Successful business relationships depend on a thorough and effective contract review procedure. Its terms legally bind the parties to the agreements once they are signed, so it is crucial to make sure that all clauses and provisions are stated precisely and clearly. Errors and omissions can naturally happen during a contract review process. Hence, a contract review checklist is frequently used by legal teams as a safety measure to standardise the procedure. This guide serves as a helpful checklist, that has made it possible for legal teams to guarantee 100% compliance while speeding up and automating the review process.
What is Contract Review?
Before it is signed, a contract is thoroughly reviewed to ensure that everything stated therein is true and accurate and that your business is at ease moving forward per the terms of the agreement. Following the initial signing of the contract, contract reviews are crucial in the run-up to particular contracting events, like renegotiation or opt-out windows. The last chance you have to identify and ask for necessary changes before committing to an agreement is usually during a contract review. Once you're locked in, there's no getting out unless the contract has an exit clause or the applicable law gives you the option to do so.
Important aspects you must take into account
Before signing an agreement, make sure that all pertinent aspects have been taken into account:
Verify the accuracy of the parties' names, addresses, and other relevant details;
Clearly define the purpose of the agreement and its alignment with the goals and objectives of the company;
Be clear about the beginning and end of the agreement as well as the provisions for renewal or termination;
Make sure that the consideration exchanged is clearly defined, reasonable and fair;
Examine each party's representations and warranties to make sure they are sufficient and accurate. Also, review each party's covenants and obligations to make sure they are reasonable and doable.
Examine the indemnification clauses to make sure the business is adequately protected.
Examine the limitations of liability clauses to make sure they are reasonable and pertinent.
Examine the confidentiality clauses to make sure they are sufficient and follow any applicable laws and regulations.
Examine the dispute resolution clauses, including any arbitration or mediation clauses, to make sure they are reasonable and effective.
Examine the governing law clauses to make sure they are pertinent and follow applicable rules and laws.
Examine the assignment clauses to make sure they are appropriate and in line with the aims and objectives of the company.
Review every clause in the agreement to make sure that it accurately reflects the parties' understanding of it.
Check the counterparts' provisions to make sure they are appropriate and consistent with the aims and objectives of the company.
Examine the amendment's clauses to make sure they're reasonable and pertinent.
Contract Review Checklist - A Guide
Starting with a plan will help you ensure that the most crucial parts of the contract have been thoroughly examined. You shouldn't proceed with the contract if any errors or discrepancies are found, or if any questions come up while reviewing the contract until all problems have been satisfactorily fixed.
1. Clauses and terms of the contract
Each line of a contract is crucial and requires careful examination, but some terms and clauses are undeniably more important than others. The most crucial contract terms differ since every business and industry is unique, but there are a few that should be carefully scrutinised in every case. Important contract clauses like confidentiality, non-disclosure, termination and dispute resolution are all worth spending extra time reviewing to make sure the language is appropriate. This step is crucial to any contract review because it helps safeguard your rights.
2. Terms of termination and renewal
To avoid being trapped in an agreement longer than initially anticipated, make sure you fully understand its termination and renewal provisions before you sign any legally binding business agreement. To know upfront how and when to cancel the agreement and what the consequences are of not notifying the other party by a specific date, also remember to check automatic renewal language, opt-out windows and other things of similar importance. Consider making plans for the future so that you won't be unprepared for important dates and deadlines. Set calendar reminders to ensure that you and your team don't miss chances to revise or terminate the agreement within the defined circumstances.
3. Language should be clear
Carefully examine how each sentence is written as you read a contract and scan it for any language that might be open to interpretation. Even if both parties read the ambiguous language in the same way, it's best to clarify the language if you can to avoid misunderstandings after officially signing the contract and putting it into effect. Make sure all terms are spelled out explicitly because significant conflicts may necessitate having a third party decide the next course of action based on how the parties interpret the contract.
4. Eliminate blank spaces
Utilizing contract templates can help you save time when drafting contracts, but the contract review process calls for extra care. Before finally signing the contract, all blanks should be filled in or eliminated. Depending on the situation, leaving a blank in your agreement could have a pricey effect on your company.
6Date. s and deadlines that are crucial
While most business contracts are entered into with the best of intentions, it's always possible that one party won't fulfil their end of the bargain, which would constitute a breach. Watch out for default provisions so you are aware of the potential repercussions of failing to meet your obligations or the choices you have if you are the non-breaching party.
6. Dates and deadlines that are crucial
During the contract review stage, in addition to making sure that all of the due dates and deliverables are consistent with any prior oral agreements, you can begin keeping track of anything your team or company is in charge of carrying out. Having a plan in place will lessen the likelihood of a contract breach, which could have serious repercussions for the party who violated it.
7. Regulating law
It is important to remember that the contract's governing law must not be disregarded. In addition to having different legal systems, each state, district, region, and even individual city may have a different set of laws.
Contracts are essential to carrying out daily business operations. The majority of related activities, including employment, non-disclosures, transactions, and corporate partnerships, are governed by them. Contracts must therefore be carefully reviewed because they are so important to ensuring that a business is on solid ground.