain a record about your experience interacting with the counterparty and how “agreeable” they were - e.g., how long did they take to get back to you, how many clauses did they change and how many times did they change these clauses. This way you have a record to refer to at a later date that assists in predicting how someone may interact with you in the future. You can then make allowances in your time scheduling for this predicted interaction;
#9. Create a workflow diagram of the contract execution process. This way those involved can see visually where they are in the process at any time, giving them a greater sense of control over the whole process;
#10. Build a list of all those persons who need to perform tasks in the contract execution process. This way at a glance you can see who is responsible for all deliverables and check in on them regularly; and
#11. Implement a sound project plan, which incorporates key milestones that need to be met on certain dates and by specific individuals.
Contract Management Software
Some software (contract management software or collaboration software) can be a great help in automating many of the above control tips. Contact us for a free demo to find out more @ www.contractroom.com .
> Click on ContractRoom's 60-sec control video, https://youtu.be/5KH4rBedACw
> Click here for a free, live demo:
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