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Blog  |  January 19, 2021

Contract Review Has Become a Lot More Important During COVID-19, Here’s What to Do About It

Add contract review to the many things that have become increased challenges during the COVID-19 pandemic.  As this essay from The Stanford Law Review indicates, the pandemic has “prevented countless people, babysitters to basketball players, from fulfilling their contracts”.  Imagine the challenge that creates when 60-80% of business transactions are governed by written contractual agreements and a typical Fortune 1000 company maintains 20,000-40,000 active contracts at any given point of time!

While the Impossibility doctrine is given a narrow scope and rarely applied to the execution of contracts, parties routinely include a standard clause known as a “Force Majeure” clause, which addresses unforeseeable circumstances that prevent someone from fulfilling a contract.  But there is no ‘boilerplate’ Force Majeure clause, as each one is the subject of negotiation between the parties.  So, how do you review a large number of varied contracts to determine how to address the unexpected?  Leverage technology to assist with the review.

Technology Use Cases for Contract Review

For some time, technology has been supporting various contract review use cases, including:

  • Regulatory Responses: Contract review to support regulatory responses for General Data Protection Regulation (GDPR), London Interbank Offered Rate (LIBOR), Interbank Offered Rates (IBOR), Secured Overnight Financing Rate (SOFR), California Consumer Privacy Act (CCPA), ‘British Exit’ from the European Union (Brexit), International Financial Reporting Standard 16 (IFRS-16);
  • Corporate Transactions: Contract review to support corporate transactions, such as Lease Review and Abstraction, Post-Merger Integration, Contract Investigation, Mergers and Acquisitions, Due Diligence, Divestitures and Bankruptcy and Restructuring; and
  • Contract Data Management: Contract review for Contract Lifecycle Management, Vendor Assurance, Solution Integrations, Contract Digitization, CLM Migrations, Insurance Policies and Force Majeure Analysis.

With the pandemic, of course, Force Majeure analysis has taken a front seat as organizations everywhere review their contracts to determine their recourse (or their exposure if they are the one who failed to fulfill their contract).  Imagine having to review as many as 20K to 40K active contracts to make those determinations!

How Contract Review Differs from Document Review

Unlike document review for eDiscovery, where the focus is on classifying information at the document level (e.g., is the document responsive, non-responsive, hot, privileged, etc.), contract review is about identifying important information – words, sentences, clauses – within much larger and more comprehensive documents that are being reviewed.  As a result, review at the contract level is a lot more in-depth than document review for eDiscovery, where a quick look at some documents is all you need to make document-level determinations about the document.  As a result, where document review for eDiscovery can result in a cost of about $1 per document for legal professional review, manual contract review by legal professionals can run as much as $200-$500 per contract as they can take hours, not minutes, to review each contract.

How Can Technology Help?

Automated contract recognition and comparison technology leveraging artificial intelligence (AI) to assist with contract reviews can help by:

  • Viewing and Navigation: Use a viewer designed for contract review to easily navigate sections, data points, and send-to-field highlights;
  • Categorization and Comparison: Automate the categorization of contract types and segment clauses, as well as compare contract language and even populate coding fields utilizing regular expressions;
  • Integrate with Popular Review Platforms: When contract review becomes part of eDiscovery review (as it often does), the ability to break out the contract review from the eDiscovery platform to address the specific requirements associated with contracts can keep the eDiscovery review process from grinding to a halt.

Machine learning technologies, analytics and other technology can even be more valuable for contracts than they can be for “typical” documents that are part of an eDiscovery review (if there is such a thing as “typical”).  Whether reviewing something as mundane as a non-disclosure agreement (NDA) or a full contractual agreement between parties to determine whether the Force Majeure clause covers failure to fulfill a contract during a pandemic, technology can assist the review of contracts to save time and costs, while even improving the quality of contract review overall.  Hey, “technology”, “assist” “review” – there’s an acronym in there somewhere!

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