What is a Contract Type in CLM?

🗺️ Overview

In CLM, Contract Types are used to classify contracts by their business purpose, while Templates define how those contracts are structured. The system provides a set of predefined contract types and allows power users to create additional custom types as needed.

Each contract type is always linked to one or more templates. This ensures that contracts are created using approved structures, documents, and attributes, and that users are guided to the correct starting point when creating a contract.

🎯 Purpose

The purpose of linking contract types to templates is to combine flexibility with governance. Contract types provide a clear classification of agreements, while templates enforce consistent structure, content, and rules for contract creation.

This approach ensures that every contract follows an approved format, while still allowing organizations to support different regions, business units, or contract scenarios through multiple templates under the same contract type.

🧱 Standard Contract Types

The system comes with five core contract types available out of the box:

Contract Type	Description
Goods	Used for contracts governing the purchase or supply of tangible products.
Services	Used for agreements covering professional or operational services.
Software	Used for software license, maintenance, or SaaS-related agreements.
Construction	Used for construction, infrastructure, or engineering works.
Others	A flexible contract type used when no predefined template fits. Typically for ad-hoc or one-off agreements.

🧩 Note: Standard contract types are system-delivered and cannot be edited or deleted.

🛠️ Custom Contract Types

CLM Power Users can create new contract types to fit organizational needs.
For example, you may add:

“Research & Development (R&D)”
“Licensing”
“Leasing”

Custom contract types allow organizations to align contract structure and content with internal policies or industry-specific standards.

Contract types have its own lifecycle, same as the Templates (it has Draft and Published status).

📁 Templates and Document Standards

Each contract template in the system is linked to a specific contract type.

When a template is selected, it automatically includes a document standard, forming a structured binder of related documents.

Example Binder:

Document	Description
Main Agreement	Core contractual terms
Appendix 1	Scope of Work (SOW)
Appendix 2	Pricing or Financial Terms
Appendix 3	Technical Specifications
NDA	Confidentiality agreement
GDPR Addendum	Data processing obligations
SLA	Service Level Agreement

Users can directly edit these documents, update relevant data, and proceed to signature — saving significant preparation time.

⚙️ Step-by-Step Flow

Power user reviews the system contract types
→ Creates templates for Organization or Organization unit scope and links to standard contract types
Power user creates custom contact types
→ Creates templates for Organization or Organization unit scope and links to custom contract types
Power User creates the contract from a Template

→ Power User selects the contract type first, after that the list of templates linked to the contact type will become selectable

Template and binder are applied automatically
→ Pre-populated structure appears in the contract workspace.

Power User reviews and edits content
→ Updates key fields and attached documents.
Contract proceeds to next Steps in the lifecycle.

💡 Benefits

Benefit	Description
Flexibility	Allows multiple templates per contract type to support variations such as regions, business units, or risk levels, without creating unnecessary contract types
Consistency	Ensures that all contracts of the same type are created using approved templates, resulting in consistent structure, content, and data across the contract portfolio
Reduced errors	Keeps contract types focused on classification and reporting, while templates define structure, documents, and attributes. This simplifies configuration and maintenance.
Scalability	Supports growing contract volumes by enforcing consistent rules and structures, without increasing administrative overhead. No limitations to the number of custom contract types creation.
Governance	Prevents creation of unstructured or incomplete contracts by guiding users to predefined templates linked to each contract type.

🔐 Permissions and Editing Rules

Only CLM Power Users can create, modify, or delete custom contract types.
Standard contract types (Goods, Services, Software, Construction, Others) are locked and cannot be changed.
Contract types are visible to all users when creating a new contract.
Templates must be assigned to exactly one contract type.

Best Practices

💡 Tips for Effective Use:

Use system contract types for common and standardized agreements.
Create custom contract types only when a clear business need exists.
Link each contract type to at least one approved template.
Use multiple templates under the same contract type to handle variations rather than creating many similar contract types.
Manage attributes, documents, and permissions at template level to ensure consistent inheritance.
Review and maintain templates regularly to keep contract creation aligned with current policies.