When people ask me about my work, I often find myself explaining in a nutshell that it is all about where the contract meets the computer. Long gone are the days where a contract is signed and sits in a filing cabinet. Now, the data contained in our documents needs to be structured and fed downstream, whether it is for the simple ability to search the basics, or at the more complex end, to model detailed legal and commercial information within financial institutions.
Indeed, according to bestselling author Yuval Noah Harari, data forms the basis of a kind of new religion (dataism) contributing to our political and social structures. And the amount of data in the world is increasing exponentially, with 90% of the world’s data having been created in the last two years.
With this rate of expansion, data is a valuable asset for any business, integral in meeting strategic goals. However it must be collected and organised in a way that it can be used efficiently, to achieve those benefits. As much as 95% of the data in the world today is unstructured, meaning it is not stored in a predefined manner. Legal contracts are generally unstructured, although increasingly they are having structure imposed on them at point of input, or digitised shortly after execution, and stored in a database.
There is also a difference between data and metadata within legal documents. Data refers to the actual content of the contract – the specific terms, conditions, and clauses that dictate the agreement between parties. Metadata is data about data. It includes information about the structure, format, and context of the data, making it easier to manage, search, and utilise. Metadata can reveal when certain terms were entered and by whom, as well as a date stamp for the signing of the contract, and detail about the parties. By capturing both data and metadata, organizations can create a comprehensive digital representation of their legal agreements.
What does this mean for legal work? It means that many legal professionals, particularly in financial services, have to upskill in the way contractual terms work from a logic or coding perspective. Clauses need to be standardised, with variations modelled so that they can be accurately captured. When there are bespoke terms, these warrant having a system in place to capture them, in a world where free text boxes are unhelpful because they are difficult to model. This data structure, or data model, allows data to be used efficiently, and lawyers often ought to be aware of the models in which the contract will ultimately be stored. In addition, it is important to have clear data governance, so that teams understand the authority, control and decision-making over the data, with defined roles.
In our work at D2 Legal Technology, we assist clients to survey huge quantities of contracts, often legacy documents which are not in clear machine-readable format. While advanced search functions have been in existence for decades, the advent of large language model-based AI now allows more powerful and nuanced analysis of existing information. Platforms can search for specific key clauses such as indemnities and liability, and determine if these are in keeping with a company’s policy. The efficiencies for legal teams are immense, and many law firms and in house teams already take advantage of this, as well as developing their own tools, or rolling out Microsoft Copilot.
Common issues we see within organisations are manual or duplicate entry of contractual terms, inconsistent use of naming conventions, and heritage systems that were designed decades ago which are too interwoven into the company to be properly replaced. However, many firms are taking the leap and embracing new technology, and engaging with one of the many new providers whose platforms can plug into existing systems. Many people find that once a new system is in place it improves their working lives considerably, as well as reducing risk and often creating financial benefits for the organisation. An example of this in the derivatives world is better capture of close-out netting terms in connection with the ISDA Master Agreement and related legal opinions. Once there is a clear chain between the opinion used for the netting determination, all the way through to the end trade, banks who are subject to certain regulations can free up material amounts of capital.
By making use of the latest documentation platforms, and understanding the data flows, legal professionals can streamline the drafting and negotiation processes, enhance the accuracy of contract interpretation, and improve regulatory compliance. As the legal industry continues to embrace digital transformation, the ability to standardise and model contractual terms will become increasingly valuable, with clause libraries, playbooks and fallbacks, and ease of producing management information.
So when I say to people that my work involves “where the contract meets the computer” it encapsulates all this and much more. This relates not just to financial services, but to all sectors and we have worked with technology companies, universities and charities to help them benefit from the valuable and ever-increasing commodity that their contractual data has become.