Commercial Contracting Trends in 2023

Commercial Contracts Trends for 2022-2024

In this panel discussion, the speakers discuss commercial contracts trends for 2022-2024. They talk about the increasing reliance on technology in contract management and how it is making transactions smoother and faster.

Introduction of Panelists

• Matt Margolis introduces himself as the head of community at LawGeex.

• Alex Sue, Head of Community Development at Ironclad, talks about his role in engaging with the community to chat about all things related to contracts and law.

• Aprajatha, Commercial Counselor at Elasticsearch, shares her background working in insurance and legal tech before joining Elasticsearch.

• Taylor Dimler, Senior Commercial Counsel at Twist Bioscience Corporation, talks about her experience working remotely from San Diego on the commercial contracts team.

• Ariel Reisinger, Commercial Counsel at Vroom, discusses her prior experience working in insurance-related work before joining Vroom.

Increasing Reliance on Technology

• Matt asks the panelists if they are seeing more or less reliance on technology in contract management operations going into 2022-2024.

• Alex responds that Ironclad is seeing strong adoption of technology relating to contracts due to a recognition that there's a lot of work to be done with very few resources. He mentions that many companies are using paper for contracting but digital contracting is becoming increasingly popular.

Tech Adoption in Contract Management

In this section, the panel discusses the challenges of finding the right tech solution for contract management and getting buy-in from team members.

Challenges of Finding the Right Solution

• There are many options available, making it difficult to find the right solution.

• The contracting process can be complex due to factors such as organization size, process, and risk profile.

• Adoption may be low because it's challenging to find the right solution for a team or organization.

Importance of Buy-In

• If team members aren't used to utilizing tech tools, implementation may fail.

• Smart solutions like Ironclad can save time and improve communication between departments.

• More dependence on tech tools in day-to-day tasks is becoming common.

Examples of Tech Tools Used

• Monday is used for overall management, Slack for internal communication with stakeholders, and Aviso for commercial council work.

• Elastic is implementing Ironclad for data management and templatization.

New Tools in the Legal Tech Market

In this section, the speakers discuss new tools that are utilizing AI or other kinds of tech tools outside of CLM. They express their skepticism about the impact of AI on legal work and highlight the importance of human intervention.

Impact of AI on Legal Work

• The speaker expresses skepticism about the impact of AI on legal work, stating that it will not take away jobs or eliminate the need for critical thinking.

• The speaker gives an example of how automated phone systems frustrate customers and highlights the importance of human intervention in solving complex problems.

• The speakers discuss recent law school graduates' concerns about CLMs taking away tasks and emphasize that they do not eliminate the need to think through legal issues.

Role of Technology in Legal Work

• The speakers agree that CLMs make tasks easier by helping with organization, finding language, and keeping track of deadlines.

• The speakers highlight technology's role in keeping processes organized and having an auditable trail but emphasize that it cannot replace human intervention when it comes to reading contracts.

Utilizing AI to Create Contracts Online

In this section, Alex discusses utilizing AI to create contracts online.

Creating Contracts Online

• Alex mentions people using AI to create contracts online and then letting them go without any further review.

Trends in Contracting and AI

The speakers discuss trends in contracting, including companies moving up market and selling more expensive products with complicated contracts. They also talk about the role of technology, such as AI, in the contracting process.

Companies Moving Up Market

• Companies are moving up market and selling more expensive products with complicated contracts.

• This trend means that there is a lot of demand for commercial council across the board.

• Contracts are getting more complex as companies move up market.

Role of Technology in Contracting

• Technology can help with routing to more approvers internally but cannot replace the negotiation or redlining process.

• Other important topics related to contracting include convincing stakeholders to adopt new processes and dealing with people who have preferred contracts.

• AI can create the bones of an agreement based on a database of agreements, but it does not take away from the need for lawyers to negotiate terms and evaluate risk.

Using AI to Empower Legal Teams

• Each AI unit should be viewed as another staff member on your legal team.

• There is a lot of implementation, training, review, feedback, and refinement involved when using AI for tasks like patent analysis or contract management.

• Using AI can empower paralegals and contract managers to handle simpler tasks so that lawyers can focus on larger collaboration agreements.

AI-Based Tools in the Legal Industry

The panelists discuss their views on AI-based tools in the legal industry and whether they believe these tools will replace attorneys.

AI as a Helper, Not a Replacement

• The panelists agree that AI-based tools are here to aid attorneys in their tasks rather than replace them.

• There is more adoption of tools that help pull out data from historical documents or highlight key risks, but based on analysis and discussions, these tools will not be replacing attorneys anytime soon.

• Chat GPT clarifies that lawyers apply the law to unique facts and situations, while chat GPT can help find the law that needs to be applied.

• Co-counsel utilizes GPT4 to make lives easier by providing answers on data and contracts, highlighting relevant provisions, and making recommendations.

Doing More with Less in Legal Operations

The panelists discuss how they are managing doing more with less in their respective legal operations.

Reviewing Everything at Vroom

• One panelist reviews everything that comes through at Vroom, from basic NDAs to large partnership deals.

• Privacy and security have become important elements for this panelist's job when reviewing contracts and handling vendors.

Creating Playlists for Different Contract Types

• Another panelist has created playlists for different contract types and established general feedback provisions.

• General thresholds have been set for each type of contract.

Learning Staff Skills

In this section, the speaker discusses how they utilize their staff's contracting experience to save time. They also talk about using revenue thresholds to determine whether to review a customer's template versus their own.

Utilizing Staff Skills

• The speaker has been lucky enough to have staff with contracting experience at various places throughout their career.

• They utilize their staff's skills in order to save time.

• Reviewing a customer's template versus theirs often depends on a certain revenue threshold.

Revenue Thresholds

• The organization strictly follows ACV thresholds.

• They try to push standard documents or URL terms in cases where it does not seem worth the time and effort to negotiate long documents.

• There have been more exceptions lately to those thresholds.

Conditional Workflows and Sales Collaboration

In this section, the speakers discuss utilizing conditional workflows and collaborating with sales teams. They also touch on messaging and keeping things simple for salespeople.

Conditional Workflows

• Some people use conditional workflows as well so that they can automate certain processes.

• This has freed up legal especially when utilizing thresholds.

Sales Collaboration

• Messaging is critical because there is an ongoing stereotype of legal being the department of no.

• Keeping things simple and letting sales self serve goes a long way.

• Sales don't want to be waiting around for responses from legal.

Introduction

In this section, the speakers introduce themselves and discuss their experience with self-service tools.

Self-Service Tools

• Self-service tools are helpful from a sales perspective.

• The team discusses the benefits of using self-service tools for revenue hitting and commission purposes.

Simplifying Legal Language

In this section, the speakers discuss how simplifying legal language can aid in adoption and commitment to usage of CLM or AI.

Providing Sales Team with Playbook

• A playbook is provided to sales teams that includes a paragraph they can share with customers to explain why they prefer their template.

• Empowering sales teams to use these playbooks will help them see general responses to that language.

Highlighting Efficiency Improvements

• Highlighting how CLM or AI improves efficiency will improve adoption and commitment to usage going forward.

• Slow uptake was experienced when first implementing Ironclad due to building out templates. However, after a year into implementation, feedback across all divisions shows improvement in communication, quicker negotiations, and empowerment for referring back without having to email legal.

Customer Perspective on Templates

In this section, the speakers discuss customer perspectives on templates and how relying on vendors' templates can be more efficient than creating their own.

Using Vendor's Template

• It is more efficient for customers to work off of vendor's templates rather than trying to come up with one that works for the variety of providers they use.

• Customers rely on vendors to provide reasonable templates except for NDA which has its own template.

Sales Negotiations and Incentives

The speaker discusses how they prepare for sales negotiations, including analyzing documents quickly and managing expectations. They also ask if anyone has experience with sales incentives, such as bonuses for successfully pushing paper with few red lines or discounts for accepting customer paper as is.

Sales Incentives

• The speaker asks if anyone has experience with sales incentives, such as bonuses for successfully pushing paper with few red lines or discounts for accepting customer paper as is.

• No one in the group has seen these types of incentives used before.

• One participant expresses concern about offering discounts on services just to accept paper as is, due to potential risks associated with personal information.

• Another participant mentions that they have seen more traditional incentives, such as rebates based on annual or quarterly thresholds.

Market Trends in Negotiations

The speaker asks what trends people are seeing in the market regarding negotiations. Participants mention heavy negotiation around privacy-related terms and provisions related to indemnities and damages caps or customer information breaches. There was also an increase in negotiations around including pandemic-related language in force majeure provisions.

Privacy Negotiations

• Participants mention heavy negotiation around privacy-related terms.

Indemnities and Damages Caps

• Participants mention that indemnities and damages caps related to customer information breaches are being heavily debated.

Pandemic Provisions

• There was an increase in negotiations around including pandemic-related language in force majeure provisions.

Security, Privacy, and Confidentiality Breaches

This section discusses the changes in security, privacy, and confidentiality breaches over the years. The speaker talks about how there are different levels of caps of liability and super caps and all these exclusions and carve-outs.

Changes in Force Major Provisions

• The pandemic has brought changes to Force Major provisions.

• Businesses are required to make active steps to mitigate risks.

• If something is persisting for more than a certain amount of days, there is a right to terminate suddenly.

• Force Major provisions have become more nuanced.

Negotiations on Termination Terms

• There are negotiations on terms termination for convenience sure termination penalty early termination penalties that sort of thing.

• People are getting much more cost-conscious in the shorter term.

Continuity as an SLA

• Continuity is becoming more like an SLA (Service Level Agreement).

• Providers need redundancies in place to continue providing services during pandemics or natural disasters.

• Customers should not have to pay full price if providers cannot provide all services.

Pandemic Language in Contracts

This section discusses how pandemic language was added to contracts when COVID first hit. The speaker talks about how they advised clients to add epidemic pandemic language just as a rule to their templates for Force major provisions because it made sense.

Adding Pandemic Language

• When COVID first hit, clients were advised to add epidemic pandemic language just as a rule to their templates for Force major provisions because it made sense.

• There were no problems or pushback on adding this language.

Privacy Issues

This section discusses privacy issues and how they have become a huge issue. The speaker talks about how they focused on privacy when the new CPRA was getting approved.

Focus on Privacy

• Privacy has become a huge issue.

• The speaker focused on privacy when the new CPRA was getting approved.

• There were more rules and guidance on GDPR that year.

Privacy Negotiations with Different Regions

In this section, the speaker discusses how privacy negotiations vary depending on the region and parties involved.

Factors Affecting Privacy Negotiations

• Privacy negotiations are regionally based and depend on who is involved.

• The type of materials being exchanged between parties also affects privacy negotiations.

Rise in Indemnity Caps for Data Breaches

In this section, the speaker talks about the rise in indemnity caps for data breaches and why it has happened.

Reasons for Rise in Indemnity Caps

• The rise in indemnity caps is due to a combination of factors such as GDPR regulations, increased awareness of potential costs associated with data breaches, and global privacy laws.

• People realized that what was once a nebulous risk now had actual numbers attached to it, leading to an increase in demand for limiting risks associated with data breaches.

Predictions for Commercial Contracting in 2024

In this section, the speakers discuss their predictions for commercial contracting in 2024.

Predictions for Commercial Contracting

• AI will be important but may die down after initial hype.

• There will be an increase in demand for commercial work due to more contracts being exchanged with technology being integrated into conversations.

• More tech tools will be used to support tasks and there will be more utilization of AI to help with analysis or research.

• Companies will empower staff members from different departments to negotiate contracts rather than just relying on attorneys.