9 Stages of Contract Lifecycle Management


Contracts are like an engine. Without them, it’s almost impossible for businesses to do anything. At the same time, contracts are a security net that helps organizations control risk and mitigate uncertainty. But, due to the complexity of their subject matter, even the most well-written agreements contain some degree of risk. In fact, contracts can and do go wrong. 

Good contract management helps guarantee that key legal components are executed on time and efficiently. Since organizations rely heavily on legal documents for their activities, systematizing contracts is essential for minimizing the possibility of future errors and problems. Taking such an approach early on can lead to significant savings in time, energy, and money.

To assist the process, that’s where Contract Lifecycle Management (CLM) comes in. CLM seeks to control unnecessary risk so that companies can confidently proceed with their daily business. 

There are many important benefits to CLM: allocating workloads as needed, ensuring documents are in compliance, and measuring key performance indicators. These are just a few. But where CLM truly shines is at creating an efficient, timely workflow.

That’s because CLM breaks down the contract’s lifecycle into a series of concrete stages with distinct activities. In other words, it is a system of steps that are clear and easy to manage. 

This is where CLM software can help. As a dedicated solution, it excels at managing CLM workflows in a controlled and systematic manner. Moreover, in addition to supporting CLM, software can speed up the process by automating certain steps as needed. 

Sounds impressive, doesn’t it? But what are these stages that we referred to? What’s required of each one? If you’re unfamiliar with them, or if you’d like a quick refresher, then keep reading to learn the 9 stages of contract lifecycle management. 

Stage 1: Contract Request

Everything has to start somewhere. And for contracts, that’s no different. Life begins the moment one party proposes a contract to another. 

Naturally, a simple request won’t suffice. The request should come with information that can be used to create the document: critical dates, important milestones, relevant organizations, and so on. 

This applies to all contracts, whether they’re for hiring staff, selling assets, or purchasing properties. The more information collected for the request, the easier it will be to create the contract. CLM software can support this step by not just systematizing the process, but by serving as a repository for relevant information and materials.

Stage 2: Authoring

Sometimes called “drafting”, this is where all the contract’s terms, details, and conditions are laid out. Components such as deadlines, terms of service, and means of handling disputes should be specified. The authoring stage is also when those who will approve and sign the contract are determined.

As many contracts include fairly standard language – with the primary difference being personal information like the client’s name – document automation can dramatically reduce the amount of time spent on this step while drastically speeding up the process. This is something CLM software is perfectly suited for. 

Stage 3: Negotiation

Ask any good writer and they’ll tell you the first draft of their latest novel is never perfect. There are several small aspects to finalize and unnecessary details to get rid of. 

The same holds true for the legal industry. Once everyone reviews the contract, there are often some components that need adjustment. And since contracts involve at least two parties, changes must be discussed and disagreements resolved. This will trigger negotiations.

But for negotiations to be productive and efficient, preparation is required. A good approach is to gather all positions, documents, and intended outcomes in one place. Not only can CLM software serve as a repository for all this information, it can help in facilitating requests and approving amendments. This has the added benefits of saving time and freeing up resources.

Stage 4: Approval

During the authoring step, a good practice is to create regular opportunities for review and approval. That way, once all parties are in agreement, the final review and approval may take less time. 

Both internal and external reviews may be necessary, depending on the contract. CLM software can be used to set up internal and external review processes. Additionally, it can help make sure the designated stakeholders have the permissions they need and that no unauthorized changes can be added.

Stage 5: Signing and Execution

After the agreement is approved, all that remains is to sign the contract. Once signed, the contract becomes legally binding and the obligations should be fulfilled as stipulated. 

Signatures can be done either manually or online. However, electronic signatures must be in compliance with various regulations.

Stage 6: Obligations Management

From here, it’s time to start delivering the results that were promised. In other words, the parties have to fulfill their sides of the agreement. There are several ways to track contractual obligations, and the parties involved decide which method is best.

CLM supports obligations management by storing records in a secure and reliable manner. Records are also backed up to local servers and safeguarded against potential improper actions like accidental deletion. 

Day-to-day management becomes easier as well. Requests and reminders can be sent automatically, allowing legal teams to focus more on high-value opportunities.

Stage 7: Contract Amendments

Just as life changes on a daily basis, situations also change. Something may happen that forces the contract to be amended. This is especially common for long-term contracts that last for more than a year. It’s natural for there to be moments when adjustments are required. When this occurs, the involved parties repeat the previous stages as needed.

Stage 8: Audit and Reporting

Stakeholders should receive regular reports that indicate how the contracts are being executed and performed. Along the way, contracts may need to be reviewed on a semi-frequent basis. This is to guarantee that they satisfy various industry requirements and government regulations. 

Performance analyses can also be conducted at this stage. This keeps parties informed about how well various teams, branches, or regions are working, and if there are any performance issues that must be addressed. 

For this, legal teams must be able to quickly retrieve information. Knowing who accessed records, as well as who made changes and when, is useful. It’s also critical to learn about contract breaches such as late payments, non-deliveries, and improper changes. 

These issues are flags that suggest potential non-compliance. Because CLM stores and indexes documents, not only can information be quickly retrieved for in-depth reports, but notifications can be tailored so that involved stakeholders are kept up-to-date.

Stage 9: Renewal and/or Termination of Agreement

And just like all things have a beginning, all things must come to an end. Once a contract expires, there are two primary options: renewal or termination. In either case, the decision must be made on time. This is for everyone’s benefit as it avoids potentially negative outcomes, such as financial penalties.

In many cases, contracts contain language that stipulate automatic renewal unless one party actively terminates the agreement. CLM provides support by informing legal teams about upcoming deadlines so that they can avoid accidentally extending unneeded contracts and incurring financial losses. And through automatic reminders and notifications about important dates, CLM software can help teams avoid unpleasant situations.

Final Thoughts

Although all of these stages can be done manually, CLM system like AXDRAFT ensures that each step can be conducted in an efficient, timely, and systematic manner. Possible financial and legal risks can be reduced, if not completely eliminated, which helps keep documents in compliance. Additionally, automating certain management activities that require little high-level thought can generate sizable financial savings while allowing legal teams to work more productively.


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