The Ultimate Guide to Contract Checklists

This is the ultimate guide to contract checklists, where you’ll find out everything about:
  • How to use a contract checklist
  • Why contract checklists are important
  • What should be included in a contract checklist
  • How to carry out a contract review with a contract checklist
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What is a Contract Checklist?

With so many contracts being exchanged between parties every day, contract checklists are an important part of legal work. Although legal teams work through similar contracts repeatedly, it is important to have a structural and consistent approach to each process.

A contract checklist is a list or framework that helps you identify and organise key parts of a contract. They can be used when creating, analysing, or reviewing a contract, and each process will alter the contents of the checklist. For example, a contract review checklist will focus on the clauses that should be checked, whereas a contract creation checklist may detail what information should and should not be included. 

Contract checklists may also differ for each contract type, as again, there will be alternating areas of focus. The terms and conditions may also require different clauses and terminology, so the contract checklist will need to reflect this.

Why Are Contract Checklists Important?

Contract checklists are useful tools that help with many contract processes, including contract reviews and contract creation. They are formalised processes that ensure that no step is missed.

It is important to introduce contract checklists into the contract lifecycle, as it significantly reduces the likelihood of human error and therefore, legal or financial risk. They help to reduce miscommunication between the parties involved and also make it less likely that a breach will occur, as contracts that have been analysed using a checklist have increased accuracy and ambiguity is removed.

A contract checklist will cover the most important aspects of a contract for the business, ensuring that all relevant provisions are included and correct.

What Should I Include in My Contract Checklist?

Before getting into the appropriate clauses and terminology that should always be included in a checklist (whether it’s for contract review or contract creation), it is important to first consider the following: 
  • What is the purpose of the contract and what are the expectations?
    It is crucial to consider what the business expects to gain or achieve through the contract. Depending on what stage you are at, you can either direct your contract creation to meet these aims or determine whether the current contract does this efficiently or not. 
  • Are there any recent changes in regulation or company policy that need to be considered?
    If terms have been altered to reflect these changes, it is vital to keep this in mind. It could have an impact on the whole contract and how it is phrased.
  • Who are the other parties?
    What might they want to achieve from the contract and what are their biases? If the contract is already created, are they delivering on their obligations or does there need to be some clarity on expectations? 

Contract Checklist Guidance

This breakdown of a contract checklist can be used for most standard contracts, and is useful to consider both when conducting a contract review or when creating a new contract. It could be useful to adapt this template slightly depending on the type of contract you are using and how bespoke the agreement is. 

Parties and Purpose

  1. Parties
    Ensure that the name (and addresses where relevant) of each individual or corporation involved in the contract is listed both in its full form and as a shortened version, which should be referred to throughout the agreement.
    It should also be clear who will sign the contract on behalf of each organisation, their roles within the company, and why they are legally authorised to sign. Additionally, the type of company should be listed along with any trading name.
    Usually, a credit check should be completed at this point to determine legitimacy.
  2. Purpose
    The primary purpose of the contract should be listed simply with minimal legal jargon, to ensure that all parties understand why the agreement is being completed. What is being provided should be transparent.
  3. Obligations
    The obligations, warranties, and rights of each party and any outcomes of these should be identified clearly with no ambiguity. It should also be made clear what penalties will occur should any of these obligations be breached or not completed. Teams should examine whether anything has been promised that is not listed in the contract.
  4. Entire Agreement
    This is an important clause that references all of the locations and documents that include information about a certain agreement. This is crucial to avoid any confusion or miscommunication at a later date.

Terms

  1. Payments
    This should include triggers for payment and when the payments start from. Ideally this should be detailed in a full payment schedule. The contract should also list the currency, how often payments are made (for example, in a lump sum or instalments), and how they are sent/received (for example, via bank transfer).
    Any tax considerations should be noted along with any fees and interest incurred by incorrect or missed payments.
    Teams should also ensure that for the relevant contracts, commercial protection is detailed.
  2. Duration
    Each contract should state the initial term, standard notice period and general termination provisions. Many typical contracts will range up to 12-months in length, but more bespoke agreements can be longer. A contract should also contain provisions on renewal and termination, detailing how these are arranged.
  3. Force Majeure
    Given the current global climate, including a force majeure clause is vital to describe how services or products should be delivered (or the compensation if this cannot be achieved) if there are delays or restrictions.
  4. Data Protection
    All data regulations (e.g. GDPR) should be followed with respect to the location of the parties involved with the agreement. It should be clear who owns the data and what can be done with it. Additionally, details of any consent requirement should be included.
  5. Intellectual Property
    The IP rights and the owners of a product, design or idea should be identified, along with the value that can be gained from any offered services. It needs to be clarified whether the terms change for any consultants vs. full time staff.
  6. Indemnities
    These should only be included in areas such as intellectual property, regulation compliance, confidentiality provisions, and loss/destruction of data. Any caveat indemnities should also only be reasonable costs for direct claims.
  7. Limitation of Liability
    This should be a generic clause that identifies the liabilities if obligations or warranties are breached and if the indemnity was enforced. It should be limited to the amount of the contract and include any indemnity obligation.
  8. Confidentiality
    Any listed confidentiality needs to be mutual and should include descriptions of the information that is likely to be disclosed.
  9. Variations
    If carrying out a contract review, any variations to the contract need to be included along with the original. It should be in writing and signed by both parties. A variation by email, phone or in person is not legally applicable.
  10. Governing Law and Jurisdiction
    Every contract is tied to the local governmental regulations and laws (dependent on where any disputes would be heard), and these should be recognised when creating or editing clauses.

How Should a Contract Checklist be Used When Reviewing or Creating a Contract?

Using the initial steps above, create the rest of your contract checklist based on the contract types and requirements of the project. It may need extra checks depending on the process you are completing - contract review, creation or analysis - and it’s important to examine your objectives.

With so many key aspects to the contract lifecycle, it can be daunting and it’s easy to make mistakes. That’s why having a framework like a contract checklist is particularly beneficial, as it can guide you and ensure you haven’t missed anything. 

When creating, reviewing or analysing your contract, work steadily through your checklist, making notes (where relevant) as you go. It may be an idea to add checkboxes, which will display when each criteria has been checked.

And that’s Summize’s ultimate guide to contract checklists!

Did you find it useful? Or perhaps there’s something we missed? Get in touch with us at [email protected] to let us know.

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