Contract lifecycle management refers to the process of managing a contract throughout the duration of its lifecycle. This means having a process for contract management from the moment a request is made until the contract has been executed. The first five stages of this process will take you from identifying the need for a contract until its execution. Here is a brief rundown of those stages.
The Request
The first stage of the contract management process is the initial request. This is where the need for a contract is identified and the initial discussions about its content occur. In many cases, the need for a contract will be understood by both parties, even if no one specifically requests it. Regardless, this part of the process will play out the same way.
Before you produce a more thorough draft, you can agree on the basic outline of your contract. This includes the essentials like the start date, duration, and the general purpose of the provisions within. As soon as a contract has been proposed, the contract lifecycle management process begins. Your CLM software will contain tools that enable you to plan out the remainder of the process from this point on.
Contract Drafting
This is the part of the process where you flesh out the details of your contract and work out how you will deliver its primary purpose. Both sides will need to come together to produce a draft. Making this a joint process as early as possible will reduce friction and minimize the potential for conflict between parties.
Contract negotiations will usually involve some degree of back and forth, depending on the complexity and scope of the contract.
Legal Review
Once you have a draft contract, you then need to put it in front of a lawyer to make sure that it is legally sound. Failing to secure a proper legal review of your contract can be a very expensive mistake. Not only can it expose you to legal liabilities later on, but it can also render your entire contract void, making it impossible for you to enforce the terms.
Agreement
As soon as the parties to a contract are satisfied with the terms within and the way that the contract is written, the next stage is the final agreement. This is where both sides formally put their names to the contract and agree to abide by its terms. This isn’t necessarily done in person. In fact, many contracts today are signed digitally.
Execution
With the contracts agreed and signed, it now falls to all the parties involved to execute the agreed-upon terms. This isn’t the end of the process, but it is the end of the first phase. Once a contract has been executed, all parties need to ensure their own compliance while also monitoring the compliance of the other parties.
After contract execution, future renewal should be the next concern. Over the course of any contract, make sure that you are aware of the impact that it has on your business. An arrangement that isn’t producing benefits for your business should be renegotiated or reconsidered.
