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All too often, contract management within organizations is a tug-of-war between legal and product teams. While the former should have total ownership over terms, in practice their management tends to fall to the latter. With the technologies we currently have available, it is more important than ever to understand the contract ecosystem at enterprise.
“Contract ecosystem” is the term we use to describe all of the contracts across your entire company. Together, the wide ranging and varied contracts that span across teams, departments, etc. make up your contracting ecosystem. And like an ecosystem, they exist in delicate balance with one another, intertwined and dependent on certain processes and order to achieve their purpose.
Understanding and distinguishing between the different types of contracts that exist across your organization AND understanding how they relate to one another is critical to identifying areas of opportunity, understanding what is ready for clickwrap/what isn't, and how best to streamline internal processes for maximum efficiency gains.
With a siloed approach to contract management, companies are often forced to choose between preserving enforceability and keeping up with business operations.
One area that particularly seems to suffer is the sales cycle, which relies on speed and efficiency to bring in revenue. When contracts get backlogged, sales teams have a choice between waiting out the delay (and potentially losing a customer) and moving forward without the necessary legal framework in place.
In a rapidly moving digital world, it’s difficult if not impossible to stay on track with outdated contracting methods. PDF contracts may have done the job when your business only processed 100 agreements in a month, but what happens when you reach 1,000? 10,000? There simply isn’t enough manpower to handle this type of volume at scale without exposing the company to legal vulnerabilities.
In enterprise organizations, legal teams are responsible for writing contract terms and keeping them updated. But legal experts don’t have the technical experience required to perform complex physical updates to software products. This means that product and technical teams are given too much autonomy over contracts, a responsibility for which they have neither the legal knowledge nor the bandwidth. The price is paid in lowered enforceability, an error that can cost companies dearly in court.
Ideally, contract management should have a hub-and-spoke structure, where the hub is the agreement template and each department forms its own spoke. Under this format, each team can perform its own tasks without requiring support from another. It should look something like this:
Under ESIGN, there are a few types of contracts that are specifically excluded from legal electronic signature recognition. Thankfully, the list is fairly short, consisting of high-stakes documents like court orders, repossession notices, and product recalls.
This means that the majority of contracts are fair game for digitization. These include:
Related: 45 Ways to Use Clickwrap Agreements
The more thorough your understanding of your contract ecosystem, the more strategic your product team and overall business is able to be with presenting agreements in-app. Using clickwrap for standardized agreements can help enable a self-service flow without interrupting user experience. It is also an excellent opportunity for better collaboration between legal and product teams - one that allows each to focus on their core competencies while working cross-functionally.
For more on the history of the evolution of in-app agreements, check out our eBook, Digital Transformation of In-App Legal Agreements.