Simply put – contract reviews are key to mitigating risks and to attaining contracts that are favorable for your business. But what might happen if you choose not to review your contracts? Well, you might accidentally commit to contractual obligations that you can’t follow through on. And what does this mean? It means you could hurt your organization’s reputation, and then you might have to go the legal route to work through the preventable disputes.
When you conduct a contract review checklist, you analyze every sentence word-by-word with a fine-toothed comb to confirm that the document in its entirety is accurate, legally valid, and that the terms and conditions contained within it are favorable. You also use the reviewing phase to gain a full understanding of potential risks associated with the agreement. The contract review stage is critical to future events within a contract’s lifecycle, like renegotiations for example. Need to make a last-minute change to the agreement? The contract review is the time to do so, so make sure you cover every detail so you don’t get contracted into something you wish you hadn’t in the first place.
A contract review checklist is a list of all the essential components within a contract that must be examined prior to signature. With an effective checklist, you can maintain an organized procedure when reviewing contracts, helping you increase accuracy and time-efficiency.
In every contract, there will be some clauses and terms that weigh more heavily than others. We suggest spending additional time reviewing some important terms such as dispute resolution, indemnification, termination, and confidentiality. Contract terms and conditions will serve as the foundational contract rules. By making sure that all clauses and terms are clear and are conducive to your organization’s needs and goals, you can protect your organization before formally entering a legally binding agreement.
There’s nothing worse than being locked in a contract for longer than you initially wished to be – this is where the importance of reviewing termination and renewal terms comes into play. Be on the lookout for specific auto renewal phrases and opt-out timeframes. This way, you know ahead of time when you can complete a cancellation and what the potential negative impacts would be if you fail to do so by a predetermined deadline. With contract management software, you can enable automated reminders and alerts to keep your organization in the loop of these key dates, such as auto renewal dates, contract expiration dates, and cancellation deadlines.
When reviewing a contract, you should assess how concise and clear every sentence is. Leave nothing up to interpretation, as this is where failed expectations and miscommunications could potentially arise. Ensuring that the document only contains clear wording can help you prevent miscommunication and conflict down the line when the contract is signed and executed. If any confusing or misleading words and phrases standout in the document, take note of them so you can discuss them with other contracted parties for continued revising and redlining.
Prior to signing a contract, be sure to check for blank spaces and choose to either fill them in or remove them entirely. By not filling in the blanks, you could potentially cost your business a lot of money – so don’t skip this seemingly unimportant step, as it’s rather critical! A contract with blank spaces is an incomplete contract, essentially meaning that it is not legally valid.
If a contracted party doesn’t fulfill their contractual obligations, you can find what negative ramifications the party will incur by reviewing default terms. By overseeing the default regulations and rules, you can gain an understanding on what the potential impact would be when you fail to fulfill your contracted obligations, as well as what your legal options are when someone else does. So, in the case that a contract is breached, you can review the default terms so you know what the impacts are.
During the contract review stage, you can plan ahead and begin monitoring all tasks that your organization is responsible for. This includes having specific items and deliverables completed by key dates and deadlines. By doing so, you can mitigate against the possibility for a breach of contract. Carefully review every deadline, key date, timeline, and other dates of note that are written in the document, and then get to planning. We suggest also having a detailed plan to adhere to in the case that a deadline or key date is changed. For example, if an unexpected circumstance occurs, be sure to have a flexible solution that protects all contracted parties.
Review Contracts Regularly
We suggest consistently reviewing all of your existing contracts and all of your new contracts to help protect your business from potential risks. Prior to a contract renewal, you should review the given agreement to help you improve the current agreement, given your experience working with the contract at hand. Now, you can fix things within the document and change terminology due to everchanging industry guidelines since the contract’s creation. Take the time to review and optimize your contract’s terms during your contract reviews, as it’s well-worth the time.
Take Your Time
Reviewing every single sentence, term, condition, and everything in between can take an insurmountable amount of time – as this is especially true for highly complex and detailed legal agreements. However, it’s crucial to be patient and take your time when doing so, as the investment of your time will help protect your business and mitigate risk. Allow for a significant amount of time to complete your contract reviews, and add more time than you might anticipate for contracts that are high-stakes or high-value.
Get Multiple People Involved
Have multiple people take part in the contract review, as one person might identify different issues than another. If it is someone’s first time reading an agreement, they may potentially see errors that the contract author hadn’t seen. If you review and review your own work over and over again, you’re likely to miss certain things that a fresh pair of eyes wouldn’t. With a member of your organization’s legal team, you can oversee all of your organization’s contracts far more effectively during the contract review process, helping you increase the potential of only finalizing and executing favorable contracts.
Utilize Contract Management Software
With contract management software, you can utilize collaboration-minded features that assist in your contract reviews with redlining capabilities that autosave changes and track document versions. This can help assist your contract reviews by providing a centralized, digital platform that is accessible to all parties during the contract review – as they can access the contract and contract review checklist tools on any device. For more information on redlining, version controls, and tracking changes during the contract review process, we recommend reading our blog here.
Contract reviews can be streamlined in numerous ways with contract lifecycle management software. An intelligent contract lifecycle management (CLM) software solution offers your organization several collaborative features so you can create the most productive and results-driven contract management experience. Our CLM solution gives you all the tools you need to monitor your contract lifecycles and expertly manage contract reviews.
Investing in a cost-efficient and proven contract lifecycle management software is one of the best decisions you could make to get the competitive edge on your contracts. Here at Dock 365, we help you manage your contracts by leveraging your existing Microsoft 365 and SharePoint platforms, as they function as the base for your contract lifecycle management system. If you're currently in the market for a contract lifecycle management system, we would be happy to offer you a complimentary demo of our system so you can see it in action.
Learn more about our Dock 365 Contract Management System here.
Learn more about Contract Lifecyle Management (CLM) Software here.
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