The Ultimate Guide to Contract Abstraction - Summize
This is the Ultimate Guide to Contract Abstraction, where you’ll find out everything about:
• What contract abstraction is and why it's important
• When contract abstraction is used and what process to follow
• The difference between contract abstraction and contract summarisation
• How legal tech can improve contract abstraction
What is Contract Abstraction?
Contracts are a crucial asset for every business. They help to define and govern the rights and duties of any new relationship or agreement. As a company grows, so does the complexity of its processes and the number of contracts that need to be managed.
Contract abstraction is the process in which a brief statement or a specific piece of information (such as dates or clauses) is abstracted. It is a legal process that highlights all the important terms, providing a window to the key information from the agreement. This summary is known as a contract abstract.
Why is Contract Abstraction Important?
Contracts can be lengthy (sometimes hundreds of pages), making effective contract management a daunting task. By abstracting dates, clauses, payment terms and other key information, legal teams can save time and resources while ensuring compliance and increasing the team’s overall productivity.
By implementing contract abstraction processes into your contract management framework, contracts become easier to read for non-legal professionals, as the essential clauses and key information is summarised and brought to the forefront. The contract management process becomes more convenient and simpler, while also making each contract accessible to the wider business.
When Is Contract Abstraction Used?
Today, every business and organisation across the globe will sign and enter a vast number of contracts. They have become the norm in all business relationships. This, however, presents a problem – contract management doesn’t end when the contract has been signed and the information that is needed to make informed business decisions resides in these signed contracts.
Contracts can seem confusing when they contain large amounts of legal jargon and unnecessarily long sentences. It makes the process of contract interpretation significantly harder, more confusing, and slow; especially when it is carried out by someone outside of the business’ legal team. At this point, contract abstraction becomes a necessary stage of the contract management process.
Contract abstraction plays an important role in law firms and businesses alike. It helps to digest long and complex documents, revamping them into a readable summary of key points. The process simplifies and facilitates the work of the legal team, while also allowing everyone in the business to understand and adhere to the contract.
What is the Contract Abstraction Process?
Almost every business relationship is governed by a contract, whether its partners, suppliers, customers, or employees. For any organisation to achieve long-term financial returns from these documents, it is crucial that they invest and effectively execute a contract management process that involves contract abstraction.
The number of stages in the process will vary depending on each business, its size, and its existing processes. To make this easier, we’ve broken down the most common steps you may come across in a standard contract.
1. Format Creation
The first step of the contact abstraction process is to establish a format. In most cases of contract abstraction, the process will be performed in a question-and-answer style.
2. Contract review
The second stage (and arguably the most crucial) is the contract review process. This step of contract abstraction involves reviewing each document to identify the areas of importance.
3. Contract analysis
The analysis stage includes the evaluation and interpretation of the clauses, which is important to understand the nuances of the contract. This stage is crucial to the final contract abstract, so the legal team should ensure they fully understand each clause to avoid any legal risk in the future.
4. Information abstraction
The abstraction stage of the process is the final step, where the identified information is abstracted and put into a readable format and template. This result is known as the contract abstract. The correct information must be abstracted, as it is the information that anyone viewing the abstraction will deem as important. Be sure to mention the page numbers on the abstracted information so that it can serve as a point of reference.
What’s the Difference Between Contract Abstraction and Contract Summarisation?
Although similar, contract abstraction and contract summarisation are designed to reflect the key metrics of a contract in two separate ways.
Contract summarisation is the process in which the important points of the contract are put together in a summary. The entire contract and the key information are summarised so that it can act as a quick reference and is easily understandable. Contract summarisation is best suited to shorter contracts, as it is intended to be a restating of the key points in as few words as possible.
Contract abstraction is best suited to multiple, lengthier contracts. The process involves abstracting the contractual rights, obligations, and liabilities to provide a brief contract of the key points, rather than the whole contract.
What Software Can Be Used for Contract Abstraction
Contracts contain a vast amount of crucial information and this information can be used to help a business make better-informed business decisions. But contracts are lengthy, confusing, and finding this key information from hundreds of pages requires time and manual searching, which is prone to mistakes and therefore legal risk.
Summize uses natural language processing to highlight the key provisions of your contract, no matter how unique it is. By analysing each contract, the software will highlight the most important clauses, red-flag areas of concern and create summaries for users, which can then be used to answer contractual questions.
Summize is a flexible tool that allows quicker insights into contracts. Some of the key benefits include cost-effectiveness, ease-of-use, and speed. Legal teams can reduce the time spent on reviewing contracts by up to 85%, allowing your team to focus their resource on the future of the company.
And that’s Summize’s Ultimate Guide to Contract Abstraction!
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