28 May 2020

What do my contracts say?

An introduction to King & Wood Mallesons’ Legal innovation and Artificial Intelligence services

COVID-19 has rendered businesses around the globe grappling with an endless array of simultaneous commercial contracting issues. Whilst not a new challenge, now more than ever, it is vital that organisations understand what contracting threats, agreed in simpler times, lurk within.

Businesses face a series of questions. Some of the more common might include what events trigger the need to pay suppliers, in what circumstances can payment or delivery be delayed, can contracts be terminated for insolvency or is it automatic, what force majeure or material adverse change (MAC) provisions apply – for better or for worse, depending on one’s perspective. When faced with impending COVID-19 related fallout, forewarned is most definitely forearmed! Business planning however, requires deep insight. 

Many businesses have hundreds, if not thousands of contracts. If a review of any contract is resource intensive, it follows that the review of all contracts is intimidating bordering on oppression – even for the most well-resourced clients. The expense of human review is out of the question save for the most business critical of contracts. Whilst legal artificial intelligence tools do exist and serve an important role in some contract reviews, they also require significant time and resources to train and program to identify the things you know you want to know about. So how is one to cope when faced with a tsunami of issues across the entire contracting spectrum? And when one finds an issue, how does one understand how big that issue is? A ‘one off’ is likely manageable but how would one know if the same problem were in many contracts? Sleepless nights await!

Making such a task manageable would be quite the special sauce. King & Wood Mallesons London are working with legal AI technology specialists, Contract Genetica, to provide a unique and integrated client solution that combines the best legal and technical capability to intelligently assimilate, analyse and surface critical contracting information, with King & Wood Mallesons’ leading legal resources to act upon it. All at enterprise scale.

Beginning the process

Any contract analysis solution requires up-front effort. COVID-19 may be the catalyst but any ideal solution would ensure that the upfront effort continues to benefit the organisation as its enduring legacy. 

The process begins with onboarding of client agreements. Contracts held in electronic format (PDF or Microsoft Word) are assimilated into each client’s own private cloud database and are read electronically. The highest quality data capture, image correction and data quality scoring techniques are integral to this automated process. Unreadable contracts (e.g. poor quality PDFs or password protected agreements) are segregated for further action. As the saying goes, quality in, quality out! 

Assimilated data enables real time mining of entire contracts’ portfolios, for any specified purpose, the instant business needs emerge. The adding of new contracts can be automated through document management system (DMS) or sharefile integration ensuring the information remains complete and up to date on an ongoing basis.

Identifying risks

For those concerned about their ability to perform a contract under the current COVID-19 induced social, political and financial environment, contract clauses for Material Adverse Change or Permitted Delay are incredibly important.

Using natural language processing techniques, Contract Genetica’s technology classifies clause content and finds other instances with semantically similar meaning across the entire contracts’ portfolio. If instead of being defined as “Material Adverse Change”, the same concept might be defined as a “Material Adverse Event”. Starting from user input, Contract Genetica’s technology finds all semantically similar content even if the specific search term is not even mentioned.

Efficient data analysis

Reviewing electronically generated output can be overwhelming. Contract Genetica’s findings are graphically represented, instantly showing the distribution of the most common instances of each clause. Displaying common and less common versions of that clause gives an instant view of the diversity of the clause landscape and the exceptions. The scale of an issue can be instantly understood. 

Through combining identical clauses, the review of one result helps determine the course of action across multiple contracts, greatly reducing the scale of the task. Realising part-way through a review that additional information is required is no problem. Simply add the new requirement, without any need to go back and reprocess or begin another time-consuming round of AI systems training. Data exported can be used with other systems like mail-merge, SharePoint or for use even on large-scale programs like the IBOR replacement. 

Output can be reviewed in partnership with your KWM team or by your own team as you wish. King & Wood Mallesons’ lawyers provide that essential deeper dive legal advice on the findings. Additionally, granted appropriate access by clients, King & Wood Mallesons’ lawyers can conduct analysis with clients. 

Imagine if your trusted advisers said ‘this definitely affects you and impacts approximately [X] contracts – it’s potentially a big issue for you and we can help you in these ways…’ or ‘its not something to spend too much effort on as your exposure appears limited, we can conduct further analysis if you would like. Spend your budget elsewhere’. Isn’t that far better trusted adviser legal service than the rather familiar ‘here is a note - this might affect you as it affects all clients in your sector…’. The current avalanche of COVID-19 notes filling client inboxes bears testament.

Ready to help

King & Wood Mallesons’ partnership with Contract Genetica ensures that our lawyers are on hand throughout the process, ensuring that the output is consistent and that remedial action is in line with the legal or regulatory requirements that apply to your business. Your King & Wood Mallesons’ contacts are with you every step of the way to discuss legal issues and solutions, interpret the results, strategise your response, and assist with the remediation and outreach element, whether directly or by putting together a legal managed service solution for you.

Contract Genetica’s technology is able to handle all major European languages and Chinese as required and can be integrated with many other available IT solutions to work with your existing infrastructure. Be it Brexit transition, LIBOR discontinuation in 2021, RPI indexation changes, regulatory or any other legal risk change, King & Wood Mallesons and Contact Genetica can help you manage that risk well beyond this current crisis.

If you would like to know more about the KWM-Contract Genetica solution, please contact the KWM team through [email protected] or [email protected] or your usual KWM London contacts.

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