How the GDPR and contract lifecycle management shape each other

Since its introduction in 2018, the General Data Protection Regulation (GDPR) has set the gold standard for privacy regulations. It defines the way in which corporations globally deal with the data of EU and EEA citizens. 

Based on principles of transparency, proportionality and legitimate purpose, the GDPR legitimises the rule of the Data Protection Supervisory Authority in imposing fines of up to 4% of annual turnover, or EUR20 million.

Altogether, it is clear why legal counsels across the board are implementing contract lifecycle management solutions to deal with a set of rules of this scope and impact. In this article we’ll explore exactly why CLM tools like Docfield significantly enhance GDPR readiness, and the steps you can take to evaluate whether a CLM is a good fit for you. 

Defining GDPR compliance: the core classifications

At its core, GDPR compliance means the proper handling of personal data of EU and EEA citizens. Data broadly falls into two buckets: sensitive and non-sensitive personally identifiable information (PII). Non-sensitive data are things like names, business information, and email addresses. Sensitive data refers to financial information (like tax numbers or credit card details) or home addresses. A combination of name, date of birth, and zip code can also be classified as sensitive. 

Aside from the data classification, the GDPR also establishes three major buckets that parties can be classified under: subjects, controllers, and processors. (Article 28A). A “data subject” is an individual whose data is collected. The “controller”, on the other hand, is the organisation that determines the purpose and means of processing the data subject’s data. Lastly, a “processor” is an organisation that processes personal data on behalf of the controller. An example of this might be a payroll company (processor) processing employee (subject) data on behalf of an insurance company (controller). 

Organisations subject to GDPR must not only adhere to privacy rules, they must also uphold the rights of EU citizens, including access, rectification, erasure, and portability.

Why does GDPR matter to your contracts?

Under the GDPR, it is mandatory for data controllers and processors to sign a DPA (data protection agreement). This is a legally binding agreement about the scope, nature and purpose of data that is being processed. We have provided a DPA template, which you can access by signing up for a free trial of the Docfield CLM platform. 

Contracts often contain sensitive and non-sensitive PII. The GDPR specifies that data should only be stored as long as necessary according to its pre-defined purpose. Of course, data subjects have the right for their data to be accessed, corrected, or deleted entirely. With the Docfield CLM, you can filter contracts easily and push changes across thousands of documents in one go (including deletion). 

How GDPR Impacts CLM Software

According to a GDPR enforcement tracker, the most common violation companies are fined for is grounded in an insufficient legal basis for data processing (676 violations totalling EUR 2 billion in fines). There are a small number of cases that account for a large portion of the fines here, but it is important to protect your business from exposure to this sort of fine nonetheless. Consider that the number of GDPR fines issued each month grows month over month and shows no signs of slowing. But, how does the GDPR inform contract management principles, and in turn the utility that we can derive from CLMs? 

1. Legal basis for processing

• Contracts often are the legal basis for data processing (e.g. employment agreements, vendor onboarding).
• A CLM ensures that these documents are version controlled, easily retrievable, and with a full audit trial. Critical if your legal basis is challenged.

2. Facilitating the 'right to be forgotten'

The GDPR is retroactive, meaning it applies to data that was collected before the regulation came into effect. Effective CLM solutions:

• Automate workflows that manage contract data erasure requests within a few clicks.
• Clearly define obligations within contracts regarding data deletion.

What sets Docfield apart?

With Docfield, legal councils can ensure that GDPR clauses are always up to date and automatically included in relevant contracts by using conditional logic. Furthermore, only authorised users can edit these clauses - and they can do so for thousands of contracts in a single click.

3. Strengthening data security and access control

Security is a foundational GDPR requirement and contributes to some of the largest fines. A CLM platform like Docfield will enable you to:

• Implement role-based access to restrict sensitive data visibility.
• Encrypt your signatures and contract data. 
• Provide real-time breach detection and alerts.

There are many features like it, and you can find more details about them here. 

How does CLM shape GDPR Compliance?

The majority of companies get fined - not because they intend to harm - but because they don’t have the means (like know-how or systems) to operationalise compliance with the GDPR. As a business scales, so does the amount of complexity it deals with. Operating a CLM like Docfield can significantly enhance GDPR readiness by providing organisations with a single source of truth for all legal matters. From creation, to draft, to negotiation and signatures, to eventual dashboards built on contract data. Operating the Docfield CLM makes it easier than ever to have all the facts in front of you. The benefits are compounded by strong integrations, enabling you to automatically port data to-and-from other sources, like your CRM or ERP. 

We asked our customers what features help them the most, and some of the more common replies were:

• Structured data management: organising contract data simplifies GDPR audits, and helps demonstrate accountability.
• Proactive compliance reviews: Periodic reviews, alongside the ability to edit thousands of contracts at once, means we can proactively iterate and stay up to date with the latest requirements. 
• Conditional logic: If we sign an agreement involving a European party, the Docfield CLM automatically includes GDPR clauses. If the location changes, so do the terms. 

Leverage a CLM to strengthen trust

Compliance isn't just about pleasing regulators, it's a very strong trust signal for all stakeholders. Organisations leveraging GDPR-compliant CLM solutions position themselves as reliable, trustworthy partners that demonstrate operational maturity. 

What steps can you take towards GDPR-compliant contract Management?

GDPR compliance is not just a checklist you cross off, but a framework within which your organisation operates and handles data. Whilst your CLM is a part of this, there are several other steps you can take to enhance your readiness.

• Create a detailed processing register (Article 30 GDPR).
• Operationalise Data Protection Impact Assessments (DPIAs).
• Develop robust consent management frameworks.
• Establish clear processes for data subject rights management.
• Implement comprehensive breach notification workflows.

If you are uncertain about whether your current contract management processes can support your GDPR readiness, it is a great time to evaluate your CLM strategy. 

Start your free trial today, or book a demo to get a live walkthrough from one of our exports.