January 31 by Casey Flaherty

When we frame the question as the “future of contracting,” we are apt to fall into a trap. We focus on the just-over-the-horizon, the whizbang, the magic gizmo, and we ignore the low-hanging fruit in the form of technology we already have. In fact, there are way too many people who rationalize the dysfunction of their existing contracting process by their perpetual search for technology breakthroughs that will make contracting easy.

The future of contracting will involve deliberate movement up the value chain, much of which can already be achieved with existing technology. While every contract seems bespoke to a start-up, as companies mature, their agreements become more routine and should be treated accordingly, especially as contract volumes increase. Yet organizations initially respond to higher volume by throwing bodies at their problems. They hire more lawyers – externally, then internally.

contractsToo many lawyers currently spend too much time copying and pasting clauses they do not understand into agreements that do not need them. They then feel compelled to engage in mindless tinkering to leave their mark. The result is random mutation of contractual language that is referred to in the academic literature as our “black hole problem.”

But as expense escalation becomes unsustainable, organizations move towards templates, playbooks, and automation to begin building a self-service culture that embeds institutional knowledge into systems. Eventually, only a small percentage of outliers get escalated to the lawyers, who are now put to their highest and best use.

The future of contracts will not expunge legal expertise from the negotiating or drafting process; expertise will become more embedded. After all, much of what we think of as ‘Artificial Intelligence’ is the ability to apply at scale what legal professionals already do (and, in many instances, we don’t need actual AI to leverage that expertise).

Our whizbang future will be about process: combining intellectual rigor with tools that have been around for years. Adding AI, blockchain, etc., may enhance or accelerate this evolution. But invention is not a prerequisite to innovation, especially when there is so much opportunity for catch-up growth.

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