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What is contract authoring?
Contract authoring is usually used as the first phase in Life cycle of a contract referred to. It covers the entire process of Preparation and editing of a contract document. In most cases, contracts are created with standardized and internally important contract clauses based on the needs and requirements of both parties.
Different departments and teams within a company are usually involved in the preparation of contracts. This is where collaboration plays a crucial role when a contract is drafted: All proposed changes and submissions that are made must be effectively communicated so that adjustments can be made with quick and easy approval by both parties to the contract.
There are essentially two approaches to how the contract preparation process can work. The first approach involves the basic draft of a contract, which is usually written by a lawyer who has the necessary knowledge to formulate legally binding elements such as contract clauses, performance obligations, conditions, deadlines, and other contractual terms.
The second approach represents a much more efficient and modern contract preparation process. In recent years, the use of automated contract software has become widespread, which specializes not only in creating contracts, but also in the entire life cycle of contracts - from automated contract drafting to managing and optimizing contracts.
What all belongs in a contract?
Identifying the essential elements and components of a contract is of great importance for efficient contract drafting. A well-drafted contract helps, among other things, to the successful conclusion of transactions without unexpected complications. In addition, structured compliance with all necessary elements ensures that the contract is legally binding, enforceable and effective. Here are some of the most important components that usually belong in a contract (depending on the type of contract):
- Contracting parties. This primarily refers to the persons or companies involved that make a contractual agreement. This could be, for example, two companies that conclude a contract for the delivery of goods, or a company and a private person who agree on a contract for the provision of a service. It should be noted that the contracting parties are clearly identified in the contract so that there are no misunderstandings later on. This usually includes the full name, address and other contact details of the parties involved. If one of the parties is a company, the name of the authorized representative should also be provided.
- The subject matter of the contract refers to the specific service or the goods that are the subject of the contract. In principle, performance subjects can be very diverse. They generally depend on the specific purpose of the contract. In order to prevent subsequent discrepancies, the object of service should be defined as precisely and clearly as possible: The services to be provided or the goods should be described in detail and comprehensively specified. This is the only way for both parties to the contract to ensure that they have the same idea of the service to be provided and prevent subsequent disputes over the fulfilment of the contract.
- The duration of the contract regulates the temporal component of a contractual relationship. It determines how long the contracting parties are bound by the contractual agreements and what consequences an early contract termination has. For example, a contract with a longer term may include a period of notice to give the parties a reasonable lead time to end the contract. Here too, it is important that the duration of the contract is clearly defined in the contract and is acceptable to both parties. This is because running times that are too short can be unprofitable for the service provider, while too long terms can be inflexible for the service recipient.
- Contractual terms define the legal framework under which the contractual services are to be provided. They set out the exact conditions for providing the contractual services, including the rights and obligations of the contracting parties, payment terms, limitations of liability and other important provisions. The terms of the contract are so important because they form the basis for the relationship between the contracting parties. Here too, it is important to ensure that the contract terms are formulated as carefully and clearly as possible in order to avoid misunderstandings.
How you can make use of an efficient contract drafting solution
Efficient and automated contract creation starts with first identifying or creating templates, which can then be used repeatedly for future contract drafts. Many companies usually already have a set of templates to get started. In this case, it makes sense to first identify the templates that are to be automated. This could include
- Lengthy and “arduous” contract processes that involve a lot of time, effort and pain
- Templates that are used most often
- Templates that are usually given higher priority, such as contracts that are used in the sales process
The next step would be to analyse the most important parameters within these contracts. In other words, we need to find out which parts and clauses of your contracts are fixed (recurring) and which parts are optional.
After the step of sorting out your key parameters, you should now have a collection of different contract clauses that can be categorized and sorted for future drafts. Now it is time to set up an automated and streamlined workflow for contract creation. If there are no templates yet, we can create new templates based on the key parameters identified in the previous step.
The contract creation process should now be as easy as choosing and implementing all the different types of templates that you've now saved in your contract playbook.
How CLM software helps with contract drafting
It is extremely difficult to do all of the above steps manually in an efficient and easy way. This is where contract management software comes in.
Most software solutions for contract creation provide an easy-to-automate contract creation workflow that performs all necessary steps — from helping you evaluate your existing templates and key parameters to organizing your most important clauses and contract components in a structured clause library.
Some solutions also offer an external editor that allows you to access your templates and use them seamlessly. In this case, you create your contract with a special contract editor instead of traditional general-purpose programs such as Microsoft Word.
Contract Lifecycle Management (CLM) solutions typically come with various additional tools that support the other phases of the contract life cycle. These tools include a collaborative contract editor, a secure and accessible contract database, and additional features to track and optimize KPIs.
Where should you start?
So how can someone who is interested in a better approach to creating contracts in terms of efficiency and effectiveness get started? The very first step is to get your to determine personal needs and requirementsbefore choosing the solution that's best for you. Today, there are a variety of different options and contract software solutions, all of which offer different contract management systems to a certain extent.
To help you make the right choice among the possible solutions, we have a comprehensive guide to contract management software created, which could help you with your selection.
The life cycle of a contract does not simply end with the creation of the first draft contract. Thereafter, necessary changes and adjustments must be communicated between the various parties and departments, the contract itself must be signed and approved, and finally the document must be properly stored and managed.
Complete CLM software comprises the necessary tools to execute all steps within the contract life cycle in order to ultimately increase the efficiency and effectiveness of contract processes and reduce a company's overall revenue losses.
