What is a Contract Review?
A contract review is a contractual process used to identify and analyse the key provisions within an agreement. A legal professional will read each contract thoroughly to understand the terms and conditions and highlight risks or relevant information.
You wouldn't sign a contract without reading it first. And when it has significant implications for the future of your business, it should be checked carefully so that you aren't exposed to substantial risk. This is where teams should turn to contract reviews.
When presented with a new contract or agreement, parties are allowed - and most of the time expected - to check and potentially rework the terms and conditions, ensuring the contract works for both parties. Reviewing a contract before it is signed clarifies each party's obligations, protects their interests and ensures that all parties are treated fairly.
Both sides may want to suggest contractual changes, leading to further negotiations and compromise before signing a final contract. The aim is to agree on a framework for a long-lasting and mutually beneficial working relationship.
Unfortunately, many manual contract reviews involve working through a contract line by line to analyse the implications of every provision. Manual contract review can be as time-consuming as it sounds. Alternatively, the process can be automated using specialist contract review software.
The Contract Review Process
The contract review process starts with preparation in the pre-review stage. This process includes: clarifying contract-related facts, measuring the feasibility of the contract and forecasting contractual risks.
Firms should be clear on the objective of the contract and what risks they are likely to face.
The next stage in the contract review process is carefully reviewing the payment terms and triggers, commercial terms and duration periods. Here, the team need to be sure that the deal is on record. Part of this should involve a deep-dive interrogation into the contract's finer points to ensure that no terms are missing.
For an in-depth look into the stage of a contract review, check out our article on how to run an effective contract review.
If the contract review occurs pre-signature, then there will also be a negation period. Any changes will need to be marked up and the new version shared with the other party. This will likely lead to some back-and-forth to finalise an agreement that works for everyone at the end of the contract review process.
Legal Contract Review
Traditionally, many non-legal firms use a diligent and experienced legal team to review all but the most basic contracts. Often a junior lawyer, paralegal or legal assistant will work through the contract first with a contract review checklist, summarising the key points. A more senior colleague then reviews the contract further.
The legal team would collaborate with the business, working with the most familiar employees with the contract's subject matter. This is typically the person who has agreed on the contract and the departments involved in its delivery.
Business or Commercial Contract Review
In a smaller organisation, the contract may be reviewed in-house by business managers or the executive team. However, this can be a slow, expensive process with a possibility of human error. A contract review for small businesses can drain resources where time is limited.
An accessible and more cost-effective solution is to employ contract review software
like Summize to create a fast, accurate and insightful process.
How to Review a Contract - A Simple Contract Review Checklist
The contract review checklist is a detailed list that contains every part of a contract that needs to be checked or scrutinised during the review and negotiation process.
Contracts can vary significantly depending on the type of agreement. But there are some common elements that every contract should include.
Here's a quick rundown of some of the key points to include in your contract review checklist:
- Does the contract accurately describe the negotiated agreement?
- Are the parties involved properly identified?
- Is the duration of the contract clear, including any expiration dates and break clauses?
- What are the payment terms and triggers? What are the payment dates and are they accurate?
- Are there any terms that could be open to interpretation?
- Are both parties' obligations accurately described?
- Are there terms in place for the termination and renewal of the contract?
- Is there an agreed mechanism in place for the resolution of any disputes?
This list is far from exhaustive, but it does provide you with a contract review checklist to start with during a contract review, even if you're a legal expert.
Why Are Contract Reviews Important?
A Contract review is important because it reduces the legal and financial risk involved in any agreement. A thorough contract review provides both parties with a chance to fully understand the terms and conditions they are agreeing to before anything is signed.
Additionally, post-signature, a contract review allows the business to check clauses and provisions to ensure they still cover the needs of the company and the regulations of the relevant country. A contract review ensures that all terms are fair, enforceable, and properly documented; it clarifies what happens if either party breaks the conditions laid out in the contract.
The language and level of detail can be impenetrable for the average businessowner, which leaves them at a disadvantage in many contract negotiations. Investing in software like Summize can help, allowing users to break down, understand and review their contracts in a matter of minutes rather than days.
What is Contract Review Software?
Contract review software,
like Summize, often uses artificial intelligence (AI) and machine learning to identify the key provisions of a contract. By analysing each contract, this kind of software will highlight the most important pieces of information in an easy-to-read summary and can even red flag any areas of concern.
Contract review software has enabled hundred of businesses to improve and streamline complex processes, helping legal teams review contracts in a matter of minutes instead of hours. For teams outside of legal, it can make contracts more accessible; instantly defining any term or phrase while avoiding the legal jargon.
These tools are not limited to simple contracts, and can often be customised to suit your business and industry. All contracts are stored digitally and encrypted to save storage space and ensure complete security.
What is Contract Review Software?
Some of the main benefits of Summize's contract review software include cost-effectiveness, accuracy, and speed. With Summize, users can reduce the time spent on reviewing a contract by up to 85%, freeing up time and resource for other fee-earning activities. Using our contract review software can simplify your business' processes and empower your legal team to focus on the future of your company.
Contract Reviews & Contract Review Software: Conclusion
And that’s Summize’s ultimate guide to contract reviews!
Did you find it useful? Or perhaps there’s something we missed? Get in touch with us at [email protected] to let us know.