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Agents Contract Validation Agent

Contract Validation Agent

Validates agreements and contracts against predefined company policies and rules, ensuring compliance and reducing risks.

About the Agent

ZBrain Contract Validation Agent automates the contract validation process using AI. Utilizing an LLM, it analyzes complex legal terms and clauses across various document formats, ensures all contract details comply with internal policies and regulatory standards, and streamlines operations.

Challenges the Contract Validation Agent Addresses:

The manual contract validation process is slow, error-prone, and fraught with risks. Legal teams must review contracts, extract key details, and cross-reference these against internal policies and compliance requirements, often requiring manual checks across multiple sources. Discrepancies necessitate time-consuming communications with stakeholders, adding delays. This manual approach delays contract approvals and renewals, impeding business operations' agility and responsiveness.

ZBrain Contract Validation Agent automates the contract validation workflow, significantly reducing manual effort and error risk. It uses AI to extract, analyze, and verify contract details, ensuring compliance with legal standards. If discrepancies arise, the agent flags issues and generates detailed reports for quick resolution, speeding up the validation process and supporting timely approvals, thereby enhancing operational efficiency and reducing legal risks.

How Does the Agent Work?

ZBrain contract validation agent automates the complete contract validation workflow, optimizing the process from start to finish. Leveraging an LLM, it analyzes contracts against predefined validation rules, identifying clauses, obligations, terms, and conditions and generating a detailed validation report. The agent supports a variety of document formats, enabling thorough validation analyses. Below, we outline the detailed steps that showcase the agent's workflow, from the input of contract documents to continuous improvement.


Step 1: Contract Document Upload and Classification

The agent is activated when a new contract is uploaded on its interface or submitted through associated systems.

Key Tasks:

  • Document Submission: Users can easily upload contracts through an intuitive interface, instantly triggering the agent to begin processing.
  • Document Classification: Upon upload, the agent automatically classifies the contract based on predefined categories such as lease, loan or partnership agreements. This classification helps fetch relevant rules from the knowledge base for the validation process. For precise classification, the agent extracts key metadata such as contract type, parties involved, and contract dates from the document's content.

Outcome:

  • Contract Readiness for Validation: Ensures that all contracts are correctly classified and ready for detailed validation. This classification equips the contract validation process with the necessary information, enabling efficient and relevant compliance checks.

Step 2: Extraction of Relevant Rules and Validation

In this step, the agent extracts pertinent rules from the knowledge base for detailed comparison and validation.

Key Tasks:

  • Knowledge Base Access: The agent accesses a configured knowledge base to retrieve validation rules and regulations specific to the contract type.
  • Contract Validation: Upon retrieving pertinent rules from the knowledge base, the agent uses an LLM to compare and validate contract documents for discrepancies or non-compliance.
  • Iterative Processing: For contracts that require adherence to multiple rule documents from the knowledge base, the agent first checks for the presence of these rule documents. If the necessary rule documents/files are found, the agent processes each one sequentially through a loop to ensure comprehensive validation. If no relevant files are present, the agent generates a response accordingly.

Outcome:

  • Detailed Compliance Check: This step ensures that all contracts are thoroughly vetted against relevant compliance standards and requirements. It ensures that the contract meets all specified rules and highlights any areas needing corrections or further scrutiny.

Step 3: Contract Validation Report Generation

The agent leverages an LLM to generate a detailed contract validation report for the user's reference.

Key Tasks:

  • Report Generation: Leveraging an LLM, the agent generates a brief validation report, including contract validation status and an overall summary that covers key terms and clauses. The report contains a detailed analysis, along with lists of present, missing, and prohibited items.
  • Discrepancy Detection: In case if contract is not validated, the agent flags any issues found during the comparison, such as missing clauses or non-compliance with mandatory terms.
  • Report Compilation: This step involves compiling one or more contract validation reports into a unified, comprehensive summary. If only one report is provided, it is treated as the sole input, and a detailed analysis is generated. When multiple reports are available, their findings are consolidated, maintaining context to produce a summary that includes a list of items that are present, missing, and prohibited.

Outcome:

  • Validation Report: Provides a thorough report detailing the contract's compliance with internal and legal standards, ready for review and action.

Step 4: Continuous Improvement Through Human Feedback

After the contract validation process, the agent integrates user feedback to continuously enhance the accuracy and effectiveness of the validation process.

Key Tasks:

  • Feedback Collection: Users can provide feedback on the accuracy, relevance and comprehensiveness of the contract validation reports.
  • Feedback Analysis and Learning: The agent analyzes the feedback to identify common errors and areas for improvement in the validation process, pinpointing opportunities for refining it.

Outcome:

  • Adaptive Enhancement: The agent continuously refines its validation capabilities, ensuring it adapts to evolving legal standards, user expectations, and contextual nuances. This ongoing learning process is essential for maintaining high standards of accuracy and effectiveness, enhancing the agent's overall performance and reliability.

Why use the Contract Validation Agent?

  • Increased Accuracy: By automating the contract validation process, the agent minimizes human errors, ensuring compliance with legal requirements and company policies.
  • Faster Processing: The agent significantly reduces the time required for contract validation, speeding up the review cycle and enabling faster decision-making and approvals.
  • Consistency: The agent ensures consistent contract validation, eliminating discrepancies from human interpretation and reviewing all contracts against the same criteria.
  • Scalability: The solution can easily handle large volumes of contracts, making it ideal for growing organizations that need to manage increasing contract workloads.
  • Risk Reduction: By identifying potential legal or compliance issues early in the process, the agent helps mitigate risks associated with non-compliant or incorrectly interpreted contracts.

Download the solution document

Accuracy
TBD

Speed
TBD

Input Data Set

Sample of data set required for Contract Validation Agent:

Company Policies, Industry Regulations, and Legal Standards


1. Company Policies


1.1 Code of Conduct


    

  • Employees must uphold the company’s reputation through honesty, integrity, and ethical behavior.
    • 

  • Any form of harassment, bullying, or discrimination, including verbal, physical, or digital, will result in disciplinary action.
    • 

  • Employees must promptly disclose any conflicts of interest to the Human Resources department.
    • 

  • Gifts and hospitality from vendors or clients must not exceed $250 and require approval.
    • 



1.2 Data Protection and Privacy


    

  • Access to sensitive company data is restricted to authorized personnel only and must be granted on a need-to-know basis.
    • 

  • All electronic communications involving customer or employee data must be encrypted using company-approved protocols.
    • 

  • Data breaches must be reported to the IT security team within 24 hours of discovery.
    • 

  • Regular training on data privacy laws, such as GDPR and CCPA, is mandatory for all employees.
    • 



1.3 Workplace Safety


    

  • The company shall maintain compliance with OSHA standards, including providing adequate personal protective equipment (PPE) for hazardous tasks.
    • 

  • Emergency evacuation plans must be clearly posted in all facilities and reviewed semi-annually.
    • 

  • A zero-tolerance policy is in effect for substance abuse during working hours or on company premises.
    • 

  • Employees must complete annual safety training and certifications relevant to their roles.
    • 



1.4 Remote Work Policy


    

  • Company-issued devices must be used exclusively for work purposes, with security software kept updated.
    • 

  • Employees are required to sign a remote work agreement that outlines performance expectations and data protection responsibilities.
    • 

  • Internet connectivity must meet minimum speed requirements to ensure uninterrupted productivity.
    • 

  • The company reserves the right to conduct virtual check-ins or audits of the remote workspace.
    • 



1.5 Environmental Responsibility


    

  • The company commits to achieving a 25% reduction in energy consumption by 2030.
    • 

  • Employees are encouraged to participate in waste reduction programs, such as recycling and paperless initiatives.
    • 

  • Procurement of office supplies must prioritize eco-friendly and sustainable vendors.
    • 

  • Annual environmental impact reports will be shared with employees and stakeholders.
    • 





2. Industry Regulations


2.1 Financial Services (Example)


    

  • Regulation Z (Truth in Lending Act): Ensure accurate disclosures for all consumer credit products.
    • 

  • Bank Secrecy Act (BSA): Maintain comprehensive records of transactions exceeding $10,000.
    • 

  • Dodd-Frank Act Compliance: Implement systems to monitor and mitigate systemic financial risks.
    • 

  • Consumer Financial Protection Bureau (CFPB) Regulations: Adhere to transparency standards in loan agreements.
    • 



2.2 Healthcare (Example)


    

  • HIPAA Compliance: All access logs for electronic health records must be reviewed monthly.
    • 

  • FDA Regulations: Conduct clinical trials for new medical devices as per FDA guidelines.
    • 

  • Medicare and Medicaid Standards: Claims must include accurate coding and documentation.
    • 

  • Anti-Kickback Statute: Ensure that all financial arrangements with providers comply with federal laws.
    • 



2.3 Manufacturing (Example)


    

  • ISO 14001 Certification: Establish an environmental management system to reduce carbon emissions.
    • 

  • Supply Chain Transparency Act: Disclose sourcing of raw materials to avoid conflict-zone sourcing.
    • 

  • Product Liability Laws: Ensure product safety tests are conducted per federal guidelines.
    • 

  • Hazard Communication Standard: Label and maintain Material Safety Data Sheets (MSDS) for hazardous substances.
    • 



2.4 Technology and Telecommunications


    

  • FCC Regulations: Maintain compliance with Federal Communications Commission standards for data transmission.
    • 

  • CLOUD Act: Ensure cross-border data sharing complies with the Clarifying Lawful Overseas Use of Data Act.
    • 

  • CIS Controls: Adopt best practices for cybersecurity, including regular penetration testing and endpoint monitoring.
    • 





3. Legal Standards


3.1 Employment Laws


    

  • Americans with Disabilities Act (ADA): Provide reasonable accommodations for employees with disabilities.
    • 

  • Wage and Hour Division (WHD) Standards: Ensure minimum wage, overtime, and recordkeeping requirements are met.
    • 

  • Employee Retirement Income Security Act (ERISA): Ensure compliance with fiduciary standards for retirement plans.
    • 



3.2 Intellectual Property


    

  • Inventions created during employment, if related to the company’s business, are owned by the company.
    • 

  • Software and design tools used must have valid licenses; pirated or unauthorized tools are prohibited.
    • 

  • Trademarks and branding must be used consistently and with legal protections in place.
    • 



3.3 Contractual Obligations


    

  • All contracts exceeding $100,000 require board-level review and approval.
    • 

  • Legal counsel must review international agreements for jurisdictional compliance.
    • 

  • Dispute resolution clauses must favor arbitration over litigation wherever feasible.
    • 



3.4 Anti-Corruption Compliance


    

  • Employees must adhere to the Foreign Corrupt Practices Act (FCPA) and avoid bribery of foreign officials.
    • 

  • Third-party vendors must undergo due diligence checks to verify compliance with anti-corruption policies.
    • 





4. Enforcement and Review


    

  • Violations of company policies will lead to a progressive disciplinary process, including verbal warnings, written notices, and termination.
    • 

  • Annual reviews will be conducted to align policies with regulatory updates and industry best practices.
    • 

  • Employees can submit suggestions or grievances regarding company policies to the HR department or anonymously via the compliance portal.
    • 

Service Agreement


Effective Date: January 1, 2025


Parties:


    

  • Service Provider: BrightTech Solutions LLC, a Delaware limited liability company with its principal place of business at 123 Innovation Drive, San Francisco, CA 94111.
    • 

  • Client: Summit Enterprises Inc., a California corporation with its principal place of business at 789 Corporate Plaza, Los Angeles, CA 90017.
    • 





Terms and Conditions


1. Scope of Services


The Service Provider agrees to provide the following services to the Client:


    

  1. Development and implementation of a custom software solution.
    2. 

  2. Ongoing system maintenance and updates.
    3. 

  3. Technical support, available 24/7 via email and phone.
    4. 

  4. Quarterly training sessions for Client’s personnel.
    5. 





2. Payment Terms


2.1 The Client agrees to compensate the Service Provider as follows:


    

  • Service Fee: $15,000 per month.
    • 

  • Payment Method: Electronic funds transfer to the Service Provider’s designated account.
    • 

  • Payment Due Date: Payments must be made within 30 days of receiving an invoice.
    • 



2.2 Late payments will incur a penalty of 2% of the outstanding amount per month.




3. Confidentiality


3.1 Both parties agree to:


    

  • Protect all confidential information disclosed during the term of this Agreement.
    • 

  • Use confidential information solely for the purposes of this Agreement.
    • 



3.2 Confidentiality obligations shall remain in effect for five (5) years after the termination of this Agreement.




4. Intellectual Property Rights


4.1 Any software, documentation, or deliverables created by the Service Provider during this Agreement will remain the intellectual property of the Service Provider unless otherwise specified in writing.
4.2 The Client is granted a non-exclusive, non-transferable license to use the deliverables for internal purposes.




5. Warranties and Representations


5.1 The Service Provider warrants that:


    

  • The services will be performed in a professional and workmanlike manner.
    • 

  • The deliverables will be free from material defects for a period of 90 days after delivery.
    • 



5.2 The Client warrants that it will provide timely access to necessary resources and information required by the Service Provider.




6. Termination Clause


6.1 This Agreement may be terminated:


    

  • By either party with a 60-day written notice.
    • 

  • Immediately, if either party commits a material breach that remains uncured for 30 days after receiving written notice.
    • 





7. Indemnification


7.1 The Client agrees to indemnify and hold harmless the Service Provider against any claims arising from:


    

  • The use of the deliverables.
    • 

  • Third-party claims due to the Client’s misuse of the deliverables.
    • 



7.2 The Service Provider agrees to indemnify the Client for claims of copyright infringement related to the deliverables.




8. Limitation of Liability


8.1 The Service Provider’s total liability for damages shall not exceed the total amount paid by the Client under this Agreement.




9. Dispute Resolution


9.1 In the event of a dispute, both parties agree to:


    

  • First attempt to resolve the issue through good-faith negotiation.
    • 

  • Submit unresolved disputes to binding arbitration under the rules of the American Arbitration Association.
    • 



9.2 The arbitration will take place in San Francisco, CA, and will be governed by the laws of the State of California.




10. Governing Law


10.1 This Agreement shall be governed by and construed in accordance with the laws of the State of California, without regard to its conflict of laws principles.




11. Force Majeure


11.1 Neither party shall be liable for delays or failure to perform due to causes beyond their reasonable control, including natural disasters, governmental actions, or labor disputes.




12. Miscellaneous


12.1 Entire Agreement: This document constitutes the entire agreement between the parties.
12.2 Amendments: Any amendments must be in writing and signed by both parties.
12.3 Notices: All notices under this Agreement shall be sent to the respective addresses listed above, via certified mail or email.




Signatures


Service Provider Representative

Name: John Mitchell

Title: CEO, BrightTech Solutions LLC

Signature: __

Date: __  


Client Representative

Name: Emily Carter

Title: CFO, Summit Enterprises Inc.

Signature: __

Date: __

Deliverable Example

Sample output delivered by the Contract Validation Agent:

Contract Validation Report


Date: January 3, 2025

Validated Agreement: Service Agreement between BrightTech Solutions LLC and Summit Enterprises Inc.




1. Key Findings


1.1 Compliance with Company Policies


Data Protection and Privacy:  


    

  • Compliant Aspects: Section 3 adequately addresses the confidentiality of sensitive information. Obligations remain in effect for five years post-termination, ensuring extended data protection.
    • 

  • Non-Compliant Aspects: The agreement lacks specific provisions for encryption protocols and breach reporting timelines, which are mandatory under company policy.
    • 



Contractual Obligations:  


    

  • The agreement’s total value exceeds $100,000; however, no explicit mention of board-level approval is present, which is required by company policy for contracts of this magnitude.
    • 





1.2 Compliance with Industry Regulations


Governing Law:  


    

  • The choice of California state law (Section 10) aligns with standard legal practices and supports compliance with local regulations.
    • 



Dispute Resolution:  


    

  • Arbitration under the rules of the American Arbitration Association is a compliant mechanism. However, it does not address enforcement for potential international disputes, which may be required for scalability.
    • 





1.3 Compliance with Legal Standards


Intellectual Property Rights:  


    

  • Ownership of deliverables remains with the Service Provider unless specified otherwise. This clause may limit the company’s ability to use the deliverables beyond the scope of the agreement without renegotiation.
    • 



Indemnification:  


    

  • Balanced indemnity clauses (Section 7) provide mutual protection for claims arising from misuse or intellectual property infringement, aligning with legal standards.
    • 





2. General Observations


Termination Clause:  


    

  • Section 6 allows termination with 60 days’ notice or immediately for uncured breaches. This is a standard practice and provides adequate protection to both parties.
    • 



Force Majeure:  


    

  • Section 11 comprehensively excludes liability for delays or failures due to uncontrollable circumstances, such as natural disasters or labor disputes. This clause adheres to best practices.
    • 





3. Recommendations


3.1 Immediate Actions


    

  1. 

    Data Protection Enhancements:  
    

      

    • Include a clause mandating encryption protocols for electronic communications.
      • 

    • Specify a 24-hour breach reporting timeline to align with company data protection standards.
      • 

    

    2. 

  2. 

    Board-Level Approval:  
    

      

    • Ensure documentation of board-level review and approval for this agreement.
      • 

    

    3. 



3.2 Contract Revisions


    

  1. 

    Intellectual Property Rights:  
    

      

    • Negotiate shared ownership or a perpetual license for the deliverables to safeguard operational continuity and scalability.
      • 

    

    2. 

  2. 

    Dispute Resolution:  
    

      

    • Expand the arbitration clause to address enforcement mechanisms for international disputes, if applicable.
      • 

    

    3. 



3.3 Policy Alignment


    

  • Conduct regular audits of agreements to ensure alignment with evolving company policies and industry standards.
    • 





4. Summary of Compliance Status






Validation Parameter
Agreement Section
Compliance Status
Remarks






Confidentiality
Section 3
Partially Compliant
Include encryption protocols and breach reporting timelines.




Payment Terms
Section 2
Compliant
Fully aligned with company policies and industry standards.




Intellectual Property
Section 4
Partially Compliant
Negotiate shared ownership or perpetual usage rights for deliverables.




Termination Clause
Section 6
Compliant
Adequately structured to allow for proper termination.




Dispute Resolution
Section 9
Partially Compliant
Expand scope for international enforcement if needed.




Force Majeure
Section 11
Compliant
Comprehensive and adheres to best practices.




Board-Level Approval
N/A
Non-Compliant
Explicit documentation of board-level review is required for compliance.




Data Protection Protocols
N/A
Non-Compliant
Add clauses mandating encryption and 24-hour breach reporting.




Indemnification
Section 7
Compliant
Balanced clauses ensure mutual protection.








5. Conclusion


The Service Agreement between BrightTech Solutions LLC and Summit Enterprises Inc. serves as a solid foundation for collaboration. However, addressing the outlined non-compliance issues will enhance adherence to company policies, mitigate risks, and strengthen the legal framework. Timely revisions and proactive measures are recommended to ensure the agreement aligns fully with organizational standards and regulatory expectations.




Prepared By:

Contract Validation Agent

Date: January 3, 2025

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