Prior to 2005 the legal department at Reuters was spending too much time negotiating sales agreements with clients, a process that slowed down the sale of products and limited the time the department could devote to more pressing legal issues. The problem was in the agreements themselves. They were overly broad and complex, which forced clients to consult their lawyers. This then sparked lengthy negotiations.

“Our customers didn't want a large document that would require a long legal review process,” says Karen Gray, vice president and principal legal counsel at Reuters America, a global newswire service provider.

So the company decided to automate the contract drafting process in early 2005 by using contract assembly software, a solution that allows sales staff to generate narrowly tailored contracts online without the need for legal review.

The system went live in July, and, although it's too early to gauge the solution's success, Gray is optimistic it will greatly reduce the time Reuters spends on contracts.

“We believe the system will sharply reduce the amount of negotiations our customers engage us in,” Gray says.

Other GCs also are beginning to realize the full potential of contract assembly software. In the past 12 months, both Microsoft Corp. and Cisco Systems Inc. began using software to automate various contracts and legal agreements.

“Requiring legal to approve and draft contracts slows things down,” says Alan Soudakoff, vice president of Capstone Practice Systems, a legal technology consultant. “We are seeing a push to get legal out of being the bottleneck. By using contract assembly, legal can empower business units to draft documents legal helped design.”

Contract Construction

Contract assembly systems have been around for several years, but only now are in-house lawyers fully realizing their benefits. They are becoming more popular for two reasons.

First, contract assembly solutions are easier to use than they were in the past due to improvements in technology. Second, the few companies that have experimented with contract assembly systems have proven that they can facilitate business deals by allowing businesspeople to produce contracts without legal's help.

The way the software works is that once a company decides what type of contract to automate, a subject-matter expert, typically an in-house attorney, compiles the different versions of that contract into one master version that contains all the various clauses and conditions. The subject-matter expert then marks up the master contract. Most solutions require the attorney to bracket variable information, such as buyer's name, seller's name and dates, and mark conditional clauses.

Once this is done, the in-house expert hands the document off to a programmer who inputs the logic of the markup into the contract assembly software. Together, these processes can take anywhere from a day to several months, depending on the complexity of the contract.

The software interprets the programming, generating a questionnaire that the user, usually a salesperson, fills out. As the user answers the questions, the software builds the contract, inserting specific information, such as names and dates, based on the information the user provides. Clauses from the master contract are pasted into the document automatically based on the user's answers. Reuters' questionnaire for its sales agreements contains only four questions, allowing users to create a contract in a matter of minutes.

“Let's say the first question asks if the deal is guaranteed,” says Tim Allen, chief executive of Business Integrity, which produces DealBuilder, a contract assembly software solution. “If you answer yes, you will be asked questions such as what's the name and what's the amount. If you answer no, you won't see any of those questions.”

After a user completes the questions, the software automatically generates a contract, typically as a Word or PDF file depending on which product the company is using. The salesperson can then send that contract to the client.

Building Better

Document assembly software isn't cheap though. It can cost between $12,000 and $200,000, not including the cost of a programmer, which only some vendors supply.

But the high price comes with benefits. Automating a contract sharply reduces the time employees spend drafting documents. For example, prior to automating its sales agreements, Cisco personnel were spending between 30 and 45 minutes to complete a contract. After automating the process, the company has cut that time to just two minutes.

These solutions save so much time largely because they eliminate attorney review from the process. Because legal creates the master template and, along with a programmer, ensures that the logic of the interview process is correct, it is virtually impossible for a user to draft a noncompliant contract.

“It seems to be a trend these days to encourage business units of corporations to generate their own legal documents,” Soudakoff says. “The technology enables that because the system is designed to produce a valid legal document with the expertise of legal built into the system.”

Moreover, if there is a change to law or company policy, an expert in the legal department can access the master template and make the alteration, which ensures all subsequent contracts reflect those changes.

“By automating contracts, you can really protect legal,” says Seth Rowland, a consultant at Basha Systems, a legal technology consultancy. “If there's a change in law or a new question in a particular state, an attorney can make those revisions to the contracts in about five minutes. That official form is shared everywhere, making it unnecessary to redistribute it to 20 different offices.”

Being Responsive

And that has a direct impact on the bottom line. Because legal essentially removes itself from the contract process, business units can complete deals at a fraction of the cost. For example, when Cisco automated its nondisclosure agreements, the reduction in review time saved the company an estimated $300,000 a year.

Yet not every company's experience will parallel the success Reuters and Cisco achieved. Contract assembly technology is most useful if a company produces a significant amount of contracts wherein speed is important.

Also, the system works best for contracts that have relatively similar terms and predictable variations. Complex contracts, such as M&A agreements, often generate questions that only a lawyer can answer.

For companies that do process a large number of routine contracts, though, contract assembly software can boost efficiency and improve legal service.

“Our internal clients and our external clients want things done quickly,” Gray says. “You can't just be this pie-in-the-sky legal department. You have to really be responsive to the internal and external needs, and this is really one way for people to do that.”

Prior to 2005 the legal department at Reuters was spending too much time negotiating sales agreements with clients, a process that slowed down the sale of products and limited the time the department could devote to more pressing legal issues. The problem was in the agreements themselves. They were overly broad and complex, which forced clients to consult their lawyers. This then sparked lengthy negotiations.

“Our customers didn't want a large document that would require a long legal review process,” says Karen Gray, vice president and principal legal counsel at Reuters America, a global newswire service provider.

So the company decided to automate the contract drafting process in early 2005 by using contract assembly software, a solution that allows sales staff to generate narrowly tailored contracts online without the need for legal review.

The system went live in July, and, although it's too early to gauge the solution's success, Gray is optimistic it will greatly reduce the time Reuters spends on contracts.

“We believe the system will sharply reduce the amount of negotiations our customers engage us in,” Gray says.

Other GCs also are beginning to realize the full potential of contract assembly software. In the past 12 months, both Microsoft Corp. and Cisco Systems Inc. began using software to automate various contracts and legal agreements.

“Requiring legal to approve and draft contracts slows things down,” says Alan Soudakoff, vice president of Capstone Practice Systems, a legal technology consultant. “We are seeing a push to get legal out of being the bottleneck. By using contract assembly, legal can empower business units to draft documents legal helped design.”

Contract Construction

Contract assembly systems have been around for several years, but only now are in-house lawyers fully realizing their benefits. They are becoming more popular for two reasons.

First, contract assembly solutions are easier to use than they were in the past due to improvements in technology. Second, the few companies that have experimented with contract assembly systems have proven that they can facilitate business deals by allowing businesspeople to produce contracts without legal's help.

The way the software works is that once a company decides what type of contract to automate, a subject-matter expert, typically an in-house attorney, compiles the different versions of that contract into one master version that contains all the various clauses and conditions. The subject-matter expert then marks up the master contract. Most solutions require the attorney to bracket variable information, such as buyer's name, seller's name and dates, and mark conditional clauses.

Once this is done, the in-house expert hands the document off to a programmer who inputs the logic of the markup into the contract assembly software. Together, these processes can take anywhere from a day to several months, depending on the complexity of the contract.

The software interprets the programming, generating a questionnaire that the user, usually a salesperson, fills out. As the user answers the questions, the software builds the contract, inserting specific information, such as names and dates, based on the information the user provides. Clauses from the master contract are pasted into the document automatically based on the user's answers. Reuters' questionnaire for its sales agreements contains only four questions, allowing users to create a contract in a matter of minutes.

“Let's say the first question asks if the deal is guaranteed,” says Tim Allen, chief executive of Business Integrity, which produces DealBuilder, a contract assembly software solution. “If you answer yes, you will be asked questions such as what's the name and what's the amount. If you answer no, you won't see any of those questions.”

After a user completes the questions, the software automatically generates a contract, typically as a Word or PDF file depending on which product the company is using. The salesperson can then send that contract to the client.

Building Better

Document assembly software isn't cheap though. It can cost between $12,000 and $200,000, not including the cost of a programmer, which only some vendors supply.

But the high price comes with benefits. Automating a contract sharply reduces the time employees spend drafting documents. For example, prior to automating its sales agreements, Cisco personnel were spending between 30 and 45 minutes to complete a contract. After automating the process, the company has cut that time to just two minutes.

These solutions save so much time largely because they eliminate attorney review from the process. Because legal creates the master template and, along with a programmer, ensures that the logic of the interview process is correct, it is virtually impossible for a user to draft a noncompliant contract.

“It seems to be a trend these days to encourage business units of corporations to generate their own legal documents,” Soudakoff says. “The technology enables that because the system is designed to produce a valid legal document with the expertise of legal built into the system.”

Moreover, if there is a change to law or company policy, an expert in the legal department can access the master template and make the alteration, which ensures all subsequent contracts reflect those changes.

“By automating contracts, you can really protect legal,” says Seth Rowland, a consultant at Basha Systems, a legal technology consultancy. “If there's a change in law or a new question in a particular state, an attorney can make those revisions to the contracts in about five minutes. That official form is shared everywhere, making it unnecessary to redistribute it to 20 different offices.”

Being Responsive

And that has a direct impact on the bottom line. Because legal essentially removes itself from the contract process, business units can complete deals at a fraction of the cost. For example, when Cisco automated its nondisclosure agreements, the reduction in review time saved the company an estimated $300,000 a year.

Yet not every company's experience will parallel the success Reuters and Cisco achieved. Contract assembly technology is most useful if a company produces a significant amount of contracts wherein speed is important.

Also, the system works best for contracts that have relatively similar terms and predictable variations. Complex contracts, such as M&A agreements, often generate questions that only a lawyer can answer.

For companies that do process a large number of routine contracts, though, contract assembly software can boost efficiency and improve legal service.

“Our internal clients and our external clients want things done quickly,” Gray says. “You can't just be this pie-in-the-sky legal department. You have to really be responsive to the internal and external needs, and this is really one way for people to do that.”