As overwhelming and complicated as a contract may be, you should never sign a contract without a proper review. The truth is, businesses both allow and expect counterparties to make changes and edits to the contract before signing it. This means that you have an option to negotiate a contract in your favor.
At Contract Hound, we believe that contract review should be as easy as possible. Follow our detailed contract review checklist with our user-friendly contract management software platform to make sure you don’t miss a thing.
What is Contract Review?
Contract review is the process of going over the entire contract and analyzing it with particular attention to detail. A contract review is conducted to ensure that conditions outlined in the contract serve your best interest. Chances are, you will find a term or condition that you may find unfavorable or unnecessary.
If you sign a contract without giving it much thought, you will likely be hard-pressed to make the required changes after the agreement is signed. Many business owners assume that the original contract is absolute. In reality, negotiations are entirely normal, but you must be the one to initiate them.
Contract Review Checklist
A contract review checklist presents a comprehensive list of every key element you need to examine before signing a contract. If you are planning to sign an agreement without a professional contract review lawyer, you should pay close attention to the following aspects:
- Blanks or missing information. Go over the entire contract and check that there are no blanks or missing details. You don’t want to risk having anyone filling the information that you were supposed to fill in the first place.
- Terms and conditions. Make sure that you agree with all the terms and conditions. If they aren’t good enough to you, remember that these are always negotiable between counterparties. Don’t be afraid to bring up any changes you would like to be made to the original contract.
- Parties involved. Make sure that you know who all the parties involved in the agreement are. You should also consider if an individual involved in the contract is tied to another stakeholder to determine this stakeholder’s influence over the terms.
- Renewal terms. Check when the contract is supposed to renew. Use Contract Hound or another contract management/reminder tool to set up automatic notifications before the contract renewal date, so that you have sufficient time to go over the contract terms and see whether it needs to be changed for the next term.
- Terms and quantities. You must be absolutely confident that any numbers and business terms described in the contract correctly represent all parties’ understanding and intentions.
- Risks. Make sure that all the risks are fairly allocated to appropriate parties.
- Indemnification and hold harmless clauses. These refer to contract agreements about how certain parties will not be held accountable for losses or damages.
- Reference documents. Always thoroughly read through reference documents tied to the contract. It’s a good idea to use a contract management platform like Contract Hound to store all the relevant documents together with the contract, as this will allow you to search and view them easily.
- Terms of default. Ensure you understand all the default clauses, and under what conditions a party would be considered to default or fail to deliver on the terms of the contract. Also, think about whether you will be able to fulfill the obligations yourself without defaulting.
- Remedies provisions. You need to understand what the worst-case scenario is in the event of default. Decide what actions will need to be taken and whether you can shift liability to somebody else.
- Termination clause. Check whether the contract describes circumstances that allow a counterparty to terminate the agreement. The contract may also include other options available to protect the non-breaching party’s interests in the event of termination.
- Confidentiality clause. The contract may include a requirement that any of the parties protect personal information, and this can include penalties for breaking the clause.
- Assignment clause. If one of the parties is required to fulfill the contract terms, written permission may be required before the party can engage somebody else to fulfill their responsibilities.
- Warranties and disclaimers. Unless disclaimed, some contracts automatically contain warranties. Make sure you know your level of responsibility.
- Dispute resolution. Review the dispute resolution route in case the contract requires arbitration or mediation.
- Other details. Make sure that you understand the other details of the contract, such as important dates and deadlines, types of insurance included, responsibilities and rights, and more.
As long as you closely examine these elements of the contract and agree on them with your counterparties, there shouldn’t be any problems. Once both parties agree on the contract terms, you can use Contract Hound’s e-signature feature to speed up the signing process.
Why is Contract Review Important?
Thoroughly reviewing contracts before signing can help you avoid a lot of problems in the future, in case any legal issues or a contract breach arise.
In addition, it will allow you to build and maintain strong relationships with your business partners by ensuring everyone stays on the same page and is satisfied with the terms and conditions of the agreement.
After the Contract Review
After your contract review and the contract has been signed, don’t forget to properly store your contract and have auditing and reporting procedures to ensure that the contract terms are being respected.
Use Contract Hound to make your contract management process much easier and more efficient. After all, going through different contracts as your organization grows can be daunting. Paper-based contract management workflows can lead to errors, too.
Around 30 days before the contract renews, make sure to check and see if the obligations have been met and if you can amend some parts of the contract. More often than not, the other party will be more than happy to negotiate if you’re willing to set a longer term contract.
Make Contract Review Easier With the Help of Contract Hound
To make the contract review checklist and process more efficient, you can automate it with professional contract management software.
For example, Contract Hound allows you to store and organize documents in one place to make them easily accessible for review. This way, all the related documents can be easily found, and all the key information can be quickly searched for using the custom search fields. Start a free trial today.