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In-house legal teams once had many awkward approaches to creating uniform contracts. They would use previous contracts as forms or even crowd frequently used clauses into an Excel spreadsheet. Rather than streamline contract creation, these early clause libraries often made the process more difficult.
But thanks to new contract lifecycle management software and A.I., creating clause libraries is much easier. We can’t all be Excel experts, but we can use these tools to keep using clauses that work. Here’s why you should embrace the new model for clause libraries.
What is a Clause Library?
A clause library is an organization tool that collects preapproved clauses for your company’s contracts. It streamlines drafting by keeping the most effective clauses on hand rather than sending junior attorneys or law clerks digging through multiple documents.
The standard clause library includes the following:
• Definitions
• Grouped clauses based on the contract type
• Modified clauses and when they’re relevant
• Clause substitution options
• Sub-clauses
You can also add tags to clauses to make it easier to find them. For example, if an attorney seeks provisions regarding data protection, they can pull up all clauses tagged “#data protection.”
Where do I access a clause library?
Once upon a time, in-house legal counsel organizations popular contract provisions in Excel spreadsheets and Word documents. If a team was lucky enough to have someone who mastered database software, the clause library might be in Access.
These systems didn’t have tags or uniform search terms. People who entered the clauses often had their own ideas of where a provision belonged. For example, “data protection” could be confused with “data security.” Or clauses could fall under so many categories that they are rendered meaningless.
This situation improved significantly since those days when clause libraries caused more arguments than convenience. Now, you create your clause library using cloud contract management software. Drop-down menus and A.I. can ensure consistent categories and tags.
Other apps can integrate with word processing programs like Word or Google Docs. Rather than switch back and forth between a database and a document, you can access the clause library within your Word file.
How Does a Clause Library Help Me as an In-House GC?
Removing Excel drama from your office is already a big incentive to upgrade clause libraries. But there are other benefits too.
Improve Risk Mitigation
You take a risk every time you draft a contract. Worrying about missing clauses or the wrong clause is reasonable when there are no tools to help with uniformity.
A clause library reduces these risks by standardizing your contracts. You refrain from worrying about a junior attorney using vague terms or bad word choices. Also, since you can vet each clause through compliance before adding them to the library, you know those provisions will likely survive litigation (if it arises.)
Decrease Human Error
It’s Friday at 4:30 PM. Cocktail hour is coming up, and there is just one more contract to finish. After a week of data processing agreements, terms of use, and other lengthy matters, your attorneys and law clerks are ready to start their weekend.
This scenario often leads to quick decisions that aren’t necessarily the best. Whether it’s the need for a break or too many contracts in one day, humans get tired and make mistakes. These “Friday night” contracts can contain typos, poor word choices, and even incorrect provisions.
But these errors become less likely when you have a uniform clause library. The clauses are readily available and typo-free. Fatigue affects decisions less, and your employees spend more time drafting contracts than sweating over the correct terminology.
Draft Contracts Faster
Previously, you had one option when drafting a new type of contract—searching for an example online.
But these searches take time. Even when you find an example, you don’t know if it’s adequate. Many free contract forms fail to meet expectations and could cause legal trouble for your organization.
A clause library is adaptable, unlike a form or working from an older contract. You can pull the basics from the clause library and add appropriate provisions for the situation.
This process is much quicker than searching your document folders or online forms. Also, since many clauses are tried and true, they are more reliable than a random form found online.
Create More Consistent Contracts
A clause library creates consistency. Rather than having five different ways to explain data protection for the same type of contract, there is one. There is no wondering whether an agreement contains sufficient language and if it’s enforceable.
This consistency proves essential when training new attorneys. Provisions are different between brands and contracts, but also industries. Data protection in the healthcare industry is different than gaming software companies. An attorney who switched industries may have to learn how to word provisions differently, which is easier with a clause library.
Your contract language remains the same regardless of your attorneys' experience or current state of mind.
What clauses should I expect a clause library to have?
First, you need to start with organizing clauses. General categories in your clause library may include:
- Types of Clauses – Definitions, time frames, performance requirements, and each party’s rights
- Type of Contract - Privacy policies, licensing agreements, employment contracts, and data processing agreements
- Clause Bundles - E.g., data security, enforcement, or forum selection clauses
- Modified Clauses - Clauses used for specific situations, e.g., a vendor contract with an individual vs. a Fortune 500 company
- Alternative Clauses - Provisions to consider during negotiation
- Subclauses - These accompany master clauses. Your clause library can pair these clauses with their appropriate master clauses and categories.
These features can identify risk as you negotiate a contract. Lengthy contract negotiations often increase risk as parties become more conciliatory. Categories like “alternative clauses” keeps this in check so you don’t agree to anything that works against you. Your contract management software should allow you to revise these clauses as needed and tie them to agreements.
What CLM solutions offer an integrated clause library?
Lexion offers an integrated clause library among its CLM solutions. You can pair that with A.I. Contract Assist, which suggests clauses and redlines provisions in real time. These solutions reduce drafting time and focus on low-complexity contract language. Your expertise can focus on what makes a contract unique and how to meet the client’s needs.
