Clause Library: What & Why of Using Contract Clause Library

Amit Sharma
March 26, 2022
3 min read

Contract Clause Library: Exploring its Purpose and Benefits

What is a Clause Library?

A clause library is a well indexed, searchable, and customizable repository of all possible legal clauses that your organization might use, review or approve in business contracts.

Why Does an Organization Need a Clause Library?

Organizations need standards for scale and efficiency.

Contracts pass through the desks of many stakeholders in any organization. Junior employees drafting or reviewing agreements, not only lack knowledge and experience but also the organizational or relationship context in which the agreements are being made.

They typically depend on existing contracts (considered internally as 'Golden Contracts'), internet searches, professional websites like ACC, or fall back on their network. While all of these are good ideas, a lack of organizational standards and a system of clause management will mean one of the two things:

  1. Every clause edit has to be approved by the senior, busy colleagues. This means contracts would be sitting in people's mailboxes just waiting for sign-offs during every iteration
  2. Clause language that is partially relevant or addresses contract risks only tangentially are drafted because there is no time to search for the most relevant example in every single case

On the other hand, when experienced attorneys or contract specialists are working on agreements, their previous experience, and extremely risk-averse perspective can sometimes lead them to draft clauses that are more like artisanal works of art than functional forms of language meant to protect their organization/client's interests.

What Does a Good Clause Library Implementation Look Like?

A useful clause library has

  1. Multiple examples of most types of clauses that your organization is likely to see
  2. Clauses that are tagged & searchable by various dimensions like
  3. State (specific statute can make a lot of difference in contracts like employment contracts, etc)
  4. Type of contract (the need and contents of a Force Majeure clause for an outsourcing agreement vs. a license agreement),
  5. Industry, practice, client, etc.
  6. Integration with MS Word since that is where most of the drafting and reviewing happens
  7. An easy-to-use interface that allows users to add, and edit examples basis their role privileges (For example, every new clause needs an admin approval, etc.)
  8. Central storage location so that best examples are not spread out in emails, hard to find documents on hard drives, cloud drives, etc.
  9. Easily to updates as laws change and new practice areas open

So, in summary, here are the key benefits of having a good 'Clause Library':

  1. Your team does contract drafting, review upto 2x faster
  2. You can ensure only pre-approved clauses are used for drafting & review
  3. You can use the contract review software as a good training aid for your new employees

How to build and manage a clause library using AI-assisted ContractKen

ContractKen helps you build, customize and maintain clause library. This clause library is fully searchable and suggestive.

clause library using AI-assisted ContractKen

Using the ContractKen Webapp, you can:

  1. Add new clause types
  2. Add new clause definitions, examples
  3. Edit, Delete existing clause types, and clause examples (there are 50+ clause types that are provided in the default ContractKen clause library out of the box)
  4. Tag each clause by State (US), Contract Type, or any other custom tag that you want to create (say for example practice type, client name, industry domain, etc.)

ContractKen clause library

We've integrated the clause library with the word add-in such that you can directly access the pre-approved clauses right within the document that you are reviewing, using the ContractKen word addin. You can either replace the concerned clause with examples from the library or insert it for comparison

Our design ensures that your contract review teams are only using the pre-approved clauses, and continue to maintain a robust clause library without complex technology integration or lengthy training sessions.

Relevant read: Understanding the role of clause library in contract risk management

Further Readings:

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