What is contract standardization and what are the benefits? 

More than ever, legal teams have a duty to shield their organizations from unnecessary legal risk in an increasingly competitive and complex business environment. Often this risk comes in the form of lost revenue from vague contract language and rogue clauses that give away too much value. Other times risk is harder to detect, as inefficient contract processes and wasted time put a drag on the bottom line. 

Many sources of business risk can be mitigated through the strategic use of standardized contracts. This article will outline the basics of contract standardization, help you identify the best contracts to standardize, and walk you through the contract standardization process. 

What is a standardized contract? 

Standardized contracts use preapproved contract templates to maximize consistency and streamline the end-to-end contract process. Often called boilerplate or standard form contracts, the terms and conditions of these documents are predetermined and preapproved—so they typically allow little room for negotiation. Standardized contracts can reduce manual work and accelerate time-to-signature for certain types of transactions. 

Standardized vs non-standardized contracts 

Most companies use contracts for a wide variety of purposes. Some of these contracts are exactly the same every time, while others must be heavily customized or even drafted from scratch to meet the business needs of everyone involved 

In general, it makes sense to standardize basic contracts that are executed at scale—especially when there’s little at stake in terms of risk and revenue. To identify contracts that could potentially be standardized, look for these characteristics: 

• Simple terms 
• High volume 
• Low risk 
• Low value  
• Minimal negotiation   

Keep in mind, not all contracts can (or should) be standardized. Complex or highly specialized business transactions are not a good fit for preapproved templates. Any agreement that is likely to require significant negotiation is also not appropriate for standardization. That said, even non-standardized contracts can benefit from streamlined contracting processes.  

Examples of standardized contracts 

Standardized contracts are especially useful when you need to set the same terms for a large number of contracts, because they create consistency and accelerate the end-to-end contract process. Following are some of the most common examples of standardized contracts:  

• SaaS agreements already cover a variety of complex terms, including data use, liability caps, indemnities and more. Standardizing these contracts prevents additional customization that would quickly become unwieldy. 
• Vendor agreements need to be consistent, so a company can manage its many vendor relationships effectively. Standardization allows organizations to quickly execute a high volume of vendor agreements. 
• Non-disclosure agreements (NDAs) are relatively simple contracts designed to protect the interests of one party, so they typically are not open to negotiation. 
• Non-compete agreements are similar to NDAs, in that they are generally unilateral and non-negotiable—making them an excellent candidate for standardization. 
• Master service agreements (MSAs) are all-inclusive contracts used to govern the commercial relationship between a company and its clients. Standardized MSAs help to ensure high-level consistency, while allowing for negotiation of individual contracts under the MSA.  
• Option agreements give one party the right (but not the obligation) to buy or sell an asset at a given price and timeframe. They are often standardized to ensure consistency. 
• Terms of service are used to govern online services that require users to create an account. Standardization is a must with these agreements, as there’s no room for negotiation—especially if the service is free. 
• Rental property agreements typically contain standard terms related to price, payment dates, liability, and more—which generally cannot be negotiated by the tenant. 
• Employment agreements for high volume positions can often be standardized, although some employment agreements can be negotiated—especially when it comes to salary and benefits.  

Contract challenges businesses face without contract standardization 

Without standardized contracts, companies may encounter costly risks like:  

Contract language control         
In high-volume sales environments, contract language is a source of constant anxiety and risk. Often, language is inconsistent across the organization—especially when contracts involve a range of custom clauses, terms, and conditions.  

Contract delays         
Sales teams are under pressure to sign new deals or renewals quickly in support of revenue and performance goals. Different customers have different demands, and every change or modification in a negotiation triggers updates to contract clauses that can overwhelm legal teams and bring contract cycles to a grinding halt.  

Rogue contract clauses         
In the pursuit of client acquisition or retention, sales teams may offer enticements or incentives to close a deal after tough negotiations. But the rogue clauses highlighting these incentives may give away too much value or revenue to the client, or violate corporate policy, industry regulations, or compliance standards.  

Conga’s solutions help legal and sales teams standardize contract language, workflows, and approval processes to minimize risk without jeopardizing much needed speed and control in the sales cycle. 

Benefits of standardized contracts 

By now it should be clear that there are many reasons to consider standardizing some portion of your business contracts. Standardized contracts provide countless benefits to your organization, including:  

• More efficient negotiations: Standardized contracts are quicker and easier to execute than non-standard contracts, so your sales team can close deals with less effort. 
• Increased consistency: Standardized contracts help to ensure that all contracts of the same type include the same terms and conditions, so you can manage your business more effectively. 
• Reduced manual effort: Standardized contracts reduce the time needed to draft and approve individual contracts, so your legal team can spend more time on high value work. 
• Cost savings: Standardized contracts reduce the time and resources spent on repetitive tasks, resulting in lower transaction costs. 

How to standardize a contract 

With enough preparations—and the right tools—standardizing contracts can be a simple process. Here are some tips to get you started. 

1. Decide which contracts to standardize        
   Before you dive in, it’s important to define what you’re trying to accomplish. Which contracts do you use most often? Are there contracts that require too much repetitive manual work? Answering questions like these will help you identify which contracts might need to be standardized. And as we discussed above, the best candidates for standardization are simple, high volume, low value, and low risk.        
    
2. Analyze your current contracts        
   Start by gathering all the versions of one contract type—say an MSA or NDA—and identifying the common links between them. Are there clauses that are seldom negotiated? Sections that always get redlined? Anything that’s consistently questioned? This exercise will give you a better understanding of what to include in a standard contract template.        
    
3. Simplify, simplify, simplify        
   The key to a successful contract template is simplicity. You need your contract terms to be straightforward, concise, and jargon-free—while still covering all your bases. Try to rework or remove anything that’s likely to cause confusion. Tables and figures can be used to make complex terms easier to understand.         
    
4. Strike a balance        
   Standardized contracts work well for transactions that are largely non-negotiable. That said, the terms and clauses in your standard contract should be fair for both parties. After all, the more balanced your contract is, the faster it will be to execute—because there will be no reason to object or negotiate.        
    
5. Build your master contract template        
   Once you’ve determined what to include, it’s time to create your master contract template. A high-quality contract management solution can help you create sophisticated templates that standardize your contracts, while allowing for flexibility where it’s needed. Be sure to apply your company’s brand standards and include appropriate design elements, to keep the document consistent with your brand identity. Gather feedback from stakeholders to ensure your proposed template works for everyone who needs to use it.        
    
6. Roll out the new standardized contract         
   Training and enablement are critical to ensure your teams know the standardized contracts exist—and how to use them. Educate stakeholders on what each contract template contains, what the clauses mean, and what (if any) flexibility is available. Contract management software can help to protect contract templates from unauthorized revision.         
    
7. Create automated workflows        
   Once your contract template is finalized, you need to make sure it follows the appropriate steps from creation through execution. Setting up an automated workflow in your contract management software lets you build a safe, efficient, and compliant contract process—while giving stakeholders visibility into the entire contract lifecycle. 

Conga contract lifecycle management 
 

Conga’s solutions help legal teams better define and control contract language without adversely impacting sales cycles. Conga’s integrated platform of solutions enables legal teams to: 

Simplify negotiations and contract details         
Legal teams can use Conga’s pre-approved clause library to create alternate clauses that enable clause swapping, empowering sales teams to independently take on more of the negotiation process without increasing exposure or risk. Now, legal teams can create contract clauses covering every conceivable obligation—responsible parties, due dates, delivery timelines, and more—for sales teams to use throughout their negotiations without the risk of rogue clauses or falling out of compliance with myriad rules and regulations.  

Improve security and speed         
Purpose-built document templates help legal teams standardize everything from master service and non-disclosure agreements to service contracts, sales quotes, and more. Document creation is simplified with the native integration between the pre-approved clause library and document template, meaning each clause selected from the library auto populates the contract in the right place, dramatically reducing language mistakes and the time required to complete a legally sound contract.  

Each template exists in a controlled, secure environment in which documents can be fully locked down to prevent unwanted or unauthorized changes. Yet, there’s no limit on how many variations of the templates teams might create to meet their unique demands.  

When revisions are necessary, users can update them using a familiar Microsoft Word interface that doesn’t require additional training which can delay the contract process. These intuitive templates empower sales teams to self-service many of their needs, alleviating the burden on their overstretched counterparts on the legal team.  

To learn more about Conga’s contract lifecycle management solutions, contact us today or schedule a demo.