On average, legal teams spend 42% of their workload managing contracts, which is nearly half their time. This inefficiency drains a legal firm's valuable resources and also takes a significant toll on the company’s revenue. Fortunately, legal Contract Lifecycle Management (CLM) exists to standardize and automate the full contract lifecycle.
Legal CLM software takes this even further as it provides a secure and centralized platform where contracts, obligations, and deadlines are tracked in real time. These platforms help law firms avoid compliance breaches and prevent missed obligations. This guide looks into both the legal CLM process and how software helps with contract management.
Legal contract lifecycle management refers to the process that goes from inception until a contract’s final renewal or closure. It outlines how a contract should be drafted, reviewed, negotiated, approved, executed, stored, monitored, and eventually renewed. This structured process helps legal teams manage contracts with far greater accuracy and control.
This process differs from generic contract lifecycle management because legal contracts require a higher level of scrutiny, governed by statutory obligations, industry regulations, and precedent-based drafting norms. While general CLM may simply track a document’s progress, legal CLM outlines the specific legal steps, responsibilities, and checkpoints needed to ensure enforceability and minimize risk.
The Three Phases Of Contract Lifecycle Management
A legal CLM process is often structured into three main phases: pre-execution, execution, and post-execution. Here is how the process goes:
1. Pre-Execution
As the name suggests, this process involves all legal activities before a contract becomes binding. It focuses on drafting, review, negotiation, and approvals to ensure the contracts are legally sound and well-aligned with organizational policies before execution.
The key steps in this phase include:
- Drafting contracts using approved templates
- Negotiating terms with counterparties
- Internal approvals and risk checks
2. Execution
The execution phase is when the contract becomes legally binding. Errors in this phase can easily create enforceability issues; hence, accuracy and oversight are non-negotiable here.
In this phase, the corporate legal team finalizes the merger agreement by confirming all agreed-upon terms. The contract is then executed with the required signatories. After execution, the team records important milestone dates, including payment deadlines and reporting obligations.
3. Post Execution
Once a contract is fully signed, the work is not over. The organization must now fulfil everything it agreed to in the contract. This includes completing obligations, meeting deadlines, generating required reports, and being ready for audits.
When the contract eventually reaches its end date, the legal team must also decide what happens next: whether the contract should be renewed, renegotiated, or formally closed. This phase has the following necessary steps:
- Obligation and commitment tracking
- Renewals and amendments
- Archiving and auditing
Legal CLM software is a digital system that helps legal practitioners with contract automation and organizes the various steps of their contract journey. The software centralizes all legally sensitive information in a controlled environment that is designed for compliance. It consolidates the scattered emails, files, and manual trackers.
Legal CLM software has the ability to remove ambiguity. It prevents lawyers from working in isolated versions. Furthermore, through audit trails, it ensures that every action taken on a contract can be traced back to the party responsible.
Since there is always a verifiable history of actions, even in the event of a dispute, legal teams can clearly present who approved a clause, who modified a term, and why a change was made.
CLM software provides strategic value to legal practice, especially when managed well. It ensures that every contract, NDAs, supplier agreements, partnership contracts, or employment contracts, follows a standardized review and approval process. Here is what else it helps with:
- Standardizes Contract Language: The platform stores approved legal templates and clauses to reduce exposure from inconsistent wording or unvetted terms
- Automates Internal Legal Review: Using the software, users can route contracts automatically to attorneys or legal committees based on type, value, or risk, ensuring proper legal oversight
- Maintains Audit-Ready Legal Trails: A legal CLM software helps users generate timestamped logs showing who reviewed, approved, or modified a contract, which is highly critical for compliance audits or court defense
- Facilitates Secure Execution And Record-Keeping: Contract management tools support e-signatures and store signed contracts securely, ensuring enforceability and protecting attorney–client confidentiality
A CLM software brings structure to the contract lifecycle and helps keep client relationships on track. Here’s a closer look at what it includes.
Obligation Tracking And Milestone Alerts
This feature allows users to record all contractual obligations, such as notice periods, renewal deadlines, service commitments, and compliance requirements, and assign them to the appropriate stakeholders.
The system automatically monitors key dates and conditions, sends timely alerts, and escalates upcoming milestones when needed. This ensures legal teams maintain full oversight of the contract and avoid penalties or risks associated with missed obligations.
Template And Clause Management
Template and clause management stores approved contract templates, fallback clauses, and jurisdiction-specific language in one controlled library. Lawyers have to select the pre-vetted clauses, apply standardized templates, and restrict edits to authorized users. This helps ensure that every draft aligns with statutory and internal standards.
Centralized Contract Repository
A centralized repository serves as the legal team’s single reference point that has executed contracts, drafts, redlines, metadata, and audit trails together. Legal CLM software typically uses intelligent search, tagging, and role-based permissions. Counsel can use these to retrieve the exact version, clause, or approval history needed within seconds.
Integration With Other Systems
Integrations link the CLM software to e-signature tools, matter management systems, CRMs, procurement platforms, and billing software. Since contract data often flows across several departments, information gaps can increase legal and financial risk. Hence, when the systems are connected, key fields (counterparties, approval status, economic terms, and executed documents) move automatically between systems.
Monitoring Of Spend History And Compliance
This capability tracks financial commitments embedded in contracts, such as fee schedules, rate cards, spend limits, and performance-based payments. It also checks whether the actual invoices and payment requests follow those terms. The software essentially compares real financial transactions against contract limits and flags any discrepancies.
A well-implemented legal contract lifecycle management system guides contracts through every step of their lifecycle. It is highly beneficial in ensuring legal teams maintain compliance and enforce contractual obligations accurately.
With proper audit trails and centralized oversight provided by the software, it becomes easier for legal practitioners to focus on high-value work. Explore top legal CLM solutions to manage contract management and strengthen your legal operations.