Contract Management Software

14 February 2002

Most businesses collect contracts at a prodigious rate. It's almost insidious as the shear numbers grow. If you stop and consider, you probably have contracts like software licenses, office space leases, maintenance agreements, warranties, website hosting agreements, employee leasing and agreements with independent contractors. Managing these agreements is essential.

Consider this. No matter how good your agreement is, it's useless to you if you don't know what your rights and remedies are under the agreement.

You can't use what you negotiated to your benefit if you don't know what's buried in your agreement.

It only gets worse as the number of agreements you have grows, the people who negotiated them move to different positions in your organization or worse, move on to other companies. With them goes the institutional knowledge of what your deal is.

Of course, the new person in their old position will find that the old person left neatly organized files with all the agreements within the purview of their responsibility. We also know that during the new person's spare time, she will review all the contracts so that she knows everything she needs to know. Finally, we know that neither you nor me believe the first two sentences of this paragraph.

Real Life

In real life, if the new person is lucky, she finds files organized using the old person's idiosyncratic filing system. As for that spare time review of the contracts, we all know that's fantasyland.

All too often, people manage the relationships memorialized by what may be 25, 100, 1000 or even thousands of agreements depending on the size of your organization "fireman" style. When it's a burning issue, they deal with it. You know how that goes.

Let's say you're unhappy with the company that hosts your website. You try to find that agreement. Is there an agreement? Where is it? You ask around. Nobody is quite sure. If you're lucky, you find it. If you're not, you ask the other side for a copy of it. Of course, now they're wondering why you're asking. So maybe, rather than ask them, you ask your lawyer. Oops, you never bothered to send your lawyer a copy of the final signed agreement although he asked for it several times. If I'm describing your life, raise your hand. (Don't worry, your co-workers will think you are stretching.)

Now, let's say you find it. Immediately, you read it. Hey, I bet you can't wait to explain to your boss that had you sent notice last week, which would have been 30 days before the agreement's automatic one-year renewal, you could have just terminated and moved on. Since you didn't know that an automatic renewal date had come and gone, you did nothing. Now, you have to call your tech lawyer and find out if the service you're getting is bad enough to be considered a breach. Of course, even if your lawyer's opinion is good news to you, if the other side believes they didn't breach, it's "Hello courtroom."

Avoiding the Mess

You got to this point because you made the fundamental mistake of not knowing your agreements. It doesn't matter how good an agreement you negotiate is if you don't know what's on the paper and don't take advantage of it.

If you haven't already done so, your company needs to implement a contract management system. Just a small amount of research on the Net will yield a wealth of information about the alternative contract management software solutions available to you.

If you're not familiar with contract management software, it's simply software that automates managing contracts in a user-friendly database. At the highest level, you have two paths. You could license contract management software like you license Microsoft Word or you could use the services of an Application Service Provider (ASP) who will provide you access to the software over the Net.

Features You Want

A good contract management system is feature rich. While no system has every feature you might like, you need to evaluate which ones are important to you and then look for the system that best fits your needs.

A basic feature is access to the actual document. My preference is that the software image the signed document so that you see the actual signature and any handwritten changes.

Next, you want to be sure that you receive notifications of all time sensitive deadlines. It's a core function for this type of software.

Other features you should look for include secure storage of all related purchase orders, warranties and other documentation relating to a contract. The software should also be a repository of information for vendor profiles, contact information and expense records. Finally, you also want to look at the software's reporting capabilities.

While the information the software gives you is only as good as the quality of what you input, this type of software can be an invaluable tool in managing your business relationships. If you haven't yet outgrown "ad hoc" as your method of managing your legal relationships, make today the day that your business procedures begin to grow up.

Mark Grossman's "TechLaw" column appears in numerous publications. Mark Grossman has extensive experience as a speaker as well. If you would like him to speak before your group or corporate meeting, please call (305) 443-8180 for information.

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