The traditional way of conducting a contract review is to hire a lawyer to do it for you. But more and more business owners are opting to outsource contract reviews rather than pay the legal fees that come with hiring an attorney.
Some business owners outsource such projects to AI-based platforms that use technology to conduct reviews. Others outsource to contract management platforms that use humans to inspect the terms.
But is either a good idea?
Whether you need a review of employment, vendor, or client contracts, here are the pros and cons of outsourcing contract reviews for your business.
PRO: Save Money
Attorney’s fees can add up quickly, so the more documents you need examined the more cost-effective it can be to outsource the process to a third party. For businesses on a tight budget or looking to reduce costs wherever possible, outsourcing is a cheaper alternative to hiring an in-house attorney, hiring an attorney for a one-off review, or keeping an attorney on retainer.
Keep in mind that you get what you pay for, and there are certain instances where hiring a contract review specialist is a must.
For example, if you’re a physician about to sign a new employment contract or renew an existing one, hiring an attorney is a must. Employment agreements are loaded with terms and stipulations that you’ll need to adhere to not just while you’re working under the contract, but also when it ends.
The Definitive Guide to Physician Contract Review fromPhysicians Thrive is a must-read for physicians and other medical professionals getting ready to sign an employment agreement.
PRO: Save Time
If you already have an in-house attorney or an attorney on retainer, contract assessments can eat up a lot of their time. Having a separate entity handle reviews for you allows your legal team to spend their time on more pressing issues that only they can do.
PRO: Prevent Disruptions in Your Business
Some business owners conduct reviews themselves, but this can be a recipe for disaster. The more hats you wear, the more at risk you are of overlooking important elements in a contract, and that can easily lead to civil litigation. If you’re debating between outsourcing and doing it yourself, outsourcing is usually the better option.
Contract disputes account for almost60% of the 20 million civil lawsuits brought to court each year. Conducting contract evaluations, and then abiding by the terms of those contracts, can minimize your risk of civil litigation from an employee, vendor, or client.
Litigation costs time and money, and it can disrupt your business in a significant way.
CON: Potential Data Breaches
As a business owner, regulatory compliance is a must. It is your duty to comply with all of the laws of your state, including data privacy laws.
When you submit contracts for examination to a third party, there’s no foolproof way to guarantee that the data in them will remain private. Even if the company says that they will keep the data private, they might not have complete control over it.
Why not?
Because many times, outsourcing companies hire independent contractors to conduct the reviews, and they may not know exactly how the contractor handles (or mishandles) the information.
CON: Potential Confidentiality Breaches
Like data breaches regarding personal and private information, business owners have to be extremely careful not to breach confidentiality agreements either. Depending on the terms of the agreement, just sending it out for evaluation may put you in violation of it.
Vendor agreements often include non-disclosure clauses that prohibit you from sharing trade secrets, proprietary information, or pricing models with anyone that doesn’t absolutely need to know. Having a third party examine an agreement that includes such information can be more than just problematic — it can be unlawful.
CON: Lack of Quality Control
The second you submit a contract to a third party reviewer, you’re giving up some amount of control. Unless you know (and trust) the person doing it, there’s no way to know if they are adhering to your personal and professional standards. When a third party uses independent contractors, you can’t even be sure if the reviewer is adhering to the legal standards in your specific state.
In Conclusion
Outsourcing contract review may sound like an effective way to reduce business expenses, but if the assessments aren’t handled properly, this can create problems down the road that can cost you far more in damages.
Hiring an attorney that you know and trust offers better protection for your business than outsourcing contract review. Yes, you will have to pay more to do so, but the benefits far outweigh the cost.