Contract analysis: Difference between revisions

So however accurate a mark-up may become, there will always be a need for a human to read and approve it. A common subject for these contract review tools is [[confidentiality agreement]]s, being as they are (a) low risk; (b) ''substantially'' standard: all confis say the same basic things; and (c) ''formally'' variable: there is no limit to the profligacy with which legal eagles can waste qwords in articulate these basic commercial requirements apable of infinite variation in their articulation

But even here the technology disappoints and, in predictable ways, makes an existing problem even worse than it otherwise might be. Institutions are decommissioning review systems the same way they are repatriating once offshored operations functions.<ref>Isn’t it funny how you never hear about ''cancelled'' offshore operations?</ref> It is worth investigating why.

Start with the problem the contract review tool is designed to solve: [[Confidentiality agreement]]s are seen as generally low-importance, low-risk agreements — assuming they are properly negotiated — that one must get through as quickly as possible in order to get on with more fruitful commercial negotiations. They tend to be “I’ll show you mind if you show me yours” kind of an affair. But — especially in this data obsessed world — they are buried risks if you don’t watch them carefully. The [[JC]] has a whole [[Confi Anatomy|confi anatomy]] you can peruse if you would like to know more.

So you need your legal eagles to be en guard to stop the stupid getting in.

Now: [[confidentiality agreement]]s come in all different shapes and sizes. They needn’t be longer than a few paragraphs, but our American friends are given to presenting 15-page bunker busters, which in the main amount to much the same thing as a concise one, ''but you never know and you must watch them like a hawk''.  There are a few points you need to check: the definition of confidential information, exclusions from the general definition, rights to disclose information that is confidential, the term, scope of remedies for breach. It is all, in concept, standard stuff. But it is a faff — depending on how excruciating is the writing style of the author, it might take up to an hour to review, correct mark up and send back. And it isn’t exactly glamorous.

So the problem: it’s slow, it takes a bit of time, the review parameters are fairly [[complicated]] (but not [[complex]]) — there is a limited risk of missing something — and ones inhouse [[legal eagle]] has invariably got better things she could be doing. This is, in person hours, effectively costing the firm money.

====The contract review tool as a solution.====

The [[contract review tool]] promises to perform this first basic check by reference to a pre-defined playbook of confidentiality policies, rather like a triage unit at a military hospital. You give it a once over and it goes out the door. Brilliant.

But it turns out parsing text lovingly confected in the brow of some unknown legal eagle isn’t as easy as all that. Just boring syntactical things like handling plurals and irregular verbs is extremely hard to code. And while in time the machine will get better at that, the universe of possible ways of articulating an idea is infinite and, while most legal eagles suffer from a form of locked-in syndrome which inhibits access to large parts of their imaginations when it comes to exercising their talent for textual complexity and saying things which, for the avoidance of doubt, are not in doubt, it is an information superhighway. Parsing the fevered prose of a human lawyer will always need some kind of a human sense check. So, the contract review tools build in exactly that kind of sense-check function. They hire paralegals, in low-cost jurisdictions, to check the output before sending it back. This has three unfortunate consequences:

Firstly, it slows down the output: Instead of getting your markup instantaneously, you get it three quarters of an hour or more later. This is more than enough time for the modern eagle to have been comprehensively distracted by something else, and in any case ''it is longer than it would have taken to review and fix the contract in the first place.''

Secondly, it adds to the cost. Now, to be sure, [[reg tech]] providers are master [[rent-seeker]]s anyway, but here they have an actual out-of-pocket cost which they have to pay. Thus, the [[contract review tool]] will carry a heavy charge per document review. Better ones charge less than a hundred bucks. Some charge as much as three hundred, ''per review''. Suddenly the cost proposition that swung the business case looks a bit squiffy: your starting assumption is you are saving an hour of your internal legal’s time, which you unitise at, say, $250. But that is a ''nominal'' cost. It is sunk. A new confi coming in doesn’t generate that cost, and firing the thing out to your [[contract review tool]] doesn’t save it. Internal [[legal eagles]] are a fixed cost, and are notoriously hard to [[shredding|shred]] back to the business. They just sit there, on the firm’s dime, ''whether you use them or not''. Most work hard, of course — the [[legal eagle]] who punches out at 5pm on the smacker on ''any'' day, let alone ''every'' day is — well, a rare bird. He ''will'' look at that [[confi]], and anything else that needs to get done, at some stage during the day. ''[[Legal eagle]]s don’t work to rule''.<ref>As it happens, the occasional [[confi]] can be a pleasant distraction: a nice re-charger after a hard morning slogging through a series of regulatory change stakeholder [[Skype]] calls. Hey, management team: why don’t you try to get rid of all the ''stakeholder management calls''? ''There'' is a question.</ref> So, unless you can prove that, with your [[contract review tool]] you can actually let some of your lawyers ''go'', it is not saving ''any'' money. It is ''costing'' money — ''more'' than it would have cost your internal team just knock off the confi in the first place.

So reg tech that doesn’t work satisfactorily without a human standing behind it to prop it up isn’t reg tech: it is a ''gimmick''. What we are really talking about here is ''[[outsourcing]]''. But to a black box: these are personnel who you can’t see, you didn’t hire and you can’t evaluate, but you know for sure are a lot cheaper than your own personnel since you are now paying for them, this confounded [[reg tech]] (''also'' a black box, by the way: how much of the work-product is the tech, how much the [[meatware]]? If they won’t show you, assume it is mostly the [[meatware]]), not to mention the [[Rent-seeking|rent]] your [[software as a service]] provider is seeking to extract on the whole operation.