Contracts are an essential part of any organisation regardless of its size, structure, and nature of business. Contracts are what encompass the workings of any enterprise from before its conception and then to its everyday functions. Therefore, there are numerous contracts in place for countless purposes making its management tedious, i.e., to keep track of all the types of contracts, their status, expirations, renewals, drafts, fulfilling of the obligations of the contract and more.
We have also seen several instances where failure to meet contractual obligations, or even to renew contracts on time, lead to pecuniary and other forms of penalties – which can range from trivial to mission-critical. Therefore, contract management software becomes essential in mitigating an organisation’s legal risk arising from its contract portfolio.
There are various contract management solutions available in India, ranging from just being a contract repository to being a complete contract lifecycle management tool. In this post we explore some of the essential features required for these.
What is a Contract Management Software?
In essence, a contract management software is a software solution or tool through which an organisation can manage all aspects of their contract portfolio. This includes activities such as storing and maintaining documents (contract documents and allied/connected documents), initiating, and finalising new drafts, collaborating, and working with internal and external stakeholders in real-time and with history logs, setting efficient workflows for request raising and approvals, keep track of due dates for obligations, e-stamp, and e-sign documents, and so on.
No single contract tool will be perfect for all. It is up to each organisation to assess its internal requirements – both for today as well as the immediate future – determine the available resources and infrastructure, fix a budget and then find the tool that closest matches their requirement.
Mitigate your risk through contract management system
• Keep contracts centralised and secure
As we know with hard copies of contracts, there is a high chance of the document getting lost or damaged/destroyed, which will open up a set of legal risks for the organisation. By digitising the contracts and storing them in a centralised repository, which includes uploading scanned versions of the physical contracts as well, one can easily access, find, and safely store all their contracts in one place. These management systems always have very strong back-end server systems as well as high security measures in place to ensure the safety of your data and contracts from loss as well as from unwanted parties.
• Customise workflows as per the structure being followed in the organisation
Having a contractual hierarchy is integral for the contracting process in an organisation, as it is necessary that the authorised set of persons are the only one permitted to raise requests, the appropriate set of people review and approve them, and the concerned stakeholders are made custodians of the document and alerted on any action or important dates. Instead of mailing it to each key person one by one, the contract can be assigned the appropriate approval matrix from within the tool itself and therefore the contract creation and execution can be fast-tracked and organised.
• Never miss key dates
Contracts usually have an end date, on which either the term expires and the contract gets terminated or it may be automatically renewed. Contract terms can also be extended, with consent of the parties involved. Notrenewing or extending the contract in time can lead to setbacks and in some cases even pecuniary penalties.
However, through the contract management solution, one can get timely reminders and alerts for all essential dates associated with a contract so as not to miss out on anything critical to the contract.
• Easy to assess contractual data
Contracts are the essence of any business, but it is not always easy to properly visualise your actionable and get insights on your contracts. There are multiple data points for a contract such as the age of the contract, obligations, value, parties, amendments and so on, which are not always easy to review in their contractual format.
The report section in any proper contract management solution, gives an overview and details of the contracts, the obligations, the value, and liabilities, arising out of these contracts. The user is able to glance at these reports and get a sense of the status of their company’s contracts. These reports can be filtered as per the various data points, downloaded in different formats, and they are usually visually aesthetic, so that they can be tailor made and utilised for board level presentations as well.
• Information security
Contracts often contain very sensitive information, which cannot be made available to even people of your own organisation, that is why it is important to ensure that the information is properly protected.
This can be done in the contract management solution by managing the access levels of various users within the organisation, the admin level users can determine how much of the information will be accessible to which key users and therefore they can keep the sensitive information secure.
• Changes to the contract
There are often small or even significant changes in a contract, which may lead to different outcomes or obligations arising out of it. However, parties not being able to keep track of the most recent version of the contract tend to suffer the consequences.
Through the contract management solution, the amendments to the contract or different versions of the drafts can be linked, attached, viewed, and compared, so that the organisation is always aware of the most current version as well as the changes made therein.
• Uniform contractual formats
All companies follow a particular “style” or standards for their specific contracts. Not following the set standards can lead to unforeseen complications in future and again, expose the organisation to significant legal risk.
The process of drafting a contract can be standardized by uploading the organisation’s contractual templates into the contract management tool and then selecting the appropriate template, adding the inputs pertaining to the contract being drafted and your draft will be ready. This helps with a centralised format being followed and leads to fewer errors in the contract. It is important to ensure that the contract management tool you opt features this as not all systems have it.
• Validity and verification of e-contracts
One of the reasons digital contracts at one point were not preferred is due to the lack of clarity around their validity and enforceability. However, as these concerns are addressed and clarified by regulators and industry practices, the e-signature and e-stamping modules of a contract management software are gaining in popularity. Especially in these times of social distancing and working from home, e-signing is essential to allow contracts to get signed/executed and move up its lifecycle. Thus contract tools should come bundled with e-signing and e-stamping options.
• Breach of contract
Not fulfilling the obligations in a contract is one of the primary risks and leads to a breach of the contract. This is a critical matter and missing out on the contractual obligations can have severe consequences on the organisation.
Through the obligations tracker in the contract management system, the organisation can assign the appropriate contractual obligation to the key person in their organisation who will then receive timely reminders and alerts to complete the obligation assigned to them and therefore ensure that there is no chance of missing an obligation therefore no breach of contract.
In summary, we can see how utilising a contract management tool or a complete contract lifecycle management solution will greatly minimize the legal risks of the organisation, arising from contracts. However as mentioned earlier, since there is no one-size-fits-all solution, it is important to assess your requirements, scope, resources, budget and accordingly find the best fit.
What as per you is the most essential feature for a proper contract lifecycle management solution?
For more information on contract management solution or to learn how it can help at your organisation, please click here or drop us a line at inquiries@lexplosion.in. You may also find out more about Lexplosion Solutions’ very own contract management solution here.
Written by: Viraj Ranjan Singh
Edited by: Saikat Mondal, Agnishwar Banerjee
Disclaimer
All material included in this blog is for informational purposes only and does not purport to be or constitute legal or other advice. This blog should not be used as a substitute for specific legal advice. Professional legal advice should be obtained before taking or refraining from an action as a result of the contents of this blog. We exclude any liability (including without limitation that for negligence or for any damages of any kind) for the content of this blog. The views and opinions expressed in this blog are those of the author/(s) alone and do not necessarily reflect the official position of Lexplosion Solutions. We make no representations, warranties or undertakings about any of the information, content or materials provided in this blog (including, without limitation, any as to quality, accuracy, completeness or reliability). All the contents of this blog, including the design, text, graphics, their selection and arrangement are the intellectual property of Lexplosion Solutions Private Limited and/or its licensors.
ALL RIGHTS RESERVED, and all moral rights are asserted and reserved.
