One of the biggest challenges for in-house legal teams today is managing their contracts more efficiently. As their businesses are scaling, in-house lawyers are finding themselves buried in low-value work, such as managing routine contracts. These types of contracts don’t need to be handled by senior lawyers, but without a strong contract tool in place that enables teams to self-serve on contracts, this continues to be the case.
But what is a contract tool, and how can using one help relieve the pressure on in-house legal counsel? This article explains what a contract tool is, who should use it, and what different types of contract tools are available, as well as how to find the right one for you.
What is a contract tool?
A contract tool is a piece of software that streamlines or increases the efficiency of one or more areas of the contract process. The main aim of a contract tool is to make contract creation and management easier and eliminate any recurring bottlenecks in your manual contracting process, and it does this by providing certain useful features and functions or automating the process altogether.
Who needs a contract tool?
Depending on the purpose of a contract and who is responsible for it, a variety of different individuals and teams might benefit from using a contract tool. In most businesses, potential users might include legal teams, sales teams, HR teams and those that sit in other commercial functions. Essentially, if you are dealing with a high (and increasing) number of contracts, then you will probably benefit from using a contract tool of some sort.
Different types of contract tools
1. Contract review tools
What is a contract review tool?
Contract review tools are software systems designed to help individuals and teams review and analyze contracts more efficiently and accurately, and ensure that the contract review process runs as smoothly as possible. Most modern contract review tools will enable users to search for certain information in contracts and organize this information in different ways, which will then empower them to understand a contract in more detail before agreeing to its terms.
Examples of contract review tools
Benefits of contract review tools
One of the biggest benefits of using a contract review tool is that it can help legal and commercial teams to mitigate risk with greater accuracy. Within the contract review process, this type of contract tool will pick up on any unclear or outdated terms, and hopefully any mistakes, too. These thorough checks will prevent nasty surprises later down the line, and ensure that your contract is as robust as possible.
Using an automated contract review tool means that lawyers spend less time going over a contract with a fine-tooth comb multiple times, which can often be very time-consuming. By using a high-quality contract review tool, legal teams can minimize the time they waste in contract review stages and spend this time doing higher-value work.
What’s more, by reducing the time spent the different stakeholders spend reviewing routine contracts, a contract review tool can also help to close large volumes of deals more quickly, since contract review tools are often used to eliminate misunderstandings before they become friction points in the contract and ensure that the contract is in a good state before it’s passed on to the counterparty.
Contract review tools are very useful in collecting and organizing important contract data, such as renewal dates, deviations and different values.
Limitations of contract review tools
Perhaps the biggest downfall of contract review tools is that they are only helpful at the review stage of the contract process, and less so at the other stages of the contract workflow.
For example, commercial and legal teams that use a contract review tool will still need to spend large sums of their time creating, approving and signing contracts, and delays in these processes can still block deals and prevent them from closing as quickly as necessary in a fast-growth business. Unfortunately, this means that a contract tool that only reviews legal agreements will always have limited success in a scaling business.
Also, although contract review tools are there to help you read your own contracts and understand what’s in them, you wouldn’t need to invest in them if you created your contracts to have structured data in the first place. By building and saving contracts in a PDF or on Word, you are creating the contracts as unstructured data, which means that it can be challenging to search and query your contract data. This is distinct from contract intelligence software which can be used to extract and analyze this data automatically.
It also means that, unless you put in a lot of manual work, this data can’t be integrated with a data pipeline. However, if businesses created their contracts in browser-natives documents and editors like Juro to begin with, then this would create structured data and eliminate the need for a contract review tool altogether, as they would be able to access actionable data using custom table views and search tools.
For these reasons, it’s fair to say that for businesses that truly want to reduce the time it takes to get a contract across the line and avoid paying for unnecessary tools, an end-to-end contract solution will often be far more effective.
2. eSignature tools
What is an eSignature tool?
An eSignature tool is a piece of software that enables users to sign contracts and legal agreements online, often from anywhere in the world. This type of contract tool will allow users to create an electronic signature on PDFs, Word Documents, spreadsheets and through other native in-browser contract platforms, like Juro. This contract tool aims to replace wet signatures and get contracts signed in a more convenient way.
Examples of eSignature tools
Find out more about the various alternative eSignature tools available.
Benefits of eSignature tools
Contract tools that allow users to sign electronically empower different parties to sign a contract from anywhere in the world, using almost any device. This means that parties no longer need to be in the same room to agree a contract, or go through the time-consuming process of emailing, printing, signing and scanning a document to finalize a transaction. eSignature tools make contract signing far quicker and more convenient for everyone involved.
eSignature tools also offer a unique level of security that wet-ink signatures on physical documents don’t. This is because, when a contract has been signed online and stored in the cloud, it is far less likely to be lost, damaged or tampered with than if it were to sit in an office and stored improperly. Similarly, most eSignature providers will create an audit trail, which can be used to ensure that any electronic signatures are acquired in the right way.
Limitations of eSignature tools
Like contract review tools, a contract tool that only delivers on one stage of the contract process will not offer much value throughout the rest of the contract workflow. Since an eSignature tool is only designed to streamline and optimize the signing process, legal teams that need to create, negotiate, approve, review and audit contracts will not be able to overcome the various blockers that occur at the other stages of contracting.
Since getting a contract signed is one of the final stages of the contract process, this means that, without an end-to-end solution in place to address the other stages of a manual workflow, fewer contracts might reach this milestone to begin with - particularly if a contract is difficult to negotiate.
3. Contract lifecycle management tools
What is a contract management lifecycle tool?
A contract lifecycle management (CLM) tool is a piece of software designed to aid legal and commercial teams in the creation, negotiation, signature, renewal and analysis of contracts and the data they contain. This type of contract tool helps to streamline the contract lifecycle and makes managing high volumes of contracts much easier and more efficient.
Typically, a contract lifecycle management tool will have some features that help legal teams create, collaborate, negotiate, sign, track and renew contracts, allowing each stage of the contract lifecycle to be addressed. This type of contract tool is typically invested in when contract volumes are increasing in a business and becoming difficult to handle through a manual contract process that uses Word and shared drives.
Examples of contract lifecycle management tools
Benefits of contract lifecycle management tools
Contract lifecycle management tools make the contract process considerably faster. This is because creating a document based on an existing template is often much less time-consuming than writing a contract from scratch.
This also means that contract management software can make contract processes more scalable, since users can quickly increase the number of contracts they are creating, without the need to hire more contract specialists.
Limitations of contract lifecycle management tools
This type of contract tool is renowned for having a long implementation period - often of between 6 to 12 months, meaning that it can take a long time before a business begins to get value from the software. This makes them a better choice for large corporations, rather than fast-growth companies keen to gain value for the product quickly, who will probably be best-suited to an all-in-one contract automation tool instead.
If you're ready for the advantages of contract lifecycle management, but without the lengthy delays and hidden costs, hit the button below to find out how Juro can help your business manage contracts at scale in your browser.