Conducting a contract review is an essential element of contracting. It is an opportunity to be aware of what you and your business are signing before writing it down. A contract review helps reduce your organization’s risk and increase the probability that a contract will have a practical business impact for everyone involved. Without a thorough contract review, there is a danger of making commitments that could damage your image and reputation, as well as spending time and financial resources to resolve disputes that could have been avoided.
To ensure that every contract is carefully reviewed before it is signed, the Legal administrators should think about drafting guidelines for various review procedures that multiple types of contracts will require. If you are using an automated system to manage contracts that prioritise contracts based on the amount in dollars, such as contract management software, consider developing a policy that will determine who and how contracts will be evaluated according to dollar value.
What Is a Contract Review?
A contract review is an in-depth review of a legal document prior to signing it. It is done to ensure that the information contained in the contract is precise and clear and your company can move forward in accordance with the provisions of the contract. After the contract has been first signed, contracts reviews are crucial before certain contracts, like the possibility of renegotiating or opt-out window. A contract review is generally your final chance to discover and make any necessary changes prior to signing an agreement.
What Is the Best Way to Review a Contract?
If you are conducting a contract review, it is recommended to begin with an action plan to ensure that the most crucial areas of your contract are appropriately scrutinised. If any mistakes or discrepancies are discovered, or concerns arise out of the review process, and you are unsure of the answer, don’t proceed in the agreement until you are sure that all concerns have been addressed in a satisfactory manner.
Here are a few essential things to look out at during your contract review
Review Important Terms and Clauses
You must go through the entire contract using a fine comb. However, the first step in any thorough review of a contract is to look at the most critical clauses and terms found throughout. This is due to the fact that certain parts that are included in the agreement may be more significant, like:
- Terms and conditions – the fundamental rules of a contract.
- The indemnification clause also referred to as a liability clause, specifies who will be responsible for loss and damages.
ensuring that the terms are clear and you’re agreeable with them can help safeguard your interests within the contract. That’s why this is a crucial step for any contract review.
Check Renewal and Termination Rules
Contracts usually include an agreement for a specific period. That means that some rules and regulations govern the termination and renewal of a contract. You must agree to and be aware of these regulations during the review of your contract.
Audit Contract Language
Contracts may contain a variety of tricky terms, and, sometimes, they can confuse. Take the time to go through the contract entirely and pay attention to any confusing or misleading language in the contract. Make a list of these issues to go over with other contract parties, and don’t be afraid to make changes – that’s what the review process for contracts is all about.
No Blank Spaces
Contract templates are an excellent way to cut down on time during the contract-drafting process, but it is a requirement for special care during the contract review stage. All blank spaces should be filled in or removed prior to the agreement is signed. Based on the situation, failing to fill in the space in your contract could result in costly penalties for your company.
While both parties usually are in good spirits when they sign an agreement, there is possible that one party will not perform according to the conditions of the contract, which could result in an unintentional infraction of the contract. Pay attention to default clauses to be aware of the possible consequences of not meeting your obligations or the options you have if you’re not the party who’s breaching.
Important Dates & Deadlines
Additionally, you should ensure that the dates and deliverables mentioned are in line with the prior verbal agreements; the review can also be a chance to begin tracking everything your company or team is accountable for—plan to reduce the chance of a breach that could result in severe consequences for your business.
A contract review also validates the legality of all conditions of the legal contract and offers a comprehensive review. If you decide to ignore the advice to review the contract, you may end up enslaved to an agreement you don’t like.