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2 Risks Introduced By Manual Contracting Processes—And How To Eliminate Them

Minimizing risk exposure is a—if not the fundamental duty of legal departments. No other department in an organization is capable of fully understanding and then building risk-mitigating processes, and so no other department is charged with this business-critical responsibility.

But even when you put aside all the legal work it takes to understand the substantive issues presented by a new regulatory regime (think: GDPR), two challenges stand in the way of compliance.  

The first is a process challenge: rogue contracting. In short, resource-strapped legal teams don’t have a great way to bake all their internal and external compliance requirements into the contracting process.

In Filmtec Corp. v. Allied Signal, the Federal Circuit held that “hereby assigns,” in the context of patent assignment, took precedence over just “assigns.”  939 F.2d 1568 (Fed. Cir. 1991). This meant that because Roche included the word “hereby” and Stanford didn’t, Roche won patent rights over Stanford. In other words, words—often just a single word!—matter critically when it comes to binding contracts.

But what happens if a case like Filmtec comes along and your legal department is still manually managing templates? You can do your best to recall the bad templates. You might send out an email to all your employees and conduct a few trainings. You might even send out a few reminders. But you can’t supervise every contracting process, or investigate every business person’s local drive.

At this point, risk becomes hard to unravel. And this example—template management and version control—is just one of many that illustrates how manual processes introduce companies to significant risk.


The key is to get ahead of the risk, by baking compliance into internal and external processes. Our customers have done this in all sorts of ways—contract playbooks, mandatory educational sessions, help text and library materials, to name a few.

Contract playbooks are great, but they take time and patience to implement. Our product, Ironclad, bakes these risk-mitigating processes right into the workflow, so lawyers never have to worry about any of the steps that expose companies to risk. Ironclad is also walk-up usable for business users because, in our experience, the best way to turn business users on to a process is to make it completely frictionless. You have to give them an experience that’s easier and better than what they’re used to in order for them to resist the temptations of rogue contracting.

The second challenge is substantive: what’s in the contracts, anyway? At the risk of stating the obvious, it’s impossible to get a handle on your contractual obligations when you don’t know what they are.

This is where a metadata becomes critical. A good, healthy process is necessary to shepherd all your contracts through the right steps so they end up in the right ending place, but it’s not sufficient: you also need to make sure all your contracts are searchable in a centralized repository. Renewal deadlines, the presence/absence of an indemnification clause, IP clauses—really, anything that might open up your company to risk can and should be tagged and made easily searchable.

So, if you're researching how contract management software might help you get ahead of risks, make sure you're investigating how the software handles your repository and database management needs. Does it automatically file metadata for you, and if so, how? Is it easy to run searches for risk-introducing clauses? How does it handle auto-renewals and expirations? 

Ironclad handles this problem by automatically tracking all relevant metadata on your contracts and allowing Legal to sift through it with a simple search or with a few clicks. This turns the contracting process from a free-for-all into a manageable and predictable processone that scales with your business as it grows.   


Ironclad simplifies and strengthens compliance protections by automating and standardizing contract processes. It eliminates the risk of rogue contracting, or the use of contracts that are either out of date or unapproved by the company. With all contracts and metadata in one place, legal teams can maintain full visibility over companies' contractual obligations. See how today.

 

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