Is Contract Creation Software really a necessity? Aren't things anyway better? The problem with creating contracts is not the large volume requirements and tight deadlines, but the granular shortcomings underpinning it, like:

- Manual and non-standardized workflows
- Outdated word processors and tools
- Multiple channels for collaboration
- Distributed storage
- No access and edit control

When combined, the above attributes make contract creation a time-consuming process, with a very high margin of error.

With contracts being a business priority, the right tools can make a significant difference. Contract creation software transforms the hassle of generating contracts from complex to simple. It leverages automation to bring efficiency and accountability to the workflow, resulting in faster and accurate contracts!

Types of Contracts

A contract is a formal, legally enforceable agreement between parties that establishes mutual duties. These obligations are lawfully binding, making contracts a cornerstone of any business.

Source: Pepe Toriello via Linkedin

Contract creation happens based on current and future entities' needs and preferences. Some common ones created and used for day-to-day activities are explained below.

1. Simple, Standard Business Contracts

Businesses rely on simple contracts to define relationships, streamline operations, and safeguard the interests of all parties. Standard contracts typically include key elements such as scope of work, payment terms, involved parties, dispute resolution, and confidentiality clauses. 

These contracts are straightforward to draft and ideal for routine activities like vendor agreements, non-disclosure agreements, and employment contracts. While some contracts can be verbal agreements, creating written agreements is strongly recommended to prevent future disputes.

Also read: Top Tools to Upgrade Your Contract System

2. Lump-Sum Contracts

Certain industries, like real estate and construction, rely on legal contracts with clearly defined scopes of work. These agreements, often called fixed-price contracts, require the party to complete the work at predetermined costs, regardless of future price increases. 

Fixed-price contracts provide cost certainty and clarity about final pricing. However, ensuring accurate cost estimates in such contracts can be a labor-intensive and time-consuming process to avoid any party incurring a loss.

3. Express Contracts

Contracts establish accountability and provide clarity for all parties involved. Express contracts are particularly important because they explicitly outline terms to prevent disputes and legal complications. These can be written or verbal agreements, formed when two or more parties agree on terms.

For example, if you place a winning bid at an auction, you form an express contract to purchase the item. This ensures you must pay and comply with the auction's terms.

4. Unit Price Contracts

There are situations where the scope of work cannot be fully decided, or the final cost may depend on the total number of work units. Such cases require creating a unit price contract.

This contract is like a standard agreement but with special conditions for deliverables, scope of work, every other unit of work, and pricing.

Let’s say your contractor adds one x unit as the cost of completing one square foot of flooring in the contract. So, the total cost will depend on the total square foot of flooring after the completion.

Such contracts are much easier for parties to understand, adhere to, and adjust to in case of any plan change.

5. Cost-Reimbursable Contracts

Cost-reimbursable contracts are widely used in the construction industry, particularly by contractors and companies handling large-scale projects where owners aim to safeguard potential profits. Under this contract, the buyer pays for both direct and indirect costs incurred during the work, with the final price determined after project completion.

The vendor provides an initial estimate, and both parties can agree on cost caps to ensure the final price doesn’t exceed a specific limit, offering protection against unexpected overruns.

6. Time and Materials Contracts

Industries like software development, construction, and consulting often adopt a project-based approach, making time and materials contracts ideal. 

In these agreements, one party pays based on the time and materials used to complete the project. This type of contract is suited for tasks with uncertain scopes, where predicting exact costs or timelines is challenging. While it offers flexibility to both parties, strict oversight is essential to prevent cost overruns.

Best Practices for Creating a Contract

A well-written contract is necessary to set clear expectations, reduce disagreements, and ensure efficient dealings. A strong contract specifies each party's obligations and offers legal protection regardless of partnerships, service contracts, or employment agreements.

Source: Shivkumar I via LinkedIn

Here are a few best practices to help you create an effective contract.

1. Keep It Simple

Legal language often includes technical terms and jargon that can confuse non-legal individuals, potentially leading to misunderstandings and future disputes. To prevent this, it’s best to use simple, clear, and concise language. This approach ensures all parties fully understand their rights, obligations, and contract terms.

Also read: AI Contract Analysis: Saving Time and Increasing Efficiency

2. Transparency Between Parties

A common challenge during contract creation is a lack of transparency, which can lead to mistrust and disputes. Hence, clear communication is necessary at all stages of contract development.

It starts with providing accurate information related to timelines, deliverables, cost, etc, needed to draft a contract. Next, both parties must have access to contracts where any changes required can be easily highlighted for modifications.

3. Standardize Creating Contracts Using a Contract Management Software

Manual contract drafting often leads to errors and inconsistencies, especially when handling large volumes. Overlooking these issues can waste time, create legal risks, and cause confusion between parties. 

Standardizing contract drafting with pre-built templates, automated workflows, and pre-approved clauses saves time, minimizes errors, and improves accuracy. Your team will also have a centralized repository to store contracts, making the entire process more streamlined.

4. Compliant Contract Lifecycle Management

The contract lifecycle has its problems. The complexity of managing contracts requires following the regulations and the ability to adapt to the constantly changing laws and standards. These can lead to reputational risks and consequences, financial risks, etc.

To minimize such risk, a compliant contract lifecycle management is required. Implementing an efficient contract management process and tool can ensure contracts are reviewed and monitored per regulatory needs.

To streamline these tasks, your firm can opt for an automated contract management solution with in-built audits and compliance checks.

What is Contract Creation Software?

“Most legal departments use contract templates for their important contracts, as it speeds up the process. Yet, less than 25% of in-house legal departments use contract playbooks as part of the process. This is surprising because everyone in the legal department, executive team, and the sales organization should understand which contracts are acceptable to the company and which contracts the company will walk away from.“

~ Sterling Miller, CEO and Senior Counsel, Hilgers Graben PLLC
Ten Things You Need to Know as In-House Counsel

A contract creation software is usually a word processor that enables the drafting, editing, and review of contracts.

Traditional platforms, such as Microsoft Word, provide basic features like grammatical checks and track changes. While these platforms help “put together” a contract, they are not optimized for an increasingly decentralized workplace and are prone to inefficiencies and inconsistencies.

On the other hand, an integrated contract creation software like SpotDraft offers advanced services, such as templatization, automation, improved redlining, clause referencing, and other purposeful features. This helps ease contract workloads, improve collaboration, enhance output, and promise better security.

In today’s remote-working and distributed office space, conventional word processors fail to make the cut. This is why you need to switch to a dedicated contract editor.

Learn more here 👉 Contract Editors for Lawyers

Steps to Generate Legally Binding Contracts

Contracts hold parties involved responsible for agreed-upon obligations. Therefore, every contract you prepare must be customized to your specific circumstances and needs. 

“First, I worked on setting up contract templates and contracting guidelines that every lawyer in the team dealing with contracts must use and follow. Doing so, we were able to bring in a lot of order to the system.”

~ Bhavna Singh, GC and DPO at Subex Limited
Streamlining Legal Processes: Advice from 7 GCs and Heads of Legal

The easiest way is to use contract creation software, as discussed above. Let’s look at how you can generate a contract using SpotDraft’s easy-to-use template.

Step 1 - Choose a template

• Log in to SpotDraft’s account.
• Click ‘new’ from the main navigator and select ‘Templates contracts.’
• Choose your required template from the list.

Step 2 - Fill information

• Enter the creator’s information
  • Legal entity of the company
  • Signatory from the party
• Enter the counterparty’s information
  • Add POC if your counterparty is an organization
  • Address (optional)

Step 3 - Answer Questions

• Answer simple questions related to contract creation.
• Review and provide accurate answers.
• If you need time to cross-check, save your response and return it later to edit.

Step 4 - Submit

• Click on submit once every information is entered accurately.

Step 5 - Get approvals

• If this contract needs approval, there will be a ‘collect approvals’ notification.
• Click on the same, and the contract will be shared with the reviewer.

Step 6 - Share the contract with counterparty

• Once the approvals are collected, the contract will go to the draft stage.
• Click ‘submit’ to share it with counterparty.
• An email will open, review the message, and ensure details are correct.
• Click on send.

Templates are one way of using SpotDraft’s contract creation software. Three more workflows can help you create contracts in no time.

“Start with agreements that are easy to compile, such as NDAs. Gather as many attorneys as possible to test the tool and take some time till every attorney in the system gets used to the interface of the CLM. Then, start building out more complicated agreements, such as third-party contracts. Finally, move on to using the tool for templatising sales contracts.”

~ Nadia Louis Hermez, Legal Ops Manager, Next Insurance, Inc.
Building a Robust Legal Ops Function

1. Contract creation with multiple questionnaires

When you use templates, you must answer the questions to create the contract. In this contract creation, you can assign collaborators to answer those questions and let SpotDraft generate the final contract based on the input gathered and the chosen format.

2. Converting PDFs to DOCX format contracts

SpotDraft can help you convert PDFs into DOCX for easy reviewing and editing. Once you log in to your SpotDraft dashboard, you can upload the document and convert it to the required format.

Also read: End-to-End Contract Management Software

What does Contract Creation Software Solve?

1. Streamline Contract Creation

Requests for new contracts travel through multiple channels before it arrives on the lawyer’s desk. This process is often time-consuming and prone to miscommunication.

A contract management software solves this by serving as a triaging platform to manage all contract-related tasks. This way, the legal team can accept and prioritize incoming contract requests easily. The software also integrates with other business tools to enable direct and instant communication between teams, instead of relying on email threads and Slack messages to keep track of contract requirements.

2. Collaboration

‍Inputs from different teams and third parties are required at every stage of the contract. If communication occurs at an individual level, it is difficult to coordinate with other stakeholders effectively, leading to chaos and delays.

A contract management software makes it easier for teams and counterparties to work on contracts together. Through features such as scoped comments, editor tools, etc., it is possible to invite specific users to provide their suggestions and edits directly on the contract.

3. Access Control

‍Not everyone should be able to make changes and edit parts of the contract. With traditional word processors, it is challenging to control who has access and permission to make changes to the document.

A contract creation software allows departments to assign roles to their members, restricting who can view and make changes to contracts. Additionally, by delegating tasks and responsibilities, the organization can manage its workflows better, while at the same time maintaining contract creation as a decentralized process.

4. Quality Control

‍Every team follows a myriad of approaches to contract creation, making them incompatible with the other. Also, to ensure consistency in legal language, lawyers have to manually refer to external sources, increasing the time spent on the document. Finally, the legal team cannot prevent other users from making changes to the contract once it is in the workflow, thereby placing more pressure on them during the revision cycles.

Contract creation software offers a standardized methodology to creating contracts that are easy to implement and highly scalable. Lawyers are also able to easily access definitions and older contracts for better reviews. With version controls, it is possible to keep only a few fields in the contract editable, ensuring a lower margin for error.

5. Speed

‍Creating contracts on basic word processors is slow and inefficient. Legal teams also need to rely on external tools, such as email, calendars, reminders, etc., to assist them with the creation process. Additionally, these word processors do not sync with other enterprise tools such as CRMs, ERPs, etc., resulting in double work for the organization.

Modern contract creation software like SpotDraft offers a complete ecosystem to create and manage contracts end-to-end. With inbuilt tools, like the contract editor, reminders, templates, and more, the work is cut out for the in-house legal department and other business teams.

Today’s contract tools also integrate seamlessly with other third-party enterprise software, allowing better faster creation and execution of contracts.

6. Contract Lifecycle

Manual contract processes and management lead to errors, compliance risk, and inefficiencies, especially in the higher stages of the contract lifecycle. 

The best contract management software, such as SpotDraft, automates the process and addresses these challenges efficiently, reducing the time needed for contract negotiations.

You can integrate this tool with your existing software or CRMs for seamless collaboration, tracking, version control, data analysis, and legal compliance checks.

Must-Haves In A Good Contract Management Software

Custom Templates

Business teams are dependent on the in-house legal department to fulfill all of their contracting needs. But, what if they could take ownership of basic contract-related tasks. Using templates, the legal team can prepare contract formats in advance, allowing other business teams to quickly pick and edit the template to proceed. Templates help business teams function independently and also remove an extra step from the contract creation process.

Source: Karan Dahiya via LinkedIn

Clause Library

‍In between creating contracts and reviewing them, the in-house legal is also tasked with ensuring that the use of legal definitions is accurate and uniform across documents. With an in-built clause library available, lawyers will be able to look up and import clauses instantly, thereby speeding up the contract creation process.

DIY Contract Assembly

‍Contracts can be intimidating and confusing for non-legal personnel. The only way to solve this problem is by making the exercise very simple for them. By using an intuitive questionnaire format to assemble contracts, it is possible to collect information from business teams without breaking a sweat. For the legal team, this means less time spent screening contract details and more time to pursue other impactful tasks.

Audit Trail

‍Contracts is not a solo pursuit, it engages multiple stakeholders simultaneously from start to finish. So, how to ensure transparency and accountability in the process? The presence of an audit trail can help monitor who makes changes to the document when and where. This makes it easier for the in-house legal team to review edits and mitigate risk, if any, quickly.

Automated Workflows

‍Manually organizing contract activity results in inefficiencies and extended timelines, all of which are not suitable for a time-bound business environment. A contract creation software offering automation can help speed up workflows by lowering operating costs, promising consistency, and increasing output.

e-Signatures

‍Approvals take up a significant amount of time in the contract workflow. This is because business teams have to coordinate with different stakeholders to receive their signatures on the document. With eSignatures, one can easily set up smart instructions to collect approvals from different users simultaneously or sequentially.‍

Integrations

‍Different departments within an organization utilize a variety of tools to assist with their tasks. A contract creation software that easily assimilates with other enterprise solutions will help improve information sharing between teams and even enhance the effectiveness of teams. For instance, the sales team can quickly draft contracts by importing client data from the CRM platform.

Cloud Storage

‍Contracts are often created and stored haphazardly as different departments operate in silos. This makes it difficult for the teams to track the location of the legal documents and retrieve them when required. By opting for a cloud storage alternative that centralizes all contract information on a single platform, teams can gain better access and control over their contracts.

Also read: Simplifying Contract Storage with the SpotDraft-Google Drive Integration

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