So you’ve heard that there’s a cheaper alternative to best-in-class, AI-based contract intelligence platforms: managed review conducted by people using a different set of proprietary contract management software. If you’re not concerned about the timeliness of your review, you might be tempted to consider the provider that outsources part of the labor to slower human teams. However, it’s important to be aware of the hidden risks of outsourcing contract review in this way, because sometimes you get what you pay for.
Here are four main issues to consider before you share your sensitive documents externally:
- Data Privacy
If you’re outsourcing customer contracts to a vendor for review, then you should be cognizant of the potential regulatory obligations imposed by the GDPR, the CCPA, and other established and emergent laws around the world. As we’ve mentioned in prior blog posts, a business that transmits sensitive customer data can be held responsible if the recipient of that data mishandles it.
If the contracts you’re sending for review contain sensitive customer information and the contractor suffers a breach exposing the contract data, that could lead to legal repercussions for your business. It’s imperative to know exactly who is handling any sensitive customer information that you’re sending to your contractors for review, and that they are taking the same amount of care to protect that information as you and your business do.
- Confidentiality
Many vendor agreements contain confidentiality clauses designed to keep buyers from sharing their vendors’ trade secrets—with competing vendors, for example. In fact, a non-disclosure agreement will often restrict the sharing of information within the same business with any co-worker who does not have an established need to know that information.
Do the terms of your vendor agreements permit you to grant access to contractors other than your own legal counsel? If so, do they extend that access to subcontractors? And have the subcontractors on the other end of the exchange taken the proper steps to safeguard any documents they receive? Getting these answers wrong could put you in breach of the very contracts you’re outsourcing for review.
- Quality Control
How do you control or even influence the quality of the work when you have no contact with the people doing the work? When law firms hire lawyers on a temporary basis for document review projects, it’s typical for them to hire lawyers who are trained, licensed, and physically located in the jurisdiction where the work is to be done. They can review the qualifications of the lawyers doing the review, and they can supervise the work.
However, if you send your documents to a contractor who then outsources that legal review to a third party, you can’t take it for granted that they’re applying the same standards. Are the lawyers trained in the right jurisdiction? This concern is even greater if the vendor is sending your contracts overseas. Are the reviewers familiar with the laws applicable to your agreements? You need to be able to trust the expertise of the people conducting contract analysis if you want to receive genuinely valuable insights about what’s in your existing contracts.
In addition to training, there is the issue of catching errors in the contract review process. If an artificial intelligence algorithm using natural language processing makes a mistake, you can quickly review the work, identify the error, and teach the program to make better decisions in all future reviews. If you’re leveraging a team of human reviewers in an unknown or distant locale, conversely, how do you verify the accuracy of their work? And if you’re trusting thousands of contracts to these review services, how do you reduce risk at scale?
- Legal Ethics
On top of those quality concerns, outsourcing potentially raises questions regarding professional conduct and legal ethics. Whether you’re practicing in a law firm or an in-house legal department, what is your obligation to vet the qualifications of any contractors you engage, directly or indirectly, to review your clients’ or employer’s documents? Are you permitted to engage reviewers who are not licensed to practice law in the relevant jurisdiction?
Do you understand the risks and exposure that you’re creating for your company by outsourcing contract review to a particular vendor?
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