Every business will eventually face a contract review decision—whether to outsource a third-party provider, hire one or more contract review attorneys in-house, or hire non-legal personnel to handle agreements.
Generally speaking, contract review attorneys can offer a corporate legal department a tremendous amount of legal expertise, experience, and oversight. However, they are not the least expensive option for fulfilling contractual needs; it’s worth considering alternatives, particularly if your business is scaling.
Companies can also consider how new legal technology that has emerged within the last five years accelerates and streamlines the contract review process.
Reasons You May Need a Contract Review Attorney
A contract review attorney can be an invaluable member of your team when it comes to:
- Legal Protection: Contract wording and formatting must be precise to be legally binding. One ambiguous term could throw off a whole deal or put the company in jeopardy of defaulting on the contract. A corporate attorney will draw up and review a legal document to protect the business’s interests and that will be legally enforceable.
- Overcoming Bottlenecks & Inefficiencies: Contracts move from drafting to review to negotiations (and sometimes renegotiations) and, finally, to signing and enactment. Corporate legal departments can run into many bottlenecks and areas of inefficiency during the process, especially if inexperienced staff members are unsure if the contract terms are ideal. Several rounds of back-and-forth emails or phone calls may be necessary before an employee receives the approvals necessary to continue with the work. Additionally, there is a significant lag time and learning curve in training new employees to corporate playbook standards. When attorneys are at the helm, they oversee the entire corporate legal department to make sure approvals are granted in a timely fashion. Opportunities to automate and accelerate the process can help legal departments avoid unnecessary delays.
- Accelerating Contract Approvals: Faster contract negotiation closes more deals. Companies that have invested in speeding up sales contract management have reduced the sales cycle by 15 days and saved $1.2 million on average. Whether you’re investing in new technology or putting more contracts in the hands of an experienced attorney, you can expect to save a significant amount of time and money by focusing on this area of operational efficiency.
- Ensuring Accuracy & Playbook Adherence: Experienced attorneys have spent years studying precise terminology and contract drafting best practices. They’re aware of everything that could go wrong and which clauses represent the highest risks. They commit the company playbook to memory, develop new ground rules for negotiating, and dedicate themselves to the company’s best interests. Innovations in legal tech enable legal departments to leverage AI technology to replicate the work of an experienced contract attorney when reviewing and negotiating contracts.
- Staying On Top of Tech Trends: While the legal field has been slow to adopt emerging technologies, forward-thinking attorneys keep a pulse on the latest tools to streamline contract review efficiency. Incorporating a contract review solution gives your company a competitive advantage in contract negotiation, risk analysis, approval time, time to execution, and legal department training.
Reasons You May Not Need a Contract Review Attorney
While contracts are part of every business, a contract review attorney may not be needed in every case, depending on your:
- Business Size: Though lawyers can help provide fledgling businesses with protection from liability, it is commonplace for small startups to “wing it” until they become more established and can afford to add personnel. A 2021 survey by Rocket Lawyer found that 88% of small and medium-sized businesses have not had any contracts reviewed by an attorney.
- Common Contract Types: You may not need a lawyer if your routine contracts primarily involve forming a legal entity, patents, trademarks, basic employment contracts, and internal dispute resolutions. It may be possible to find templates for these agreements online or use a subcontractor who can adapt template terms to your precise needs.
- Budget: The average cost of an attorney’s salary is about $50/hour or $104,000/year, plus benefits. By comparison, outsourcing contract review could cost $300 to $1,000 per contract. Increasingly, contract review is performed by paralegals and analysts with backgrounds in business or finance. These analysts can be hired for $38,000 a year at entry-level.
- Willingness To Try New Technology: One way to save money, in the long run, is to consider moving to an AI-powered contract platform. LexCheck, for instance, provides automated contract review and negotiation and is as easy as sending an email. Within a few minutes, the AI will scan the contract for errors, inconsistencies, and outlying provisions. Obvious errors are auto-corrected, while more complex issues are redlined and annotated with context-based revision suggestions. Based on contract risk analysis, the AI can flag agreements that need to be escalated to a senior-level attorney. Leveraging an AI solution like LexCheck can assist contract review attorneys and accelerate the contract approval process while enhancing accuracy and playbook adherence.
AI legal tech is best used in conjunction with attorneys who can deal with high-level escalations. In one case study, LexCheck reduced these escalations from 80% to 10% to maximize the efficiency of top-paid staff and enable them to concentrate on high-value, strategic tasks.