Use Cases

What is Contract Analysis Software? Sometimes, companies (and the professionals who serve them) need to review contracts in bulk. Generally, these projects tend to break down into two broad categories: (1) event-driven contract reviews (i.e., help determine implications of a company sale or financing (e.g., M&A due diligence) or a major change event (e.g., Brexit or the LIBOR transition)), and (2) knowledge management contract reviews (e.g., loading details of legacy contracts into a company’s CLM; a law firm trying to determine “what’s market” in private merger agreements). Contracts analysis software helps accelerate these project-based contract reviews, and can make it more accurate and comprehensive too.

What is contract management? Contract management (sometimes known as contract administration) is the process whereby contracts get: created, negotiated, approved, executed, amended (if necessary), and post-execution renewed or terminated, obligations tracked, and intelligence from them gleaned. Not every company does each (or any!) step systematically. Many enterprises appear increasingly focused on contract management. While it is possible to manage contracts without purpose-built software, the Contract Lifecycle Management (CLM) software space is booming, with well over 100 vendors in it (including several unicorns). There are often multiple vendors focused on different subsegments of the contract lifecycle management market (e.g., for companies most concerned with sell-side or buy-side contracts; sector-specific (e.g., tech companies, oil & gas, or health care businesses)). It’s not uncommon for a large company to have several different contract lifecycle management systems (e.g., one for their sales team, another for their procurement team, another for their finance team, another maintained by legal, a custom one for a different division, another division using Sharepoint or Excel for some processes). While there are many off-the-shelf contract lifecycle management software offerings (some requiring heavy customization), system integrators also build custom CLM systems. Some companies do elements of contract management using general-purpose systems like Sharepoint, Excel, or their CRM to track and manage their contracts.

What is contract negotiation? Contract negotiation is the process by which parties agree to a contract. It is a regular (and often painful) activity for law firms and in-house teams. How AI can help in contract negotiation In contract negotiation, Contracts AI can help: automate markups (by spotting acceptable and unacceptable language), suggest or automatically make revisions (by knowing fall-back clauses (from playbooks or precedent) or how negotiators have dealt with similar situations in the past), and triage review (by, e.g., sending contracts the AI deems “risky” or “leases” or “Mississippi law” or “French language” to the appropriate place). AI-enhanced contract negotiation systems can help get contract negotiations done faster, which is highly valuable - saving in-house lawyer time, pulling revenue into earlier periods, and increasing the odds that deals get done (“time kills all deals”). They can also help identify clauses and apply consistent language with respect to the firm or legal department’s official view on an issue or matter.

What is eDiscovery? eDiscovery refers to the practice of searching and discovery of electronic information to support litigation or investigations. eDiscovery software helps users process, review, tag, and produce electronic documents as part of this work. eDiscovery is a well-established software category with many large vendors in it. You can read LOTS more elsewhere about eDiscovery! How Contracts AI can help in eDiscovery Sometimes, eDiscovery projects have a contract angle to them. For example, determining which of a company’s contracts have a problematic term in them, or which might have antitrust implications. Additionally, since eDiscovery professionals have real expertise in reviewing large collections of documents, they frequently work on non-confrontational large-scale contract reviews. Examples would be helping a large corporate with a spin-out or big change (like the LIBOR transition). While dedicated eDiscovery software may have a bunch of very useful features for these large scale contract reviews, eDiscovery software also tends to have weaknesses against dedicated Contracts AI software. This stems from important differences in contract review and eDiscovery projects. eDiscovery vendors can use Embeddable Contracts AI to help bridge some of these gaps, enabling them to quickly bring pre-built Contracts-AI-specific features to market. Frequently, some UI work is needed too. For a good example of this working in practice, see Heretik (which works in Relativity, and has integrated Embeddable Contracts AI.

What are virtual data rooms (VDRs)? Virtual data rooms (VDR) are secure online spaces for sharing confidential documents beyond the corporate firewall. VDRs are typically used to support M&A due diligence, financings, litigation, and compliance activities where disclosing sensitive information and large-scale collaboration with security measures are required. VDRs typically offer a range of engagement tracking features, so, e.g., the seller of a business can see how seriously prospective buyers are taking diligence, and what areas prospective buyers are spending time (or not spending time) in.

What contract review happens in Audit Auditors typically review a sample of their client’s contracts, to determine whether the company being audited has appropriately described its business. For example, auditors will review contracts to determine if a company actually has the customer commitments it says it has, see if it has appropriately recognized revenue, and whether it has disclosed embedded leases. How Contracts AI can help in Audit Contracts AI has been used for years in Audit. In fact, Audit was among the first areas where Contracts AI tech was used heavily. Audit teams can use a general-purpose contract analysis software system for this work. However, the contracts sampling review is just one piece of a broader audit procedure. A better approach can be to build Contracts AI directly into a broader-featured audit software platform, enabling auditors to (1) work more seamlessly and (2) ensure that they follow the correct procedure.

What is Customer Relationship Management (CRM) software? Most companies manage their customers and revenue with the support of some form of Customer Relationship Management (CRM) software. CRMs aim to provide a unified view of customer data. They assist sales and marketing teams in managing leads, new opportunities, and tracking deal progress; operations teams in tracking interactions with and determining obligations to customers; and finance teams in knowing where the business is at.

What are Document Management systems? If you’re in a law firm or corporate legal department, a document management system (DM) is likely among your most important software. A document management system enables teams to file, organize, and access documents (and, today, even items like emails) for a particular client, customer, project, matter, or file (Canadian for “matter”). DMs minimize the potential for duplication of work and help prevent teams from using the wrong documents. They also allow users to find appropriate precedent.

What are Enterprise Resource Planning (ERP) Systems? Enterprise Resource Planning (ERP) systems give finance, management, operations, and other teams a window into and the ability to control what is happening in their business. ERPs can include tracking of financial activities (accounting), as well as procurement, risk management and compliance, project management, supply chain tracking, and potentially much more. A major part of their value involves stitching together data from disparate parts of a business, enabling a central shared view.

What is a Human Resources Information System (HRIS)? A Human Resources Information System (HRIS) helps companies understand details of their employee relationships, and convey HR-relevant information (e.g., leave policies or holiday schedules) to employees. A HRIS tracks all sorts of critical employee data, including employee name, address, birthday, identification number, address, role, job level, pay, manager, vacation days granted and used. It should also contain relevant employee documents, like signed employment agreements and copies of formal correspondence (e.g., promotion or disciplinary letters). Many companies with over 50 employees have a HRIS.

What Is Lease Management Software? Companies use lease management systems to track the details of their leases. These systems are in heavy use in the real estate ecosystem, including by property owners and managers, investors, and large lessees (i.e., enterprises that have a lot of leased locations). Lease management systems can contain lease abstracts, as well as data like payment streams. While lease management systems often cover leases of real property, they can also be focused on leased equipment.

Large financial firms often enter into a significant number of commercial loans. While smaller individual loans are done on the financial firm’s appropriate form loan agreement without modification, commercial loans are often heavily negotiated. Lenders (often but not always banks) and borrowers spend significant money on getting outside counsel to negotiate the wording of credit agreements. All those lawyers make changes. In general, lenders have access to the actual credit agreements themselves. However, many lack an ability to see generalized details on how credit agreements have been changed. They may have a spreadsheet or database listing borrower name, principal, interest, payment schedule. But do they know how all the agreements differ off the form? Presumably, all the money spent on negotiating credit agreements yields meaningful changes (especially to the covenants). Do lenders know what the changes are, en masse? Likely, these changes impact the risk profile of the loans. If lenders had a better understanding of the details of their loans, it might enable them to get a better handle on the risk of their loan book (which might even enable them to take on more risk).

In the United States and elsewhere, public companies have filing requirements for certain contracts. Because of these requirements, millions of agreements are publicly available. Contracts are among many businesses’ most important documents. They contain a lot of data. Some of that data may enable traders to better evaluate a company’s value. One problem with contracts as a data source is that there are a lot of them and they can be dense. A few services use experienced lawyers to do thorough analysis of loan covenants (e.g., [Covenant Review](Covenant Review), Xtract Research), and many use their data to make better decisions. As Xtract says in an article about syndicated loans:

Contracts are super important in insurance. In fact, insurance companies can somewhat be thought of as a brand, people, risk models, and a whole bunch of contracts. Contracts that take others’ risk, in exchange for money; reinsurance contracts that offload some of that risk; investment contracts related to the float; plus the standard suite of supplier, employment, real estate, and other contracts that most large enterprises hold. As such, Contracts AI can be useful for insurers in a few serious ways that are somewhat unique to insurance companies, as distinct from other large businesses.