We have made it to the end of our series on the 10 Rules of Contract Redlining Etiquette and I think this one is going to be your favorite. It’s certainly one of mine! In particular because it involves insight directly from some awesome CLM companies on this thought-provoking topic.
Rule #10 – Leverage technology to automate and streamline the contract negotiation process.
While Rules 1 through 9 focus on how to redline (the human component), this Rule #10 focuses on where to redline (the technology component). Because the future of redlines involves the optimal combination of both human skill and technology.
From Red Pens to Redlines
In 2007, just 15 years ago, I learned how to redline contracts using…that’s right…red pens. I was a second-year law student interning at a software company going through a due diligence exercise. Part of my job was to manually catalogue important information from hundreds of software licensing agreements into an Excel spreadsheet. Terms like start date, end date, licensee name, term of license, etc. Whenever there was an issue, like a missing signature or an ambiguous clause, I was to redline the document and flag it for further review. I vividly recall having a pen holder on my desk with a bunch of red pens in it and paperclips clipped on the edges. All three of which have become redundant.
My learning process involved mostly guessing what was important, presenting my redlined versions to my boss for review, and then absorbing her feedback on my markups. She presented her feedback in the form of more redlines. Usually using a different color pen, lots of arrows pointing to the back of the page, and near illegible notes scribbled in the margins. We would then meet to review her feedback together so she could explain what certain symbols and smears meant. That process repeated for an entire summer. It was grueling, but I eventually learned how to redline.
At some point between then and now, I can’t even remember exactly when or how it happened, I ditched the red pens in favor of Microsoft Word’s Track Changes. It was like night and day. Only, still red. And I would bet a hundred bucks that in another 15 years (most likely a lot less), I’ll be using an entirely different platform to redline contracts. That’s why it is important to keep an open and adaptable mind when it comes to where you redline. You may not be able to envision it right now, but there are better solutions on the horizon. Below we will hear from 10 innovative CLMs about this very topic.
The Forever Human Component
There will always (always) be a human component to contract negotiations.
Whether you redline contracts with a red pen, by turning Track Changes on, through a collaborative platform, or in a virtual reality conference room, technology is not going to replace you. Though it is going to narrow our scope of work to just the hard stuff. The expectation then, is that we should be refining our contract negotiation skills and leveling-up. Focusing on how to successfully navigate the hard stuff. That’s where Contract Redlining Etiquette comes into play.
Contract Redlining Etiquette is a set of recommended best practices that applies to how humans should redline contracts regardless of where you decide to redline.
The Forever Technology Component
There will always (always) be a technology component to contract negotiations.
That’s why Rule #10 of Contract Redlining Etiquette is to leverage technology to automate and streamline the contract negotiation process. On the obvious end of the spectrum, everyone should at a minimum be using Track Changes to manage markups. On the other side of the more advanced spectrum, companies that are truly invested in bettering their contracts and commercial processes should be implementing enterprise-wide solutions that have integrated negotiation tools.
According to the World Commerce & Contracting 2021 Benchmarking Report, organizations that are investing in contracting and commercial capability are seeing numerous benefits, including faster contract execution times and lower costs of contracting by way of less leakage. So it really doesn’t make sense not to be utilizing technology to improve the overall contract management process, including contract negotiations.
The Future of Redlines, from Top CLMs
Advancements in legal technology have solved many of our industry’s largest contracting problems. Such as a centralized contract repository, streamlined intake forms, tracking approvals, automating electronic signatures, etc. But one phase of the CLM process that remains largely unsolved by technology is the contract negotiation phase.
As part of my research for my upcoming book, and out of sheer passion and curiosity, I wanted to learn more about existing and upcoming solutions. So I found 10 CLM companies who are already spinning their wheels on this exact topic. And I asked them all the same question.
How will technology change the future of redlines when it comes to contract negotiations?
I was invigorated by the creativity and thoughtfulness of each response. And surprised to see how much is already being done to make improvements in this space.
Here’s a glimpse of what these 10 innovative CLMs said in response.
“The future of redlines is like the future of anything else: browser-based. But for real change to take root at scale, the document format is the easy part to change. The hard part is convincing the person on the other side of the contract – the person negotiating the redlines – to discard a familiar, albeit painful process. Creating behavioral change at scale, so that people will commit to a foreign process for something as important as legally binding contracts, is not easy. A great user experience will get them to take that first step.”
– Richard Mabey, CEO of Juro
“Manual contract review leaves lawyers to work as if they’re seeing each revision request for the first time ever. In reality, lawyers see many of the same revisions requests over and over. As companies start to track and analyze the effects of the decisions made during prior negotiations, legal teams will use AI-enable software to avoid the need to go back to the drawing board with every new contract. Connecting contract negotiation data to performance data will help lawyers make smarter choices on issues that affect value.”
– Olga Mack, CEO of Parley Pro
“The future of automated redlining looks just as cool as the present – if not more so. Think far more collaboration, with easier tools to do so. In addition to speeding up the negotiation process by eliminating manual review, AI-based software facilitates more collaborative lawyering, particularly in deal-making and more positive encounters. This means that lawyers – on both sides of a deal – will be more willing to “work together.” Internal collaboration is much quicker, too, because parties can make and see changes all at once, within one application.”
– Jerry Levine, Chief Evangelist and General Counsel at ContractPodAi
“If lawyers are reviewing routine contracts today the same way they did five years ago, they’re doing it wrong. In fact, for some lower-value contracts, lawyers shouldn’t be reviewing them at all: AI should. Managed AI combines the capabilities of both artificial intelligence and human expertise in the form of experienced commercial attorneys.”
– Noory Bechor, CEO and Co-Founder of LawGeex
“The future of contract redlining includes the recommendation of fallback clauses, recognition of liability, risk prevention planning tools, and recommended caps while automating document revisions and contract document assembly.”
– Mark Nastasi – EVP & Founder of CobbleStone
“There is an art and human element to contract drafting and negotiations that can’t be replaced by technology. But technology can provide valuable assistive features to speed up the redlining process.”
– Jessica Nguyen, Chief Legal Officer at Lexion
“In a nutshell, technology will continue making redlining increasingly efficient.”
– Karyna Pukaniuk, Head of Legal at Loio
“In the not-too-distant future, it will be a natural act for anyone redlining a contract to “sift” it before they sign it, just as easily as they use spell check and grammar check today. People will not want to read a contract without the help of AI, knowing that a human plus an algorithm is stronger than either by itself.”
– Kevin Miller, CEO of LegalSifter
“Technology-enabled contracting processes offer prescriptive negotiation insights and help understanding risk scores. For example, AI should also be able to analyze counterparty papers and offer risk scores based on a word-to-word comparison between drafts.”
– Ajay Agrawal, Founder and CEO of Sirion Labs
“Artificial Intelligence will transform contract negotiations as it did for the game of chess. Mere mortals, augmented by AI, will be able to strategically analyze thousands of data points to make fast decisions while maximizing deal outcomes. In many cases, it will uncover additional hidden value.”
– David Chan, CEO of Intellext
Never Stop Innovating
Bottom line. The future of redlines involves 1) refining human skills to master the hard stuff, and 2)implementing relevant technologies to handle the easier stuff. To stay on top of your game, never stop innovating how you redline and where you redline.
There is truly so much to look forward to in this space. I’m so excited to share it with you all in my upcoming book on Contract Redlining Etiquette™ where I will dive even further into these 10 rules using real-life examples and visuals to demonstrate these best practices. We will also hear more about the future of redlines from Juro, Parley Pro, and ContractPodAi.
If you want to receive a free downloadable copy of Chapter 10: Rule #10 on Process Automation & CLM, sign-up here and I’ll email it to you once it becomes available.
Author: Nada Alnajafi
If your SaaS system is going to be tested in a proof of concept (POC), be sure to put an agreement in place. The POC agreement would ideally restrict access to the SaaS in a test environment, disclaim any warranties and indemnities and require your customer to ensure that no confidential or personal data is processed while in the POC mode. To learn more and join in the discussion, check out my LinkedIn post.