Legal Contract Management: What to Know + Best Practices

Properly managing legal contracts is crucial for all businesses to ensure they stay compliant and keep both customers and employees satisfied. If contracts are lost, overlooked, accidentally destroyed, or experience another issue, it can lead to legal penalties, disputes, or simply a loss of reputation.

These potential risks are why every business needs to have a contract management process in place to keep everything organized, secure, and easily accessible.

Let’s take a closer look at legal contract management: what it is, the process involved, best practices to keep in mind, and so much more.

What is Legal Contract Management?

Legal contract management is the system or process that a company has in place to handle important documents and agreements. This process tracks, manages, and oversees every aspect of the contract lifecycle, from the creation of the contract to its eventual termination.

This is not only a matter of keeping contracts safe, but also ensuring that all parties adhere to the terms of the contracts, manage risk, maintain compliance, enhance productivity, and improve contract visibility.

Who Handles Legal Contract Management?

The legal operations team generally handles legal contract management within a business. This may be a single individual or administrator, or an entire collection of people, depending on the size of the entire business and its legal contract needs.

This individual or team is responsible for making sure contracts comply with all necessary laws, align with company policies, and don’t put the organization at risk. They may also assist with negotiating contracts, offering valuable advice, maintaining contract records, resolving disputes or disagreements, and addressing other issues that arise.

While it’s mainly the legal team that manages these contracts, they may collaborate with other teams such as procurement, finance, and operations.

Understanding the Legal Contract Management Process

To truly understand what legal contract management is and what it entails, it’s crucial to understand the contract management process. To start, here’s a step-by-step guide to the contract lifecycle.

1. Planning: T First, you need to think about the kinds of contracts you’ll need to draft, the number of contracts you’ll need, who’s going to handle the creation and management of the contract, and more. Once you have this plan in place and know who is responsible for what, you can begin crafting your contracts.

2. Creating Your Contracts: This is when you’ll actually create your contract(s). You’ll need to do so carefully to ensure the contract reflects the terms of the agreement and has all the necessary conditions and information. It should include all important dates, the services or products each party receives, pricing, and any contingencies. Also, while you could start from scratch, there are several contract templates you can start from, too.

3. Internal Collaborations and Revisions: Once the first draft of the contract is done, the next step is to collaborate with others to ensure nothing was missed. By having multiple people review and revise it, there’s a lower chance of something being missed or left out. Whoever is responsible for creating and editing the contract also needs to ensure it’s forwarded to the individual or team responsible for ultimately delivering it to the client, customer, or employee.

4. Negotiation and Signing: Once the contract is finalized and in the proper hands, the next step is negotiation and signing. In some cases, the contract can be signed immediately by everyone; however, if any party has issues with certain parts of the contract, it can be amended at this stage.

5. Contract Management Stage: When the contract is signed and the agreement goes into effect, you enter the contract management stage. This involves keeping track of all obligations and ensuring that both parties comply with the terms outlined in the agreement. This is when you’ll also track any milestones, monitor any changes, and ensure the contract is safe and secure.

6. Renewal or Termination: Eventually, when the terms of the contract are near expiration, you’ll  either need to renew the contract or end it. If you renew, you will need to decide whether any terms or conditions need to be changed, or if everything can continue as before, effectively. If you’re ending the contract, ensure both parties have completely fulfilled their obligations so there are no loose ends. During this stage, you may also conduct audits to assess the effectiveness of the contract.

Overview of Legal Elements of a Contract

It’s also crucial to be aware of the legal elements of a contract, as these are what make a contract legally binding. If these elements aren’t present, a contract may not be enforceable. In total, there are six elements that you need to be aware of:

• Offer: The offer is when one party communicates their terms to another person, and that person can either accept, decline, or negotiate. This offer outlines the terms of the agreement and typically explains what each party will receive from the deal.

• Acceptance: This occurs when the person who received the offer agrees to the terms laid out by the offeror. To be legitimate, the acceptance needs to be clear and definite. Also, once an offer is accepted, the terms can no longer change.

• Awareness: For any contract to be legal, both parties need to be aware of the fact that they’re entering into an agreement with one another. Each needs to be completely aware of all the terms laid out and confirm that they know those terms and conditions bind them.

• Consideration: In this context, consideration is what each party is obligated to do or provide as a result of the contract. It’s essentially something of value that each person exchanges with the other. This doesn’t need to be money for a product or service; for instance, it could be an exchange of services, products, or a variety of other options.

• Capacity: You need to ensure that all parties have the legal capacity to enter the agreement. For example, someone who is a minor, currently under the influence of a substance, has limited cognitive ability, or doesn’t fully understand the language the contract is written in may not have the capacity to validate a contract.

• Legality: For a contract to be considered legal, it must comply with the law. Any contracts that involve illegal products or services won’t be enforceable. The laws a contract is subject to depend on the location where it operates and is enforced.

Contract Management Software for Legal Departments

Instead of handling your legal contract management manually, it’s generally a good idea to use some contract management software. These are digital platforms that streamline and simplify the contract lifecycle management process, helping you save time and money.

Some of the benefits of contract management software include:

• Quickly finding contracts in seconds
• Speeding up approval and signing
• Mitigating risks
• Automating manual tasks
• Tracking changes
• Securely storing contracts
• Assigning responsibilities
• Ensuring teams are aligned

These tools not only help you manage and keep track of all contracts in one place, but they also reduce your risks as much as possible and help you maintain compliance.

There are many software options out there with the features you need to manage your documents, including Signaturely, properly. Of course, each solution may have slightly different features, so be sure to do your research to find one that includes the features you need.

For example, Signaturely makes it simple to create contracts from scratch or bring in contracts you’ve created elsewhere. All you need to do is sign in to the platform, navigate to the Sign section, and choose to either Upload File, Import files, or Choose Template. From there, click the Prepare Document button to move forward and prepare the document for signing.

Best Practices for Legal Contract Management

If you want to take your legal contract management process to new heights and ensure you’re doing things properly, here are a few best practices to keep in mind.

Centralize All Documents

Firstly, it’s a good idea to centralize all of your legal documents in one place for easier management, access, and collaboration. If you have to search through multiple databases or online platforms to find and manage legal contracts, it increases the risk of misplacing them later. As a result you may open yourself up to legal penalties like fines or lawsuits, and this loss may also lead to missed deadlines, unhappy customers, or being unable to prove or establish a claim.

Some examples of legal documents that you should make an effort to centralize include:

• Non-disclosure agreements
• Payment agreements
• Property management contracts
• Independent contractor agreements
• Loan agreements
• Retainers
• Sales contracts and more

Speed Up the Process with Templates

Legal contracts tend to be full of complex terminology—what many call legalese—and specific terms and conditions. As you might imagine, building these complex contracts from scratch is a time-consuming and challenging undertaking.

But instead of creating them from scratch, you can dramatically speed up the process by using templates.. There are several free templates you can use for a variety of different types of contracts and agreements, and they can save you a ton of time and effort.

Automate Contract Management

Even if you simplify and speed up the process of creating legal contracts, they’re still a pain to manage manually. As a result, you should look to find ways to automate the management process, especially if you’re dealing with a mountain of contracts like many legal teams are.

This could involve integrating templates with data from your customer relationship management (CRM) platform, so that information populates automatically; establishing automated workflows; or utilizing AI to help extract, analyze, and review contract data.

All of this frees up more time for legal teams to focus on strategic matters, instead of manually managing contracts and agreements.

Using Electronic Signatures

Not only are electronic signatures secure, but they’re often much quicker to get than trying to organize an in-person meeting to get a wet-ink signature.

If you’re worried about the legality of using electronic signatures, or “e-signatures,” you shouldn’t be. This is because e-signatures are legally binding in the U.S. and have the same legal status as a handwritten signature.

However, keep in mind that some kinds of contracts, such as wills and some types of court orders, may still require a handwritten physical signature. Still, for many other types of contracts, using electronic signatures is completely fine.

The good news is that some contract management software for small businesses include e-signatures as a feature. The process for receiving and providing these signatures is also easy with most platforms, such as Signaturely:

1. Begin by creating or importing a contract using the process outlined earlier in this guide.

2. Once you’re in the Prepare for Signing stage, you can either choose to sign the document, sign it and send it to someone else for a signature, or simply send it to someone else to sign. You can also add viewers to the contract, as needed.

Pay Attention to Security & Compliance

You must ensure that every contract is compliant with all applicable laws and regulations in your state and/or industry, and that sensitive and private details within these contracts are kept secure.

If not, you run the risk of experiencing massive issues like data breaches, lawsuits, hacks, and more, which can not only hurt your reputation but also cost you a ton of money. While it might be quicker and more efficient to cut corners when it comes to security or compliance, doing so puts your entire company at risk.

Also, you need to make sure the contract lifecycle management software you use takes security seriously and has proper precautions in place, like multi-factor authentication, audit trails, encryption, and more.

The last thing you want is for your contracts to be leaked in a data breach or hacked because a platform has lackluster security features in place.

Invest in Team Training

Training your legal team to manage contracts effectively is crucial, as it empowers them to handle complex contracts with confidence and ensures they are familiar with all the key terms and conditions within the agreements. It also helps them recognize issues, identify problems, have knowledge of compliance, and more.

Training also mitigates risk, boosts efficiency, and reduces the amount of time your team wastes. If training doesn’t occur or isn’t thorough enough, your team may not be equipped to properly manage contracts, which may lead to contracts being lost or deleted, stored in the wrong place, or shared with the wrong people.

Designate a Point of Contact for Contracts

By designating a specific point of contact for contracts, you  simplify the entire process and improve clarity. If there are too many people to reach out to , it can become convoluted and confusing. Additionally, these individuals may provide different responses, which can be frustrating for everyone involved and lead to misunderstandings and errors.

Always Negotiate

Lastly, you should always make an effort to negotiate the terms of any legal contract. This ensures the terms are fair, your interests are protected, and there’s a lower risk of disagreements taking place.

Negotiating also ensures you get proper value out of an agreement and gives you a way to clarify confusing or ambiguous terms.

A standardized negotiation process helps non-lawyers within your team negotiate without always needing to take up a lawyer’s time. Creating this process also speeds up negotiations and ensures consistency.

Optimize Legal Contract Management With Signaturely

If you’re looking for a legal contract management system that’s versatile and powerful, while still being simple enough for almost anyone to use, consider Signaturely. It helps you easily manage contracts and streamline the entire lifecycle, from securing electronic signatures to viewing contract activity and making amendments if needed.

The platform also has a variety of other useful features for companies creating and/or managing contracts such as free templates, seamless collaboration, automatic reminders, an audit trail, and more.

The process for managing contracts in the system is also surprisingly easy. Once you’ve created your contract and completed signatures using the processes we outlined earlier, you can begin to manage it effortlessly.

1. First, to locate your contracts, navigate to the Documents section of the platform. Here, you’ll see a streamlined list of your contracts, along with their creation dates and the individuals who created them.

2. In addition to keeping everything in one place for easy contract location, this page also lets you take several actions, such as editing and resending contracts, deleting the document, viewing activity, renaming it, or even moving the contract to another location for better organization.

So, whether you need to simply view your contracts in one centralized place, or want to be able to monitor contract activity and make amendments in seconds meticulously, Signaturely makes it easy.

If you want to try out Signaturely for yourself and see if it’s right for your contract management needs, don’t hesitate to check out the free trial.

FAQs About Legal Contract Management

Here are a few common questions about legal contract management, along with their answers.

Final Thoughts About Contract Management for Legal Professionals

Properly managing your legal contracts is crucial to ensure compliance, boost productivity and efficiency, and effectively manage risks. Improper management often leads to issues such as losing contracts, accidental deletion, or wasting a significant amount of time and effort trying to track down information. Many of these may come with steep penalties or losses to your reputation.

Thankfully, by using the right legal contract lifecycle management software and keeping the best practices we covered in mind, you can optimize your contract management process for all of your legal documents.