What is a Clause and Template Library?

In contract management, a clause and template library allows organizations to standardize the contract building process using a set of preapproved, reusable objects. Contracts underpin most of an organization’s daily operations and need to be accurate, complete, and enforceable. 

In a recent survey from World Commerce & Contracting, about two-thirds of organizations reported taking action to improve their contracting processes. Modern technologies are helping organizations streamline the entire contract management lifecycle using automation and digitalization. Sustained improvement in contract management will depend on implementing data-centric solutions (compared to the traditional document-centric approaches). 

In this post, you will learn everything you need to know about clause and template libraries. We’ll also delve into how these types of data-centric solutions help organizations and why more businesses are moving to a data-centric clause and template library to optimize contracting processes. 

Key Takeaways:

  • A clause and template library uses a centralized repository to standardize the drafting of new contractual agreements.
  • Clause libraries allow legal teams to create preapproved clauses and compose them into templates for business agreements, enabling self-service contracting.
  • Organizations that want to digitize contracting processes will need a data-centric approach to managing all clauses and templates.

The Definition of a Clause and Template Library

As the name implies, a contract clause and template library is a collection of preapproved templates and clauses used to speed up the contract building process while also mitigating risk by ensuring the use of proper legal language and formats. 

Over the last few years, more organizations are turning to dedicated software solutions such as contract management software to help them draft, review, approve, and execute their business agreements. A key differentiator in these solutions is the availability of a clause and template library. The type of agreement and the exact language used in each clause may determine the validity (or enforceability) of the contract. 

What are the Most Common Types of Contract Templates?

Some of the common types of business contract templates may include:

  • Non-disclosure agreements (NDAs) – To protect the intellectual property of a business, it’s common to enter into nondisclosure agreements between two or more parties when discussing or sharing confidential materials.
  • Master services agreements (MSAs) – To help facilitate future business between two parties, MSAs typically govern the terms and conditions of current and future relationships and agreements.  
  • Partnership agreements – Businesses often use partnership agreements to define the roles and obligations of each party including capital contributions, profit and loss distribution, or ownership interest.
  • Employment contracts – One of the most common types of contracts used to define the relationship between an employee and an employer.
  • Lease agreements – Can cover everything from equipment to property and sets out the exact terms and conditions including monthly costs, deposits, maintenance terms, and duty of care between a lessee and lessor.

Although the contract templates above will have some commonality to most businesses, it’s by no means an extensive list. There are also service-level agreements (SLAs), contractor agreements, and ad hoc or custom contracts depending on the goods and services the business may need from an external entity. 

Cloud-based contract management solutions should allow your teams to create templates by defining each section of the agreement using predefined clauses. 

Image of the template designer available in Contract Logix with numbering format and different types of clauses

What are the Typical Types of Clauses Included in Contracts?

To ensure agreements are enforceable, provisions or clauses describe the rights and obligations between the parties. 

The typical clause categories that may form part of an agreement are:

  • Enforcement clauses – Provides a statement on the consequences when one of the parties fails to meet the obligations as set out in the agreement
  • Execution clauses – Covers the execution of responsibilities for a specific party that could include time or performance, non-waivers, or force majeure conditions in the agreement
  • Interpretation clauses – Describes the legal principles required to understand the duties and responsibilities of each party to avoid ambiguity or contradictory language in the same or any other agreement

These three categories cover most of the clauses used in business contracts. The language used in each contract clause needs approval from an organization’s legal counsel to ensure the agreement is binding and valid. Using a contract lifecycle management (CLM) platform enables organizations to ensure they can standardize templates and clauses in a library for improved contracting execution and management. 

How Do You Benefit from a Clause and Template Library?

Digitalization is helping organizations to excel in today’s competitive business landscape. Those organizations that empower their legal resources with automation can help procurement teams to capture additional value and uncover new revenue streams. 

The smart and efficient execution of each contract lifecycle phase is the quickest way to streamline all your procurement operations. With a data-centric CLM platform, your clause and template library becomes an essential tool that enables you to respond quickly and mitigate risks efficiently. 

A clause and template library helps organizations to:

  • Compose new contracts quickly using preapproved language, format, structure, and terms
  • Manage all templates and clauses from a single location to ensure organization-wide consistency
  • Proactively mitigate risks based on new regulations, standards, or contract-specific obligations
  • Retain a comprehensive audit trail about changes to clauses or templates

These benefits translate directly into time and money savings but also enable the business to reduce its risk profile and improve its operational excellence.

Image showing search capability of a cloud CLM for different types of contract templates

What Components Make Up a Clause and Template Library?

Using a CLM solution like Contract Logix allows your legal counsel to compose templates and clauses and allow for self-service contract requests from other resources. If you update one of the clauses or templates, it will automatically reflect in the system and be available to other users. 

You can also integrate your CLM’s template with other software systems like your ERP or CRM solution, making it easy to populate key fields in the template and enforce consistency. Finally, clauses can have tags, groups, sub-clauses, and rules associated to make the entire contract draft and approval cycle faster. 

A clause library should have the following components:

  • Central repository for all clauses using preapproved legal language
  • Structured document templates that don’t require any manual cleanup
  • Role-based security and access model to control changes
  • Version control to track changes with a complete audit trail

Centralized Clause and Template Library Management from Contract Logix

Contract Logix makes it easy to control all your clauses and templates in a single repository. You can track changes to either templates or clauses and quickly compose new agreements without daily input from your legal resources. 

To ensure contracts comply with all your business requirements, a workflow engine ensures each agreement goes through the necessary review. With a centralized CLM cloud solution, you can let your stakeholders collaborate frequently and procurement teams can operate with newfound confidence. 

To see how a clause and template library can speed up your contracting lifecycles, request a demo from Contract Logix today. 

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