Contract review with in-house legal teams or external legal firms is common and, in most cases, organizations use standard vetted templates while entering a business relationship with customers or suppliers.
Organizations will use only the standard legally vetted contract templates when signing up with any vendor or customer but it is possible that standard contract templates of your organization are not accepted by the other party and in turn expect you to agree to their standard template. This is called as “accepting third party paper”. When you accept third party agreements here are some of the issues you are expected to encounter
- Introduction of new clauses that you do not expect to see
- Minor to major changes in the language across the contract clauses
- Termination terms not in line with your expectations
- Contract is set to renew automatically after the completion of initial term
Not just the above listed issues, depending on the contract you accept there could be many other deviations from your standard legally vetted templates.
What is the common process followed to understand these deviations?
In most organizations whenever a third party paper is accepted, your internal legal department or the external general counsel comes into picture and performs a full manual review of all the clauses to see what are the differences in terms of language in each of the clauses, the level of deviations and determine if there is any language that is unacceptable and potentially cause risk to your organization. This process of manual review can take up lot of time and efforts especially when the contract is huge (with lot of clauses and addendum). Not only the time and efforts there is also the possibility of human oversight. Also according to the Harvard business review, organizations can lose up to 40% of value on any given deal because of how laborious the contract process is.
What is possible with AI based Contract Analytics Software?
Contract Analytics platforms like Smart Contract Analytics helps organizations to greatly automate the entire review process when you accept especially third party paper. The platform uses a combination of Artificial intelligence, machine learning, natural language processing and semantic analysis to review all the clauses automatically, compare with the organization’s standard clause library and visually show what is deviating and how much is the deviation for each clause. The platform not only performs clause level deviations but also provides a quick clause score to tell you what is the percentage of match between the third party agreement clause and the clause from your standard clause library based on not just the language but based on the semantic meaning of the language.
When it comes to using organization standard contract templates there is also a review that is needed whenever we send the contract template to the other party and if the other party makes some changes by adding some language or changing some font style or anything or removing some language etc. Smart Contract Analytics has the ability to quickly compare one version of the contract with another to show all the language changes including additions and deletions, style and meta data centric differences on the fly
What about just leaving this heavy lifting and clause analysis to an AI engine which can compare any clause of any contract including third party contracts with your standard clauses and show you the deviations in seconds saving you, your legal teams and your organization a lot of valuable time
You want to check out how this works with your third party contracts, schedule a demo and see it for yourself. Contact us now