Contract Version Management

What is Contract Version Management?

Before we answer this, let's start with one abstraction level higher: what is version management? For this we would like to reference the version management definition of the University of Nebraska which is "Version Management also called  Version Control or Revision Control, is a means to effectively track and control changes to a collection of related entities."

This definition can be easily applied to "a contract" - the part that may require some further elaboration is "... a collection of related entities". For a Contract, that can refer to (i) a collection of one: namely a single contract (ii) a collection of agreement components, e.g. one "Main Body" plus three exhibits and/or (iii) a collection of legal clauses between two or more parties.

Version Management is useful, since it helps you to keep track of whether such a collection was changed, when and by whom. It should also help you answer the (somewhat painful) question "Is this the latest version of this contract"? In other words, there are roughly two objectives:

1. To keep track of changes - if, when and by whom
2. To always know where the latest version of the contract is

Versions across diferrent Phases

Version Management for contracts has relevance both before you sign as well as after you sign. We will review the following stages and describe how version management is relevant in each:

1. Drafting the Contract
2. Negotiating the Contract
3. Signing the Contract
4. Post-Signature

Stage 1. Drafting the Contract

A draft of a contract generally comes from a template, whether it's yours or provided by your counterparty. The necessary amendments need to be made to tailor the template to become the desired contract. These amendments can be automated (e.g. through Canveo smart fields) or be made manually by one or multiple team members. Further, there may be internal approval or review workflows that need to be triggered before you actually want to send this to your counterparty.

The importance of solid version management increases when you are having at least two team members involved in the Drafting process.

Stage 2. Negotiating the Contract

Once the Draft is ready and sent to the counterparty, there will by definition be more than two people involved and each need to be fully aware on whether they are looking at the latest version or not. Negotiations can be straightforward, ie. with limited edits and with perhaps one active team member on each side. Even then, version management can be challenging in case you have to deal with more than one negotiation at the same time.

Further, contract negotiations can get more complex, with additional stakeholders, approval workflows, a range of discussions, redlines, rejection of redlines, etcetera. Keeping track of who owns the latest version and which team member has changed what and when becomes essential for anyone who does not want to waste time - or even worse - lose sight of critical changes to a (soon to be binding) contract.

One fundamental question regarding version management, is whether both parties always have access to the same version (e.g. a shared document in the cloud) or whether one party can work on the document without the other party seeing the changes until they are being sent (e.g. a file). We will review this topic in more detail further down.

Stage 3. Signing the Contract

When the negotiation is completed, and both parties are happy to sign the contract, it becomes critical that both parties are accessing the exact same version, and that the version that gets signed is unaltered from what both counterparties have reviewed and agreed upon at the very end of the negotiation.

Stage 4. After the Signing

After the contract is signed, version management becomes even more formal, since any changes to the contract post signature will need to be formalized through a signed Amendment.

In between the Signing of the Contract and the signing of an amendment, the contract may go through the previous three phases again. Basically there is another cycle of Drafting, Negotiating and Signing. The end result of that cycle will become the legally binding Amendment.

Different approaches to Contract Version Management

Today's commonly used approaches to contract version management are restricted by the technologies that have historically existed, rather than by what is actually ideal for all stakeholders in the contracting workflow. More specifically, there is roughly two approaches (i) the File approach (or "MS Word" approach) and (ii) the Shared document approach (or "Google Docs" approach).

The File approach

For companies using and negotiating contracts with the use of MS Word (or a platform that uses the same approach), they usually have one team member start with a MS Word document, that the user will be sending back and forth over email or internal document management systems. The advantage of MS Word is that it allows a team member to work on the contract without those changes actually being visible to the counterparty until the company is ready to share their position. The downside of MS Word in the context of version management is that it requires active handling of all the participants to know where the latest version of the file is and to inform all stakeholders when someone is "working on a version" in order to not lose any changes. Unfortunately, there are many horror stories and people who have lost time chasing after the latest version or working on an older version and this is a common pain point experienced by companies using this approach.

The Shared document approach

The Google Docs approach on the other hand, solves that particular challenge because there is one link/url where everyone has access to. The downside of Google Docs in terms of version management is that it does not allow each counterparty to make changes without those being immediately visible to the counterparty. This is far from ideal in a contract negotiation situation. Companies may work around this by making copies of the google doc, but this is not visible to other stakeholders and thus could result in the exact same challenges that we described for the "file approach".

Canveo's approach

Canveo has entirely automated Contract version management and used the best of both worlds. Canveo is able to do this, since we have developed a proprietary editor that is entirely tailored towards the contract creation, negotiation, signing and management lifecycle.

An agreement in Canveo is accessible through the unique relationship page that is created between two counterparties, this ensures it never gets lost, and you do not face the issue of not knowing where the latest version is. However, even though all changes are automatically saved (like Google docs), Canveo allows you to work sequentially when you are negotiating. This means that any changes that are made by one counterparty will not be visible to the other counterparty until they have actually been sent to that counterparty.

Canveo allows you to work on versions and discussions internally until you are ready to indicate your negotiation positions to your counterparty. With Canveo's granular Clause History, Track Changes and Version Compare functionalities you are completely in control when an agreement is returned to you by your counterparty.

Conclusion

Version Management for contracts can be tricky, time and energy consuming and can have severe risks for the business if not done properly. There is roughly two approaches today: the "file approach" and the "shared document approach", both have their own pros and cons. Canveo aims to combine the best of both worlds and has fully automated contract version management.

If you have ever experienced challenges in management of contract versions while creating, negotiating or managing contracts and this approach sounds interesting, please contact us via hello@getcanveo.com.