Chainsaws and contracts: How technology has harmonised legal and business objectives

As an in-house counsel, you carry a heavy workload. You have to bridge multiple roles as legal advisor, commercial drafter, transaction negotiator, mediator and manager. It’s a role that often reminds me of the analogy of the wood cutter straining to saw down a tree. 

A man walking through the forest sees him and says, “You look exhausted! Take a break. Sharpen your saw. Then it’ll be much faster and easier to get that tree cut down”. The woodcutter’s angry response is “Are you crazy? I’ve got to get this done by the end of the day. I don’t have time to stop sawing!” 

In any industry, it’s important to sharpen your saw from time to time. As lawyers, we may feel that we don’t have time to sharpen ours, let alone consider changing to a new one. But technology – new tools and ways of doing things – is all-pervasive. It can help create a legal department that operates efficiently and in harmony with the broader business. In short, it can make sure you are armed with a chainsaw instead of a sharper saw. Let’s see what this chainsaw can look like.

Time consuming drafting

This will sound familiar: You receive an email requesting an independent contractor agreement. It includes “the details”, which are about 10% of the information you actually require to draft the contract. You respond, requesting further information, which is followed by a ping-pong match of emails as you collect the necessary information. You trawl your computer looking for the closest possible precedent. When you eventually find it, it’s missing new POPI clauses and other people have worked on it so now you have to spend hours sorting out inconsistent paragraph formatting, non-sequential clause numbering, etc.

So how can contract generation technology help?  In a nutshell, the non-legal elements of drafting are shifted to the business, whilst the legal department retains central oversight and control. A contract management system allows staff to trigger a secure, online drafting interview that collects a complete set of drafting instructions for the document they need. The questions asked are determined by previous answers provided and the specifics of the unique transaction concerned.

This online drafting interview is built by lawyers in consultation with your in-house legal department. The system is also able to draw legal conclusions in the background – checking for legislation that impacts on the transaction; inserting appropriate clauses and checking business and compliance rules unique to your organisation.
In the end, the document generation engine has compiled a fully completed, bespoke contract tailored to the transaction concerned in less than 15 minutes.

Control and compliance

In most companies, staff are required to upload signed contracts to a document management system, together with key data relating to the transaction. So how does a contract drafting system assist with this?

  • Firstly, the business comes to realise very quickly that the fastest and easiest way to get the exact agreement they need is to complete a drafting interview on the system.
  • This means that every transaction is recorded, and every contract is stored, together with all of the information that was collected in the process of drafting it.  
  • Inherent in these systems is a full audit trail of all activity on a transaction and version control of all drafts of a contract. 
  • The systems incorporate multifaceted data encryption and security measures, as well as security privileges, that ensure full compliance with section 19 of POPI. 

In essence, the system creates a secure, central repository of every agreement concluded in the business, and at the same time it stores every key detail about each of the transactions involved. Your legal department now has a bird’s eye view of the legal operations of the entire business. 

Managing the contract lifecycle

A contract is almost always a long-term commitment. It includes key dates, like condition precedent deadlines, notice periods, annual escalations and expiry dates that you really shouldn’t miss. So wouldn’t it be useful to get a daily email or system message giving you advanced warning of upcoming contract deadlines, with links back to the original contract and all of the details associated with the transaction?

Remember: managing a contract’s lifecycle isn’t just about meeting deadlines. The process impacts directly on the business. For example, if you can stay on top of escalation clauses and ensure that your company actually applies its fee or price increases on every escalation date, you can make a direct and significant impact on your company’s turnover. 

Using contract data to streamline business and legal functions

Every employment relationship, every corporate deal, every sale is a conglomeration of contracts. Read together, they provide a blueprint of the entire business. It’s difficult to extract key contract information from a dumping ground of Word documents. Which is why a systemised process of drafting introduces such a fundamental shift in the value that a legal department can offer to the broader business.  

By using drafting interviews, the key transactional details are stored as part of the process of drafting every single contract. This information is stored in a dynamic database that allows it to be cut and sliced for any application in the business, for example reports on BBBEE contribution levels across all service providers.

This wealth of information can, for the first time, start to demonstrate the value of a legal department – for example, reporting the number and type of contracts drafted as well as the individual and total transaction values of those contracts. 

It’s no wonder then that the implementation of legal drafting and contract management systems is now being driven by financial directors and auditing firms. It speaks to the convergence of legal, financial and business interests and it introduces a new, more central, role for the legal department – creating a far greater potential for harmony amongst the broader divisions of any business.

If you want to find out how Updraft can harmonise legal and business objectives in your company, contact us today for a free demo.