Wash your hands of manual doc review: The Coronavirus and its effect on contracts
The Coronavirus is having an enormous impact on a global scale in terms of health, travel, supply chains, working procedures and events. As a result, Firms around the world are analysing the contracts in their document management repositories to see if a Force Majeure (act of God) clause is present, and seeking to understand whether the Coronavirus is an event which enables them to terminate or postpone their contractual obligations.
As of 11th March, the World Health Organization has stated the Coronavirus is officially a global pandemic. Force Majeure seeks to protect contracting parties from unforeseen events and so firms are seeking to understand whether, what is now a pandemic, can be deemed an unforeseeable event. This means that while the Coronavirus unfortunately appears to worsen, the need for fast, accurate contractual information becomes ever more paramount. As the contract digitization world has evolved and the use cases from new regulation to global events continue to require large contract review programmes, the need to digitize contracts seems to become more of a ‘when’ than an ‘if’.
From a contract lifecycle management perspective, most institutions have a form of contract management system which stores meta data about their contracts such as parties, date of agreement and contract type. More sophisticated firms are now using AI software to search for these provisions. This software performs OCR (Optical Character Recognition) on the contracts, which makes them searchable, and then extracts key clauses from those contracts. Once extracted, key provisions are stored as data in an easily searchable way across the entire contract database.
While the digitization of contracts can initially be complex, the benefits become clear over time. The journey to digitization requires the identification of all documents, creating and testing of data models, then quality assuring extracted clauses against established playbooks. Once complete though, finding (for example) Force Majeure provisions will be very straight forward. The alternative, of course, is a long process to gather and manually review contracts.
Organizations who are about to embark on large digitization programs, such as those who will be searching for LIBOR related terms as part of the LIBOR transition can use such programmes as an opportunity to capture clauses that may be useful for a wider range of use cases and needs. It does require increased work through requirement gathering, but once complete, it protects organizations against any future requirement for large scale contract review. For those organizations about to embark on extraction programmes it is worth considering what other fundamental terms could be included in this review, so it is done once, and done right.
Matthew Allen, Global Head of Legal Services and Americas Head of Relationship Management