For any company, the management of its contracts is of vital importance. After all, contracts are the pillar on which any business transaction is based and, therefore, their correct generation, management and storage are essential to ensure transparency, efficiency, effectiveness, and security in any company.
Contract management should be considered an integral part of document management, and this is where CLM (Contract Lifecycle Management) software comes in, which is now indispensable for improving document management and represents a revolution in the way companies generate and manage their contracts.
The revolution lies in the fact that CLM is a complex process of contract generation and management that integrates many people and documents throughout their lifecycle, with their different stages, i.e., negotiation, drafting, review, approval, execution, monitoring and termination. This integrated approach is what is new and revolutionary.
Although the approach may seem overly ambitious, Contract Lifecycle Management ensures the effective and efficient management of each of these phases and can be implemented using specific software or a combination of manual and automated processes to minimize the risk of errors and improve process efficiency, effectiveness, and transparency.
In addition, CLM provides a comprehensive view of contracts that helps companies make informed decisions in real time and comply with contract regulations, thus reducing the risk of fines and penalties.
Stages of the Contract Lifecycle Management process
- Identification of the need: the need for a contract is identified, which may arise for several reasons, such as contracting a new supplier, purchasing new equipment, or acquiring new software.
- Negotiation: contract terms are negotiated between the parties and CLM assists in monitoring negotiations and reviewing contracts.
- Drafting: the contract is drafted according to the terms agreed upon during the negotiation. CLM helps create contracts and ensures the use of predefined templates. In addition, it allows tracking any changes to the terms during the drafting process.
- Review: the contract is reviewed to ensure it complies with legal and commercial requirements. CLM automates the review.
- Approval: CLM helps manage the approval process and ensures that all necessary signatures are obtained prior to contract execution.
- Execution: the contract is executed, and the parties begin to fulfill their contractual obligations. CLM helps monitor them and guarantees that the established deadlines are met.
- Monitoring: contract compliance is tracked and any problems or disputes that arise during the life cycle of the contract are resolved. CLM also allows monitoring changes in contract terms and conditions.
- Termination: CLM helps manage the contract termination process and ensures that all contractual obligations are fulfilled before the end date.
Contract storage
The storage process is a critical part of contract management. It is necessary to ensure that contracts are stored securely and can be easily accessed.
Contracts can be stored in different ways: physical files, electronic media such as hard disks, cloud servers or document management platforms.
Regardless of the storage method, the important thing is to take appropriate security measures, namely data encryption, user authentication and the implementation of access policies.
Legal requirements for electronic signature
Undoubtedly, electronic signature has also meant a revolution and a before and after in contract management, since it allows making a comparison with the paper signature in an easy and convenient way. However, it is worth bearing in mind four legal requirements that must be met for an electronic signature to be valid and binding.
- The electronic signature must be attributable to the signatory, i.e., it must be linked to the signatory in such a way that it is possible to identify him/her. Authentication tools such as passwords or biometric parameters can be used for this purpose.
- The electronic signature must be created with the intention of signing the document in question.
- The electronic signature must be linked to the document in such a way that any changes can be detected, and the integrity of the document can be ensured.
- The method for creating the electronic signature must be reliable and secure. Therefore, this method must guarantee that the signature cannot be replicated or forged.
Beyond these four requirements, it is also necessary to consider the specific regulations of each country or region, which may have its own laws on electronic signature that must be complied with for the process to be binding.
CLM, a great ally for lawyers
Contract Lifecycle Management has arrived to revolutionize the lives of in-house lawyers in companies and large law firms. Let’s put ourselves in their shoes: lawyers are asked to prepare a contract with a supplier or a client, they access their document management platform, fill out a form and, in a matter of minutes, they have the contract ready.
They send it via the platform to the other party, approve their comments on the document itself and send it back for digital signature. All this in record time. Something unthinkable a few years ago.
CLM is one of the most helpful software programs for legal work, as it simplifies the whole process and helps automate, share, comment and digitally sign documents. Therefore, Contract Lifecycle Management merges different technologies into one and has become the reference in the field of document management for all professionals involved in legal matters.
In addition to time and cost savings, CLM technology offers other advantages:
- Reminders to avoid missed deadlines. We all work at an amazingly fast pace, and it is easy to forget sometimes that a contract expires and needs to be reviewed. CLM comes to the rescue and sends an alert notifying that the contract is coming to an end to give time to renegotiate terms.
- Greater control. It is common in today’s work teams for more than one person to be involved in document generation. To make things more difficult, there is usually no fixed storage space or access controls. CLM makes it possible to manage and control documents in the cloud, and centralize the company’s knowledge, designating authorized users and exercising more control over versions.
- Universal software. All companies in all industries handle legal documents on a daily basis. Therefore, they can all benefit from Contract Lifecycle Management Large companies in the banking, insurance, pharmaceutical or real estate sectors can streamline document management, since this software can be adapted to the needs of each company.