Third-Party Contract Reviews: Determining Your Best Options
Ensuring that your legal agreements comply with laws across multiple and relevant jurisdictions – and that your business is never exposed to risk – demands a great deal of time and human hours. Your in-house legal team or internal contract management staff may be overburdened with everyday legal work, as a result.
However, your company can mitigate risk, while safeguarding your reputation, in a number of other ways. Here’s just a few of them:
- Outsource third-party contract review to a local service provider or offshore firm
- Hire a local law firm to assess your contracts on a one-off basis or retainer
- Invest in a contract management platform with artificial contract analysis functionality
Outside expertise could be a firm that specializes in doing due diligence for their clients can look at contract terms and conditions, such as:
- What the contract expiration date is, and if there are any auto-renewal provisions
- If there are any clauses specific to intellectual property, l or third-party use rights or restrictions
- What termination rights, remedies, or fees would apply if the contract doesn’t to full-term
Naturally, hiring outside expertise can take more time, and the quality of service varies widely. The costs associated with having local companies provide these services may also be prohibitive. What’s more, they may not be able to turn a contract around on time. In addition, there may be confidentiality risks that prevent you from having the contract reviewed by an outside party.
ADVANCE CONTRACTS THROUGH REVIEW CYCLE
So, let’s say that your in-house legal team, finance analysts, or contract managers don’t have time on their schedules. Is outsourcing to a local firm feasible? What are the alternatives then?
Some companies entrust their contracts to offshore providers for third-party contract review due to lower costs. But doing so may incur unacceptable risk. That’s because offshore providers do not have the same kind of context or investment in quality as your own team. They may not thoroughly understand laws that are applicable to your industry or region.
Contracts that aren’t reviewed properly can result in disputes with customers or suppliers.
They may not have the speed of review software that is powered by artificial intelligence (AI) either.
In the age of AI, contract management systems (CMS) have definitely advanced beyond searchable agreement repositories. Such solutions can be “trained” on a set of historical contracts to detect where key terms are in standard contracts. They know how to kick off workflows, like digital signatures, if a contract passes a review.
Plus, this virtual legal assistant (VLA) only gets better and quicker over time, as it maintains confidentiality and executes a thorough review of contracts and related documents.
MITIGATE RISK, MEET COMPLIANCE REQUIREMENTS, MINIMIZE DISRUPTION
Generally speaking, third-party business management providers create risks, such as regulatory breaches, confidentiality breakdown, and reputational harm. Contracts that are not reviewed properly can result in disputes with customers or suppliers. This can leave businesses in litigation or receiving fines for fraud or non-compliance. , For these reasons, many situations prohibit the use of offshore contract review services.
An AI-powered contract review engine, on the other hand, is programmed to identify non-standard clauses or inconsistencies. Just imagine that for a moment.
IDENTIFY OPPORTUNITIES AND THREATS IN CONTRACTS
Of course, the most reliable VLAs are built with the very latest in artificial intelligence. As a VLA processes multiple contracts over time, its contract auto analysis function can identify trends and patterns in your contract data. You can even customize the review algorithm to fit your business requirements and set up approval workflows and alerts on important dates, such as when a contract is scheduled to renew or post-execution milestones that identify each party’s obligations.
Some companies entrust their contracts to offshore providers for lower costs but incur risks.
Now, if a potentially problematic term is identified based on its programming, the legal assistant will alert its human counterpart. It will learn from the experience for the next time it encounters the same clause. For instance, terms might be identified as ambiguous or contradictory to clauses elsewhere in an agreement. Those are flagged and further clarified by you – because you know what happens when you just assume!
Essentially, by automating contract review in this way, you can augment your entire legal team. Such automation then frees members up to do more strategic work, as opposed to reviewing legal documents all day long.
USE THE RIGHT TOOLS FOR CONTRACT REVIEW, CHANGES, AND VERSIONING
Whenever contracts are negotiated and passed back and forth through email versions can easily become mixed up. Changes can be overwritten. And chaos can ensue. However, you can automate the contract review by integrating a legal assistant with a negotiation portal. You then minimize the risk of signing off on the wrong version of a contract – those that may have changed along the way.
A feature-rich contract lifecycle management (CLM) solution eases the burden of reviewing complex contracts and even third-party contract review. CLMs ensure that you stay within the bounds of your compliance obligations, and accelerate both buy-side and sell-side contract processes. They mitigate the risk of overpaying contracts or suffering penalties for not being able to meet the terms of a poorly vetted agreement.
Want to see how ContractPodAi’s virtual legal assistant can analyze contracts with speed, effectiveness, and overall accuracy? Request a live demonstration from us today.
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