Guaranteeing that your company, and those working there, are protected from accidental violations of the law is one of the most prominent reasons to implement a contract management system; when legal repercussions are on the table, you don’t want to take any chances. That being said, there are also benefits to utilizing contract management resources beyond legal protection. According to the International Association of Contract and Commercial Management, improvements to contract management can increase a business’s profits by almost 10% annually.
Managing contracts means managing the intricate inner workings of both your business and the environment it operates in. Regardless of how robust your contract management procedures are, there are a few critical resources that will come in handy.
Relevant Laws And Regulations
Contracts, in their simplest terms, are legally binding, enforceable agreements between two or more parties. No matter how well your contracts are managed, ensuring they meet any and all legal requirements is of the utmost importance. To do this, it’s helpful to know what you’re dealing with from the get-go.
Know The Types of Contracts
Bilateral Contracts vs. Unilateral Contracts
When most people think of contracts, they’re likely picturing bilateral contracts. These agreements come in the form of a promise from both parties; each player agrees to exchange an asset or perform a service in exchange for an asset or service from the other party.
Only one party makes a promise in a unilateral contract. The offerer puts out a request for a service in return for some form of payment, and if someone completes the request, the offerer is obligated to make the payment they promised. The main difference between these two forms of exchange is that in the latter, no one is obligated to complete the service – but if someone does, the party offering the deal is obligated to hold up their end.
Express Contracts vs. Implied Contracts
Both bilateral and unilateral contracts can be categorized as either express or implied. Express contracts describe a legally binding agreement and its clearly defined terms. For example, you could create an express contract stating that you will exchange a used car for $2,000. In this example, the terms may include details on the condition of the car, when you will receive payments, and whether or not the vehicle can be returned.
In contrast, implied contracts are based on behavior; the contract is created by the actions, behaviors, and circumstances of the relevant parties. While these assumed agreements are not verbal or written contracts, they can still hold legal weight.
Implied contracts are happening all around us, all the time. For example, when you enter a restaurant, it is implied that you will be served the food you order, and it’s implied that you will pay the requested rate for the food and service. Another example could be If you rake your neighbors leaves one Saturday and the neighbor offers you $5, then you show up and rake their leaves the following three Saturdays and are offered $5 each week. In this case, you have entered an implied contract with the neighbor. While no one ever stated that you would rake leaves on Saturday in exchange for a crisp five-dollar bill, both parties appeared to agree to the arrangement.
Know The Laws Governing Contracts
The Common Law
Most contracts we deal with in business are governed by the Common Law, the group of unwritten laws derived from court rulings, otherwise known as precedent. Contracts governed by common law often include employment agreements, real estate, services, insurance, and intangible assets.
- To learn more about The Common Law and how it applies to business, visit: https://www.legalmatch.com/law-library/article/business.html
The Uniform Commercial Code (UCC).
The Uniform Commercial Code (UCC) is a body of written laws overseeing transactions, particularly the sale of goods and tangible items. While these aren’t federal laws, the vast majority of U.S. states follow at least a portion of UCC guidelines. Knowing these guidelines is key to protecting your company from any accidental violations, which could result in lawsuits and paying damages.
- To learn about the specific laws under the UCC, visit: https://www.uniformlaws.org/acts/ucc
Determine How Your Measure Success
One of the most important contract management resources to have on hand is the company objectives and the KPIs you’ll use to measure your success. It’s crucial to keep these goals at the forefront of your contract management; focussing every decision around achieving your goals ensures that those goals are prioritized.
Business objectives are the major, overarching goals you hope to achieve. When setting objectives, it can be helpful to frame them around SMART goals, which stands for Specific, Measurable, Achievable, Results-oriented, and Time-constrained. For example, a business could set an objective to reduce security breaches by 20% over the course of a year. For contract management specifically, an objective could be to increase productivity by 10% over the course of a year.
KPIs, or key performance indicators, are smaller, short-term goals that demonstrate your progress towards an objective. Unlike objectives, which tend to be company or department-wide, KPIs are more specific. Following the example objective of reducing security breaches, a supporting KPI could be the number of intrusion attempts, the mean time to detect threats (MTTD), or the mean time to resolve threats (MTTR). Tracking these KPIs can help determine how much progress the company has made towards the overarching goal of reducing security breaches. The purpose of KPIs is to help a company see how effective their efforts are, and if they’re proving not to be all that effective, knowing so provides an opportunity to pivot.
KPIs for contract management could include:
- Contract Efficacy: This could be measured by looking at indicators such as the number of contracts per category or the contract value.
- Contract Efficiency: This could be measured by looking at indicators such as the contract lifecycle timeline, geographic trends, or percentage of key milestones are met.
- Contract Risk: This could be measured by looking at indicators such as the number of contracts that get renewed vs. the number that expires, number of errors, or number of issues with electronic signatures.
Cover All Your Bases With Checklists
Because contracts are legally binding, a breach (accidental or not) can be disastrous. To prevent any issues from arising down the line, it can be useful to create checklists so nothing slips through the cracks. When you’re absolutely certain that you’ve checked every box before signing a contract, miscommunications happen far less frequently; everyone is on the same page, and everyone understands what is expected of them. The specifics of the checklist will vary depending on the nature and content of the agreement, but there are many websites with premade templates to turn to for inspiration.
- To browse sample contract checklists, visit: https://www.template.net/editable/contract-checklist
Contract Management Software: Essential Features
Like most business technologies, there’s huge variability in the quality and effectiveness of contract management resources. The right software for your organization will depend on your company’s size, specific operations, and the legal requirements your work is bound by. That being said, any software worth investing in should keep documents secure, streamline your processes, and make life easier for employees across the organization.
When the law, finances, and proprietary information are considerations, you don’t want to leave any room for a security breach. Any decent contract management resources will have some form of security, and most rely on cloud services that offer layers of protection. To further secure your documents, many contract management resources also offer user roles. This allows a company to set levels of access, meaning only employees who have been given authority to access a file can do so. Whether it be data encryption, multi-factor authentication, user roles, or another method – what matters is that the application keeps your data safe.
Search And Review
One of the greatest advantages of opting for contract management software is the time this technology can save. Analog contracts tend to live in filing cabinets, cluttered closets, or atop some poor manager’s desk. Finding contracts in these situations can end up taking far longer than necessary, and that’s if you’re even lucky enough to find them. With digital contract management resources, documents are automatically placed in categorized folders. To find what you need, all you have to do is utilize the search feature.
Contracts need to be reviewed, re-signed, and updated on a regular basis. With contract management software, we don’t have to keep up with all of these dates, we can simply wait for a notification. In addition, all of the contracts are held in one central location, giving companies full visibility of their contract lifecycle.
Electronic signatures are a game-changer for large organizations or those who deal with mass amounts of contracts. Hunting down droves of signatures is far easier when employees can sign online; no one needs to travel, send contracts in the mail, or even walk across the office. Not only do electronic signatures save paper, but they also save countless (billable) hours.
Contract Management Resources From ComplianceBridge
If contracts are a regular part of your business activities, there’s no better time than the present to leap into modern technology and perfect your contract management lifecycle. With features such as dynamic organization, layered security, workflow staging, notifications, and collaborative contract creation, we have all of the contract management resources you could need. Ready to streamline your process and simplify your contract management? Request a demo today!