I recently sat down (virtually, of course) with two subject matter experts in contracting. Patricia Dzikowski is a very tenured lawyer and expert in things such as standardizing contract templates. Robert Couch is a tenured technologist and expert in the implementation of CLM systems. In this conversation, there was no doubt I was not the smartest person in the digital room.
Prashant: Customers often ask us to help them simplify or rationalise templates. What does that mean?
Patricia: First of all, simplification and rationalisation are ambiguous words. In practice, they often mean different things to different people. It’s usually more about standardising templates.
Prashant: OK, I get that. Standardisation is clearer. So, as a practical matter, what does this mean?
Patricia: Well, a company likely has multiple templates for the same business purpose. They probably want these consolidated (often called simplification or rationalisation) so there are fewer templates to choose from and fewer to maintain. Legal language can be standardised across similar templates, and a basic template with an accompanying clause library can be created. This clause library would have different alternatives for different products, regions, or risk thresholds. Of course, there are company-specific levels of detail here, but this is the general approach.
Prashant: That makes sense. These days, most companies ask us to make sure that as we conduct this exercise on their behalf, we ensure the work product can easily automate templates in their CLM or any CLM (if they don’t have one yet). How does this change the process for the standardisation work, if at all?
Rob: The approach Patricia outlined makes complete sense. The mechanical elements of this exercise occur at the end to ensure the template can be easily loaded into a CLM system for automation. For example, the annotated template reflects how the technology will control its behaviour, e.g. Governing Law clause, indicating whether the entire clause conditionally changes or just the court location. Where there is more of a difference typically is a result of the technology. For example, some CLM systems can conditionally change the text within a clause inserted into a template. While that is slick, it may be hard to maintain. So, there is necessary subject matter knowledge about the CLM software (or categories of software) to know the best options for establishing a clause library so that it complies with how the CLM functions and is easy to maintain. This need is why our legal and technical teams work closely together in these types of engagements.
Patricia: Ideally, if you are going to configure your template for use with a CLM’s contract creation module, you would pay much more attention to standardisation. As Rob said, each tool has different options, but I’d say generically, you would want to:
- Standardise formats (document style, preambles, signature paragraphs, clause order, etc.)
- Standardise definitions and other clauses to the extent possible
- Make sure the language is clear. There is not much legalese left in contracting, but sometimes the language is a little bulky – maybe break out long paragraphs into subparagraphs or break down long sentences into lists, etc.
- Analyse similar templates to see if you can reduce the number by combining them and using alternative clauses for specific situations, products, departments, regions, etc.
- Define rules for the use of the alternative clauses (which can later form the basis for an intake form that would automatically select the correct alternative clause in the tool)
- While you are at it, you might want to revisit your risk positions and make overly risk-averse positions more balanced to lessen negotiation time.
Prashant: Thanks, Patricia and Rob. This conversation has been extremely revealing, and thanks for keeping it “simple” so I could understand it!
our legal and technical teams work closely together in these types of engagements