As a GC, you understand the trust-building value of a contract between parties. It identifies and allocates the business relationship risks. While these legal documents protect the company, they are also a rich source of business data. Strategic-minded GCs can leverage this data to deliver enterprise value.

The key to harnessing the power of your legal agreements lies in the ability to develop effective contract data models. No matter the state of your CLM, our introductory guide will equip you to improve its functionality using data models.

Key Takeaways

• Contract data models are a method for giving structure to your company’s agreements using well-defined, standardized terms.
• Contract data models improve speed, accuracy, and insights in your CLM process.
• Building a contract data model begins with a thoughtful expression of your contracts, their parts, and the many positions they could take.

What Is a Contract Data Model?

Contract data models are blueprints that provide clarity and insight into the terms of agreements by converting them into actionable data points. They create a standardized system for organizing and structuring the various concepts applicable to your legal documents. You can store and access the data models in your contract lifecycle management (CLM) system for further use and benefit.

The Benefits of Contract Data Modeling

Legal departments and other business unit stakeholders can greatly benefit from incorporating contract data models into their operation and management systems. However, to realize these benefits, you must consistently develop and apply your models to your contracts over time.

Find Contract Information Faster and with Greater Depth

Early computer-based contract management systems resembled .pdf and .word documents stored in a folder on your desktop. Besides the naming convention, your only way to determine information about the agreement was to open the file and read it.

Alternatively, you might have had a spreadsheet or another document containing data about the contracts (e.g., term, effective date, party names). One survey shows it takes more than two hours on average to find specific language in a contract, and only 65% of legal teams use integrated tools for their CLM.

With advanced legal tech solutions, it’s now possible to have a CLM that benefits from detailed data modeling. This allows new ways to store, search, and report on essential terms without rereading the entire contract. For example, you can create and assign tags for elements within a contract.

Improve Contract Accuracy for Diligence, Audits, and Other Compliance Efforts

Old contract management methods created risk for your organization during key review periods. These include making disclosures during due diligence, completing an external or internal audit, and other compliance efforts with regulatory agencies.

The risk exists because you must rely on human review of dense legalese to determine whether a contract term applies to a particular compliance matter. This can be especially easy to overlook depending on the contract’s style and organization. Think long contract sections with multiple lines of text with no paragraph breaks and without any section headings. Contract data modeling fixes this issue through mapping systems that clearly and easily identify whether a term exists in a contract and its position (i.e., favorable or unfavorable).

Become a Strategic Partner of Your Company as a Data-Led General Counsel

With data modeling, you can breathe new life into your company’s dusty contracts and uncover the hidden commercial value within them. Contracts are written representations of your company’s operations, including its assets (i.e., rights) and liabilities (i.e., obligations).

You can use your contract data models to identify opportunities to expand those rights and limit the liabilities. The power you can obtain through contract data depends on your alignment in understanding the problems and goals of the other business units. This will allow you to find the contract terms that apply to those units the most and prioritize new solutions for them.

How to Create Data Models for Your Contracts

Data models may sound like a technical and complex process better suited for IT professionals, but they can be relatively simple for GCs and in-house attorneys to develop. However, being thoughtful in your approach is essential for creating an adaptable and scalable design for the current and future needs of your contract management. Consider the following 5-step process for building a contract data model.

1. Establish Your Contract Terms and Their Sub-Parts

The first step is to determine the parts and sub-parts that make up your contracts. Broadly, this will include the types of contracts you manage (e.g., a licensing agreement, service contract, or purchase agreement). As you delve deeper, you will identify specific terms (e.g., a dispute resolution clause) and their subparts (e.g., effective notice or choice of venue).

2. Identify Potential Positions Within Your Contract Terms

After establishing the elements of your contracts, you will want to identify the potential positions your contract could take on that element. Continuing with the dispute resolution clause example, you could have several positions, including arbitration, mediation, or court.

3. Determine the Responsible Business Unit(s) or Stakeholder(s)

Each contract and element within the contract should have a designated representative within the company responsible for its management. Usually, this will be the legal department along with another business unit. For example, HR when handling an employment agreement, or marketing when handling a trademark license.

4. Select and Rank Optimal Positions for Each Type of Contract

Your contract data model should consider a method for ranking the preferred position of each contract term for each type of contract. For example, you might prefer exclusivity of a trademark license when your company is the licensee but opt for a non-exclusive license when operating as the licensor.

5. Have Model Language for Your Positions on Each Contract Term

Consistency and standardization are essential when building a contract data model. Without them, you risk contracts within the company not fitting into the model, which could limit the overall benefits. Keeping model language in a clause bank allows you to retain as many standard terms as possible. Variations will inevitably occur during negotiations with outside parties, which is why you need a system for noting these variations and creating new positions when necessary.

Engage with Our CLM Team About Building Contract Data Models

Contract data models are an effective method for making your organization’s agreements more user-friendly and helpful during key business operations. Maximize the power of your CLM by creating a blueprint for the structure and elements of your contracts. With a data model in place, you can align your legal department with the needs of the organization and find new solutions in their contracting.

Contact our representatives about building contract data models for your CLM today.