A Contract is of course a document but it is not any document; a contract has a "purpose" as well as unique "characteristics".
A contract has a "lifecycle" which can be defined around a "process".
The most Contract Management Systems will help you manage these 4 aspects:
- Purpose: purchase or sales contract? inbound or outbound? Commercial or non-commercial?
- Characteristics: jurisdictions, applicable law, legal nature of the parties, specific clauses etc
- Lifecycle: very simply: creation, review, approval, execution, archiving. Industry jargon sometimes refer to this as "Contract Lifecycle Management"
- Process: who creates the contract? Who reviews the contract? Who needs to be involved in the approval process? How is execution managed?
Depending on the maturity of the legal function as well as the type of transaction of course, these steps can be fully automated.
In the case of (perceived) low risk contracts such Confidentiality agreements for example, in some organisation, these are not handled by the Legal Department anymore but by Business users who populate a few fields around: purpose of the Confidentiality agreement, nature of the counterparty, Scope (products/solutions) which generates a Confidentiality agreement ready to be executed by both parties.
Even the lifecycle of more complex contracts can be dramatically accelerated with the use of templates, effective collaboration and well defined processes.
The Contract Management field is a complex one, with Solutions ranging from "Enterprise wide" (such as SAP) to very niche ones, specifically designed to be used by Legal departments.
When selecting a Contract Management Solution it is crucial to determine:
- Primary use of the system: contract repository only or full Contract Lifecyle Management?
- Primary users of the system: legal or Business users
- The type of contracts that the system will handle: simple contracts (template based) or more complex ones?
Contract Management 2.0 systems have come a long way for their predecessors and are now immensly more user friendly (typicaly requiring no training), templates can be created a modifed by end users, workflows are simple or flexible.