Phases of the Contract Abstraction Process and How Automation Can Help
Contract abstraction is the best way to consolidate contractual rights, liability, and obligations by pulling out key aspects from the body of the agreement. By implementing contract abstraction processes into your contract management framework, contracts become easier to understand, and the overall contract management process becomes more convenient.
What is contract abstraction?
Contract abstraction is the practice of summarizing a statement or a specific piece of information (such as dates or clauses) from a contract. It is a legal method that emphasizes all relevant provisions and provides a glimpse into the agreement’s critical information.
The importance of abstraction
Contracts are an essential asset for every company. They aid in defining and regulating any new partnership and the agreement’s rights and responsibilities. As a business grows, the complexity of its operations and the volume of contracts must be managed effectively, making abstraction vital.
When to use abstraction
When contracts contain a lot of legal terminology and needlessly long sentences, that can be confusing, it makes interpretation far more difficult and time-consuming. Contract abstraction becomes a required component of the contract management process at this point. Agreements become easier to understand for non-legal professionals when abstraction techniques are implemented into your contract management framework, as the relevant provisions and vital information are summarized and highlighted.
How to do contract abstraction
Contract abstraction aids in the digestion of lengthy and complex agreements by turning them into a comprehensible summary of the main points. Companies can save time and resources while assuring compliance and enhancing overall productivity by abstracting dates, clauses, payment terms, and other critical information in legal documents. This approach streamlines and facilitates the legal team’s job while ensuring that everyone understands and follows the contract.
Here are the key components of the abstraction process:
1. Unique format creation
Establishing a format is the first step in the contact abstraction process. Companies typically do this on an excel sheet or a word document to abstract metadata per the client’s request. In most cases, the procedure will be conducted in a question-and-answer format.
2. Contract review
The contract review phase is arguably the most important stage. This step entails reviewing the entire contract and going over each associated document to identify the key points. The reviewer must go line by line and clause by clause to ensure that no critical information is missed during the review.
3. Contract analysis
The provisions must be evaluated and interpreted at the analysis stage to understand the contract’s details fully. Since this stage is essential to the final contract abstract, the legal team should thoroughly understand each clause to avoid any future issues.
4. Information abstraction
The abstraction process is the last step. In this process, identified data is abstracted and structured into an understandable format. The correct information must be identified to include the relevant key points in the finished abstraction. The abstract can be used as a quick point of reference compared to hunting down information in the agreement itself if done correctly.
Contract abstraction checklist
Before beginning the abstraction process, professionals should consider a few things, such as recognizing significant terms, metadata, and other aspects of the contract.
Contract abstraction entails several tasks, including:
- Defining contractual rights and obligations
- Identifying the contract’s inconsistencies or contradicting provisions
- Making updates and revisions to the agreement
- Examining the contract for any amendments
- Creating a compliance checklist that includes timetables, renewals, and progress reporting
Boost efficiency and eliminate errors with automated contract abstraction
Searching through hundreds or thousands of documents repeatedly to find critical information requires excessive time and resources. Manually searching through these contracts also often results in damaging mistakes. Contract abstraction software is a versatile tool that allows you to better understand legal documents quickly and accurately. Cost-effectiveness, ease-of-use, and speed are just a few of the major benefits enabling your team to focus on the company’s future.
Here are the reasons why your company will benefit from implementing an intelligent contract abstraction tool:
- Make the abstraction process quick and accurate via AI
- Instantly gain access to critical information via a repository
- Upload and analyze documents virtually
- Stay on top of industry changes and identify obligations
- Cloud storage allows for remote access
- Increased risk management
- Save money by eliminating legal penalties and missed revenue
- Gain insight into contract opportunities through intelligent data