Contract Management Demands a Modern Approach in the Age of COVID-19
As the coronavirus pandemic continues to force businesses to make dramatic changes to the way they operate, utilizing a modern digital contract management tool is key to keeping up.
May 14, 2020 at 12:10 PM
6 minute read
The original version of this story was published on National Law Journal
COVID-19 is leading many companies to make dramatic changes to the way they do business. While the work-from-home model has grabbed most of the headlines, companies are currently evaluating other (though equally important) measures that may stay with us for years to come. One big change: the way we set up supply chains. For years, globalization allowed businesses to develop razor-thin supply chains that drove higher margins. But many of those worldwide, lowest-cost, just-in-time supply chains have been stretched dangerously thin or even broken by the COVID-19 pandemic.
Businesses are reacting quickly. For example, a recent white paper published by global investment firm KKR estimates that many parts of the technology sector in China will consider diversifying 20%–40% of their production away from the country within five years, partly in response to the pandemic. Such a retreat from globalization—at least in the near future—seems inevitable. Some others have described this retreat as moving from "just in time" to "just in case."
As businesses survey the damage from the pandemic and rethink their supply chains, many are finding that their decades-old contract management techniques are not meeting the needs of the business. In those cases, a modern digital contract management tool may be the solution.
|The Basics of Digital Contract Management
Digital contract management tools are software products that store contracts in a way that allows users to locate, track, analyze and change contracts in an accurate, reliable, documented and cost-effective way. At the most basic level, digital contract management tools are document databases—the primary benefit of which is that they organize contracts in one place. But like many aspects of our daily lives, technology is making these tools better and more indispensable every day.
Today, contract management tools incorporate artificial intelligence that allows the software to perform advanced searches and analytics on a repository of contracts. The tools can be used to identify and compile otherwise disparate families of contracts, identify particular covenants across a large data set, identify and locate contracts with nonstandard provisions, and assist in reforming contracts that need to be changed.
You may be familiar with similar technology through litigation. Historically, an army of junior attorneys would review boxes of documents to produce to an adversary in the discovery phase of a case. When the world digitized, junior attorneys were set loose in document databases on their computers. Now, modern discovery tools use artificial intelligence techniques like predictive coding and continuous active learning to find responsive documents with minimal human intervention. This evolution is similar to the evolution of contract management.
|How Can They Help?
Broadly speaking, modern digital contract management tools offer benefits in three areas:
- Organization. In many businesses, contracts are not centralized in one location. Some may be in hard copy, while others may be in folders on a SharePoint or other file management system. Evaluating a business's portfolio of contracts poses obvious challenges if they are not ready to hand. Digital contract management tools solve this problem by making the contracts accessible through a single interface. And for businesses that cannot readily identify all of their contracts, some tools have features that scan file systems and locate contracts automatically.
- Analytics. The most basic contract management tools have a basic search feature that locates documents containing key terms. Modern contract management tools use artificial intelligence to "learn" concepts in documents, even if they do not contain a uniform set of terms. For example, modern tools can identify all the contracts containing a force majeure clause or a termination provision, including those that do not follow the business's standard template. Through AI, the tools can quickly compile data about a set of contracts, such as when contracts are expiring, and generate custom summary reports.
- Renegotiation. Confronting an external shock, such as COVID-19, may require a business to identify and even renegotiate provisions in many or all of its contracts. While a small set of contracts can be identified, analyzed and renegotiated manually, it may be difficult and impractical to do so for a large portfolio of contracts. Digital contract management tools provide the necessary technical aspects of workflows designed to automate the renegotiation and repapering process.
Application to COVID-19 and Beyond
Just as companies are rethinking their supply chains at this inopportune time, this may well be the right time to implement a digital contract management tool as well. In the short term, these tools may yield the most benefits by organizing contracts impacted by COVID-19 and analyzing business risk in light of particular contractual provisions. Force majeure clauses are obvious examples: the software can quickly identify contracts with (and without) these clauses and ascertain which ones have standard or nonstandard provisions.
In the medium term, these tools may help businesses navigate other business challenges that arise in the changed economic landscape. Deadlines may need to be extended. Payments may need to be delayed. And other terms may need to be modified or provisions invoked. Making these changes on a mass scale may prove less challenging with a digital contract management tool.
After we move past COVID-19, a fully implemented digital contract management tool is likely to continue to pay dividends. When integrated with document generation and e-signature software, these tools will prove far superior to sending redlines back and forth by email. They will lead to quicker and more efficient negotiation with less human intervention.
Such tools may also prove useful in confronting other external shocks. For instance, as we approach the end of LIBOR in 2021, businesses and financial institutions are finding that they need to repaper their LIBOR-related contracts. Some businesses are already using digital contract management tools to identify affected contracts, analyze them and repaper them with appropriate LIBOR fallback language.
Especially in a time of economic upheaval, the goals in implementing a new technology should be to increase efficiency and reduce cost. Digital contract management tools may do both.
Paul Forrester and Ethan Hastert are partners and Anthony Pastore is an associate in Mayer Brown's Chicago office.
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View AllNew Federal Pregnancy Regulations: Five Key Takeaways and Five Key Action Steps for Employers
7 minute readLegal Profession's Mental Health Woes Start to Take Root in Law School, Many Attorneys Say
6 minute readLaw Firms Mentioned
Trending Stories
- 1Infant Formula Judge Sanctions Kirkland's Jim Hurst: 'Overtly Crossed the Lines'
- 2Abbott, Mead Johnson Win Defense Verdict Over Preemie Infant Formula
- 3Preparing Your Law Firm for 2025: Smart Ways to Embrace AI & Other Technologies
- 4Meet the Lawyers on Kamala Harris' Transition Team
- 5Trump Files $10B Suit Against CBS in Amarillo Federal Court
Who Got The Work
Michael G. Bongiorno, Andrew Scott Dulberg and Elizabeth E. Driscoll from Wilmer Cutler Pickering Hale and Dorr have stepped in to represent Symbotic Inc., an A.I.-enabled technology platform that focuses on increasing supply chain efficiency, and other defendants in a pending shareholder derivative lawsuit. The case, filed Oct. 2 in Massachusetts District Court by the Brown Law Firm on behalf of Stephen Austen, accuses certain officers and directors of misleading investors in regard to Symbotic's potential for margin growth by failing to disclose that the company was not equipped to timely deploy its systems or manage expenses through project delays. The case, assigned to U.S. District Judge Nathaniel M. Gorton, is 1:24-cv-12522, Austen v. Cohen et al.
Who Got The Work
Edmund Polubinski and Marie Killmond of Davis Polk & Wardwell have entered appearances for data platform software development company MongoDB and other defendants in a pending shareholder derivative lawsuit. The action, filed Oct. 7 in New York Southern District Court by the Brown Law Firm, accuses the company's directors and/or officers of falsely expressing confidence in the company’s restructuring of its sales incentive plan and downplaying the severity of decreases in its upfront commitments. The case is 1:24-cv-07594, Roy v. Ittycheria et al.
Who Got The Work
Amy O. Bruchs and Kurt F. Ellison of Michael Best & Friedrich have entered appearances for Epic Systems Corp. in a pending employment discrimination lawsuit. The suit was filed Sept. 7 in Wisconsin Western District Court by Levine Eisberner LLC and Siri & Glimstad on behalf of a project manager who claims that he was wrongfully terminated after applying for a religious exemption to the defendant's COVID-19 vaccine mandate. The case, assigned to U.S. Magistrate Judge Anita Marie Boor, is 3:24-cv-00630, Secker, Nathan v. Epic Systems Corporation.
Who Got The Work
David X. Sullivan, Thomas J. Finn and Gregory A. Hall from McCarter & English have entered appearances for Sunrun Installation Services in a pending civil rights lawsuit. The complaint was filed Sept. 4 in Connecticut District Court by attorney Robert M. Berke on behalf of former employee George Edward Steins, who was arrested and charged with employing an unregistered home improvement salesperson. The complaint alleges that had Sunrun informed the Connecticut Department of Consumer Protection that the plaintiff's employment had ended in 2017 and that he no longer held Sunrun's home improvement contractor license, he would not have been hit with charges, which were dismissed in May 2024. The case, assigned to U.S. District Judge Jeffrey A. Meyer, is 3:24-cv-01423, Steins v. Sunrun, Inc. et al.
Who Got The Work
Greenberg Traurig shareholder Joshua L. Raskin has entered an appearance for boohoo.com UK Ltd. in a pending patent infringement lawsuit. The suit, filed Sept. 3 in Texas Eastern District Court by Rozier Hardt McDonough on behalf of Alto Dynamics, asserts five patents related to an online shopping platform. The case, assigned to U.S. District Judge Rodney Gilstrap, is 2:24-cv-00719, Alto Dynamics, LLC v. boohoo.com UK Limited.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250