Contracts are supposed to give businesses certainty and security. They set out what was agreed, what each side is responsible for and, importantly, what the company is entitled to receive in return. It’s the most black-and-white form of an agreement (literally) possible, leaving very litte up to chance. Well, in theory.
But what happens when a business signs a contract and then effectively forgets why it even agreed to those terms in the first place?
New research published by Luminance suggests this is happening at a larger scale than one may expect. A survey of 538 enterprise leaders across the US, UK, France and Germany found that 79% cannot reliably explain the reasoning behind the terms of their own commercial contracts, including why clauses were agreed to and what was negotiated away.
And this isn’t just an issue of being a little out of touch or needing to go back and check the notes. There’s also enormous financial value attached to that missing knowledge which really shouldn’t be forgotten.
There Are Billions Sitting In a Blind Spot
According to Luminance’s research, nearly a third of enterprises that formed part of the survey estimate that the value of contracts where the underlying reasoning is undocumented is more than $1.3 billion. For 10% of respondents, that figure rises above $6.7 billion. That is not a small number by any means.
That doesn’t necessarily mean companies are literally losing billions in cash. Rather, what it really highlights is the enormous value that’s tied up in commercial agreements where businesses no longer have easy access to the thinking behind the terms.
In fact, 97% of respondents said their organisation has at least some contract value where the reasoning exists only in an employee’s memory, personal files or old email threads. And while that still means that technically, in theory, that information exists somewhere in the ether, that doesn’t really help anybody if it’s inaccessible.
This creates a problem that doesn’t really have any easy solutions. A contract might be perfectly stored, signed and legally valid, but the context surrounding it can still disappear. And without that all-important context, businesses can end up making decisions without knowing what happened last time and that’s not ideal for very obvious reasons.
The Problem With Just Storing Contracts
The research points to the fact that it’s becoming more and more important than ever before for businesses to digitise their operations, but having said this, there’s a difference between digitising operations and company information and actually being able to use it.
Some 71% of respondents said their organisation has a formal system or process that’s designed to preserve contract knowledge. However, 96% of those respondents said they had still lost access to contract knowledge. Only 21% said the reasoning behind existing terms is always immediately available when a significant contract is renewed or renegotiated.
Thus, the result is often a familiar kind of corporate treasure hunt, so to speak. More than half of the respondents said they would need to ask Legal, contact the contract owner or search manually to get information from a commercial contract. So, in this context, it’s great that they may have access to the general information in a digital database, but they still need to go through other checks and enquiries to acquire any meaningful or solid answers. That can become quite costly when the person who negotiated the original agreement has moved teams, left the company or just doesn’t remember the details several years later.
Research from Legitt AI similarly highlights how poor contract management can contribute to missed renewals, inconsistent pricing, underbilling, missed payment milestones and unenforced commercial terms. It argues that decentralised contract information can make it harder for businesses to assess exposure, forecast revenue and identify opportunities.
When Does Missing Information Become Expensive?
The Luminance research seems to indicate quite clearly that this isn’t just an administrative inconvenience; there are actually very real-world implications for this problem. Almost all the respondents, 98% of the total, said their organisation had experienced a financial or operational consequence over the past two years because commercial contract information or the reasoning behind agreed terms wasn’t readily accessible. One third had repeated a negotiating concession without knowing why it had originally been agreed. Meanwhile, 31% had accepted legal or commercial risk without knowing their company’s previous position and another 31% had missed or delayed a saving, rebate or entitlement.
And that’s where the issue becomes particularly interesting for businesses that are investing heavily in technology. Companies may have CRM platforms, financial systems, document repositories and contract lifecycle management software, but if these systems don’t make the underlying intelligence accessible, there can still be a significant gap between having data and actually using it.
What Happens When Something Changes?
The problem becomes even more obvious when something unexpected happens. Luminance found that 89% of enterprises had faced an external change in the past year, like a tariff change, interest-rate movement or supplier failure, that required them to urgently understand their contractual position. However, only 26% said they could quickly obtain a portfolio-wide answer.
Nearly half of them couldn’t get a complete view of their exposure. Some would review only their most important contracts, while others would rely on whoever happened to remember the relevant agreements. Another 11% said they had no reliable way to answer the question across their portfolio at all.
This is where the idea of “contract intelligence” comes in. Rather than treating contracts that are designed to be static documents that simply need to be stored, the aim is to make the information inside them searchable, connected and useful to the wider business. And these things should almost be as important as the details in and legality of the contracts themselves.
As Luminance CEO Eleanor Lightbody puts it, businesses aren’t necessarily short of contractual knowledge, but they’re definitely short of access to it, and perhaps that’s the real lesson here. In an increasingly data-driven business world, just having information somewhere in the system isn’t enough. Because if a company can’t quickly understand what it agreed to, why it agreed to it and what that means today, even a perfectly signed contract can become a surprisingly expensive blind spot.
