With rapid innovation happening across the contractual sphere, an essential part of the contractual process –negotiations – is also facing evolution. CodeX Fellows, Olga V. Mack, CEO of Parley Pro and Gary Sangha, CEO of Lexcheck, provide their perspectives on the future of contract negotiation.
Beyond the Four Corners of Contracts: Negotiation Data (Olga V. Mack)
Contract negotiation is about more than agreement on paper and managing endless redlining. With the right technology and processes in place, digital negotiation transforms into:
- A process of learning about each parties’ values, needs, and priorities.
- A process of operationalizing data to make smarter, risk-adjusted decisions, support strategic business goals, and achieve contract compliance.
A contract is a collection of 15-22 (on average) clauses. “Negotiation data” consists of each clause’s attributes (e.g., jurisdiction, dollar amounts, dates, obligations) in addition to information such as, who reviewed each clause, who suggested what revisions, what language was approved or rejected, by whom and why, over how many iterations, the reasons for the priority associated with each clause, and any other attribute.
Up until now, negotiation data stayed hidden in individual emails, undocumented calls, untraceable chats, and siloed documents and repositories. But now we can use contract lifecycle management (CLM) software to unify and perform five critical contract activities:
- Fulfill an initial request to create a contract.
- Identify each clause’s specific attributes.
- Identify the actions, people, and automated processes associated with each clause.
- Automate clause review and redlining, including reconciling and validating internal and external clause data.
- Assemble the final contract for signature and post-signature management.
Digitally negotiated contracts become interactive files with shareable data. Integrating CLM software with CRM, ERP, and other systems enables you to link a contract’s negotiation data to its performance data. You gain unprecedented insight into how the attributes and actions associated with each clause affect business outcomes. You can then optimize contract language and workflows to minimize risk and deliver the highest value. As a result, you can obtain instant responses to:
- What is in our contracts?
- Which contract applies? When?
- Why does the contract contain this specific clause?
- Which situations should be addressed during contract negotiations?
CLM tools are available now, and it is incumbent on lawyers to use them to guide organizations to optimal action in a rapidly advancing digital world.
AI for Contract Negotiation? (Gary Sangha)
The future work of a contract negotiation lawyer is rapidly changing. Forward-thinking legal departments have begun utilizing artificial intelligence (AI) to successfully negotiate contracts and maintain consistency with corporate playbook standards. The transition marks a dramatic leap forward for automated contract review and negotiation.
Can an AI Improve Consistency in Contract Negotiations?
Relying entirely on lawyers and legal staff for contract review and negotiation opens the gate to potential errors. Like anyone, lawyers sometimes feel tired, stressed, hungry, burnt out, or distracted. At these times, it can be easy to overlook ambiguous language or omit necessary agreement terms.
An AI contract review platform can enhance the accuracy and consistency of your agreements by:
- Conforming to Digital Playbook standards
- Applying best practices learned from previous successful agreements
- Enabling lawyers to specify which clauses to automatically require, accept, reject, or flag based on their intuition of which will be more likely to get the deal done
The most innovative AI platforms not only flag ambiguous language and potential negotiation bottlenecks, but can also offer suggested revisions based on your company’s guidelines.
How does an AI save time Negotiating Contracts?
Corporate attorneys spend countless hours proofreading agreements to ensure all necessary clauses are included and potentially risky sections are flagged before passing the contracts to senior reviewers for further consideration. Spread over several workdays, it can take weeks to finalize an agreement.
Advanced AI-powered platforms can near instantly parse dense and complicated documents at a glance – highlighting areas of risk and redlining the document where appropriate. Over the last few years, advances in AI, machine learning, and natural language processing have made AI a viable means of making current staff much more effective.
Not only is AI a victory for time-strapped lawyers, but AI frees attorneys from the manual, repetitive labor inherent in routine contract review. Legal departments can make strategic and competitive moves while saving money.