Contracts are essential to running a successful business. They govern various business activities, whether procuring services from a SaaS vendor, providing services to customers, or engaging in routine business transactions. 

However, if you've ever tried to decipher a contract in its entirety, you'd be aware of the difficulties involved, be it the complex legal jargon or the sheer length. Blink once, and you can find your business in legal, financial, or compliance trouble. The less said about the associated time and opportunity costs, the better. 

If you think throwing more money at the problem and hiring a team of legal professionals is all you need, think again. Research suggests nine in ten contract professionals admit finding specific contracts challenging, with most spending over two hours looking up legal definitions. The delay in the review time can extend to days. Can your business afford this luxury- the hiatus in decision-making where everyone sits on their hands waving at potential opportunities?

Contract summaries are what you need to move forward quickly without worrying about potential legal troubles. A well-done contract summary is a concise document that gives a birds-eye view of the contract so that business executives not versed in legal language can make fast and accurate decisions.  

Contract summaries will enable your business to make hay while the sun shines in today's fast-paced business environment. But there's a catch. And a way out. Read on to discover more.

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What is a Contract Summary?

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A contract summary is a concise document highlighting the clauses, provisions, scope, objectives, and implications of a contract that are most critical to decision-making. It is written in simple language so that non-legal professionals can act on the information immediately without resorting to legal dictionaries.

Depending on the target audience, a contract summary can take different forms as follows:

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1. Call to Action for Client or Internal Stakeholder

Suppose you have received a contract from your client's counterparty. Before the entire contract is reviewed, you can send a digestible format of the contract to your client or internal stakeholders, including key issues and clauses to kickstart negotiation.

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2. Comprehensive Legal Summary

This type of contract summary contains a comprehensive analysis of legal terms and provisions written in technical legal language. It is generally meant for lawyers to understand the legal implications of a contract quickly.

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3. Commercial Summary

If you are dealing with a business transaction-related contract, such as a SaaS procurement contract from a vendor, and your target audience is stakeholders responsible for making key business decisions, go for a commercial contract summary.

A commercial contract summary focuses on business terms such as the scope of services, pricing, deliverables, and financial terms. The focus is also on terms such as liability, indemnification, intellectual property rights, termination, etc. The contract's language is non-legal, making it easier to understand for business executives.

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4. Contract Abstract

This type of contract summary refers to an organization's standard template or checklist, which includes important legal and business terms and is meant for busy executives to read quickly and make decisions.

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What are the Benefits of Contract Summaries?

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The benefits of contract summaries in optimizing your business processes and decision-making are immense. These include:

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1. Saving Time and Resources

In the words of Tabitha Studebaker, Director of Presales and Contracts at Day Wireless Systems, "The basic contract summary is one of the best time-saving tools."  

Time is not the only thing they save. Contract summaries also save a lot of resources. You no longer have to spend time or appoint in-house counsels (who charge by the hour) to sift through an entire document of legal language for days before arriving at the information required for decision-making. With a contract summary, you can focus your energy on strategic tasks, boosting productivity and efficiency.

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2. Improving Communication and Collaboration

As a business owner, don’t you just hate it when everyone is not on the same page in your organization? Well, get a contract involved, and you’ve got stakeholders (internal and external to your business) thinking London, talking Tokyo. Imagine the bedlam.

 A contract summary in simple language can help all stakeholders get on the same page (regardless of legal expertise), enabling clear communication and collaboration. Negotiations and decision-making become quicker, and business relations are strengthened.

3. Mitigating Risks and Disputes

You do not, under any circumstances, want to violate a contract and end up in court now, do you?  A contract summary avoids this problem by enabling the stakeholders to understand the legal terms of the contract better. This reveals potential red flags that can lead to legal issues, which you can address proactively.

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What Should a Contract Summary Include?

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How do you decide what goes in a contract summary? Simple, look at the target audience. For example, depending on whether external clients or internal stakeholders will read the summary, you can decide on how much detail to include in the summary.

A typical contract summary includes the following key terms:

• Who are the parties involved in the contract?
• The type and purpose of the contract.
• The contract term, i.e., when the contract begins and ends.
• The financial value of the contract.
• The essential terms regarding the obligations of the involved parties.

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How to Create a Contract Summary?

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You can create an effective contract summary in just two steps:

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1. Identify and Prioritize Key Points

The first step in creating an effective contract summary is to identify and prioritize the key points of the contract. These include:

• Parties Involved: A contract summary must include the parties' full legal names and responsibilities. This is essential to establish accountability and ensure all stakeholders understand their duties and key obligations.
• Scope of Work: Scope of work refers to the details of specific tasks, deliverables, and timelines as agreed upon by all the parties involved. A clear and concise description of the scope of work is essential to prevent misunderstandings and disputes in the future.
• Payment Terms: This section includes payment-related details such as payment amounts with due dates, payment procedures, invoicing procedures, and penalties associated with late payment. This section is essential for proper financial planning and budgeting.
• Contract Term and Termination: This section includes the contract duration (start and end dates), conditions under which each party can terminate the contract, notice requirements, and associated penalties. This section is essential for expectation management and contingency planning.

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2. Use Clear and Concise Language

Well, that’s kind of the whole point of a contract summary, isn’t it? Clear language allows each involved party to understand the terms easily, reducing misunderstandings and mitigating future legal disputes and problems.

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Problems with Manual Approach to Contract Summaries

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Here’s the catch about contract summaries we spoke of earlier. Manual contract summaries carry all the disadvantages of the contract sans the legal language.

Your business or start-up will eventually deal with mountains of contracts if it’s not already doing so. Creating contract summaries manually for each specific contract presents the following challenges:

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1. Time Constraints

To create a contract summary manually, you'll have to sift through multiple contract pages for days, undoing its advantages of saving time and resources. Add to this multiple contracts and you can expect a real productivity crisis on your hands. 

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2. Risks of Oversight Errors

While talking about oversight errors when scanning a contract, Sterling Miller, the CEO and Senior Counsel of Hilgers Graben PLLC explains:

‘If you try to read a complex contract carefully, from front to back, and expect to understand it on just the first read-through, that's wishful thinking (and potentially very messy).’

Manually creating contract summaries is rife with risks of unavoidable human errors. These risks become more severe the faster you try to complete the process. The pressure becomes immense, and the margin for error is zero. It is like walking through a minefield blindfolded, basing the entire journey on luck.

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3. Difficulties with Version Control

Contracts typically undergo several amendments during negotiations. Maintaining updated contract versions for multiple contract summaries becomes an arduous task. Imagine finding out that the contract renewal date for a critical SaaS service your business procured was a month ago. Now just because someone, somewhere didn’t update a measly date, you’ll have to go through the entire procurement cycle again with your fingers crossed.

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4. Limited Contract Analysis

There's a limit to how much you can analyze a contract manually to create a contract summary without falling into the trap of a standard template. Hence, while the essential information regarding the contract is available, a deeper level of insight doesn't come to light.

The lack of such deep analysis prevents you from fully taking advantage of the contract. This has severe consequences for your business in the modern, data-driven world and can hamper its competitiveness and agility.

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5. Slow Contract Review Processes

Let’s face it-creating manual contract summaries takes time. Till the summary is ready, negotiations are delayed, decisions are stalled, and the entire contract lifecycle management is adversely affected. As a result, while you're reviewing the contract, the outside business world keeps spinning and passes you by, leading to a significant opportunity cost.

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The good news is: all these problems have one solution —contract summary software!

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Contract Summary Software Features

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Automation becomes especially useful if you’re a high growth business or start-up that deals with SaaS procurement contracts and their negotiation, renewal, performance review and upgrades. 

Let's check out the essential features of a contract summary software:

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1. AI Powered Contract Analysis

With an efficient contract summary software, you can leverage AI and Natural Language Processing to analyze the contract document, extract essential information, and obtain actionable insights on potential red flags.

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2. Notification and Reminders

The contract summary software offers to create notifications and reminders using in-system alerts, email alerts, etc. These reminders help you stay on track concerning deadlines and critical contract milestones.

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3. Centralized Repository and Easy Search

With the contract summary tool, you can find all your contracts and their summaries in one place with an easy search option, so you don't waste time searching numerous folders and files for relevant information.

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4. Automated Workflows

Contract summary software typically includes automated workflows to automate and streamline the contract approval process, with tasks assigned to various users. This reduces the contract lifetime cycle by reducing delay and determining accountability.

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5. Seamless Integration

The contract summary software seamlessly integrates with your existing systems, such as CRMs and word processing tools, so you don't have to overhaul your entire process.

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What are the Benefits of Using a Contract Summarization Tool?

Here are some key benefits of using a contract summarization tool:

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1. Improved Time Efficiency

A content summarization tool frees up your legal team from summarizing so they can focus on other critical tasks such as strategizing, negotiation, and risk mitigation.

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2. Reduced Human Errors

With a contract summarization tool, you can eliminate the possibility of human error and associated costly mistakes and legal disputes.

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3. Enhanced Scalability

As your business grows, the sheer volume of your contractual requirements becomes overwhelming. Content summarization software can handle a large number of contracts with zero errors, allowing you to scale your operations effectively.

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4. Strategic Decision Making

Contract summarization software, with its advanced analytical capabilities, can uncover deeper insights from a contract that are not possible with manual summarizing. This helps you develop a comprehensive understanding and make strategic decisions.

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Conclusion

Contracts are an integral part of your business journey. A contract summary presents the critical details of a contract in a concise format and non-legalistic language, saving crucial time and resources. This allows stakeholders to communicate effectively, mitigating future legal disputes.

However, manual contract summarizing negates its many benefits. By automating contract summarizing using a contract summarization tool, you can save time, reduce human errors, simplify business expansion, and focus on core business activities.

Spendflo's vendor management suite provides a one-stop solution for all your SaaS procurement contract needs. You can add, view, and edit your contracts using this suite from a single dashboard. You can also manage your upcoming contract renewals or upgrades with customized notifications. Book a free demo to optimize your purchasing process today.

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FAQs

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1. How to prepare a contract summary?

To prepare a contract summary, identify key elements such as parties involved, contract value, payment terms, duration, and termination. Use clear and concise language to express the essential content of these key points.

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2. What should be included in a contract summary?

The key elements of a typical contract summary include:

• Who are the parties involved in the contract?
• The type and purpose of the contract.
• The duration of the contract, i.e., when the contract begins and ends.
• The financial value of the contract.
• An overview of the obligations of the involved parties.

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3. What is contract management software?

Contract management software is a tool that helps businesses create, negotiate, and sign contracts digitally, typically on a single platform. It automates the contract management process, reducing contract lifecycle, mitigating risks, and improving compliance.

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