Every detail of your contract matters. If a conflict arises that might lead to default or litigation, every word of every line will be picked apart. That’s why it’s so important to have a thorough contract review process.
When it comes to creating contracts, legal teams must always have an opportunity to review the contract terms to ensure they are agreeable. Only once that’s finished can the contract be signed and enforced. In today’s blog, learn what goes into the contract review process and what you should look for.
What Is the Contract Review Process?
The contract review process is a chance for legal professionals — whether an outside law firm or an internal legal team — to review all the terms and key points in a contract to understand what it means for your business. During contract review, your legal team will search for any clauses in the agreement that might be a potential risk for your business. This risk will be analyzed with the contract as a whole to determine whether to sign the contract or propose altered terms.
Risk Management During Contract Legal Review
Much of the legal team’s job is to mitigate risk for the company. In the case of contract review, that means reviewing the document thoroughly. It can help to have a contract review checklist for reference. Once every section of your contract checklist is satisfied, you can confidently move forward with the contract. These are some of the best tips to ensure you enter into a contract with confidence and security.
Read Over the Entire Document
Contracts are dense, often long, and complex. But that’s what a legal contract review is for. It’s crucial to read the entire document and not skim over any section. You may even need to make notes or highlight relevant terms to ensure nothing is missed. Consider printing the document or using contract review software that allows you to interact with the document. There will likely be fine print and terms to be defined. Don’t skim over these sections. These are often the areas that need the most attention.
Review the Basic Terms
The basic terms should be easily laid out. Often, these are numbered and even bolded within a contract. After reading the entire document, go over the basic terms again. Familiarize yourself with them and consider what those terms would look like for your business. You may wish to propose a change to the terms or add or remove any of the terms before signing. With the right legal contract review software, you can easily make a comment proposing a change in terms on the document itself well before it comes time to sign.
Check Contract Renewal Rules
Contracts are set for a limited life cycle because life tends to be changeable. At the end of the contract, you have an opportunity to renew or end the contract. Some contracts, however, will include renewal rules that could change the terms of the contract.
It’s crucial to consider the difference between a contract extension and a contract renewal. Though both are sometimes used interchangeably, a contract extension continues the same contract. The terms remain the same, but the time frame extends. In a contract renewal, you are signing a new contract. Many terms may be the same, but some might be different. Carefully consider your contract renewal rules now so you won’t have to in the future.
Consider Alternate Contract Language in Cases of Ambiguity
Ambiguity is the enemy of a good contract. If the terms aren’t explicitly clear, they may be warped and abused. Misunderstandings might arise, even with good intentions. Worst of all, if the language is not clear, you might not be able to defend your rights within the contract.
Watch out for ambiguous terms as you review the contract. If anything is unclear, bring this up. Suggest clearer language so there can be no dispute about what is meant.
Double-Check Contract Signature Authority
Not everyone within your business is authorized to sign the contract and represent your entire business in that agreement. Your company likely has designated people who have been given signature authority in contracts. If the person who signs the contract does not have signature authority, the contract can be null and void. To avoid this kind of pitfall, double-check the signature authority policies within your company and any clauses on the contract itself.
Some contracts may also call for witnesses and notaries. Make sure you know if it’s needed and that witnesses and notaries are brought in for the signing. The signature makes the document legally binding, so extra care has to be taken.
Streamline Proper Contract Review With Contract Management Tools
Contract review might seem tedious, but it’s not an area where you can cut corners. To do so could put your business at risk, as well as sour important professional relationships. It’s essential to go through each step of this contract review checklist with care and attention before moving forward. But with multiple contracts to review and manage, how can you organize it all?
That’s where contract management tools such as contract review software can come in handy. Lexion streamlines the contract review process without cutting any corners. The software is designed to maximize workflow, assign tasks, and allow your team to access the contract, review, and make notes remotely from their devices. With Lexion, all relevant parties can review and suggest changes to contracts until everyone is satisfied with the result. Try Lexion today to see what contract review software can do for you.