Contracts are often referred to as the lifeblood of an organization, as they are the backbone that establishes and governs transactions between parties, including the buying and selling of goods and services.
Thoroughly reviewing contracts is critical to ensure that the terms and conditions of the agreement accurately reflect the transaction contemplated by the parties. By keeping these seven tips in mind before and during your review, you can help yourself and others navigate the complex process of contract review.
Tip #1: Speak with stakeholders first.
Before looking at the agreement, speak with the key stakeholders for the transaction. Understand what the deal is intended to accomplish and, importantly, why.
Reviewing an agreement without understanding the bigger picture may lead your review astray. You may pick up on something you perceive as an issue or something concerning in the agreement when, in fact, it is not because of the context. You also want to understand from the stakeholders potentially other parties you may want to speak with about the agreement such as finance and IT.
Tip #2: Have a checklist of key issues and clauses.
Have a checklist of key issues/clauses on hand before beginning your review. This can take the form of a playbook that lays out the key positions your company takes on common provisions and potential fallback language/clauses to use if you need to end up negotiating any of these key areas. It’s common to have such a playbook or checklist incorporated into any contract review tools you may have on hand to help with your review such as a contract management solution.
Tip #3: Read through the contract from start to finish.
The purpose of the review is not to find all the potential issues in it but to understand its overall structure and flow. Reading through the entire document will also show where items are cross-referenced and give you an understanding of how specific terms are defined and used within the agreement. Reading through the entire agreement will also point out potential inconsistencies or terms that lack a definition.
Tip #4: Make collaboration easy and welcome.
When you come across issues that require input from others, help those stakeholders help you.
- Provide a simple explanation of why you need their help and what information you are seeking from them.
- Call out specific language of the agreement you need them to review or if you are emailing them, copy and paste the language into the email for their review. Everyone is busy. You want to make it easy for them to respond so they do not need to wait for you to help.
Tip #5: Watch out for “hidden” references.
Hidden references are hyperlinks or references made to other agreements or other terms that impact the agreement you are reviewing or, as sometimes can happen, adds terms to the agreement. Be especially careful if there is language stating that any incorporated terms can be changed by a party at any time and without notice. You will want to ensure that cannot happen.
Tip #6: Be on the lookout for boilerplate provisions.
“Boilerplate” provisions are often where the most heavily negotiated clauses can be found such as indemnification limitations of liability, governing law, dispute resolution, and warranties to name but a few. Any time someone mentions boilerplate provisions or just the word boilerplate, be on alert. While these clauses are found in nearly every contract, they should not be taken lightly or glossed over.
Tip #7: Be mindful of dates.
Ensure that the dates of a contract are consistent, are aligned with what the words of the contract say, and accurately reflect what the contract term is. Do not be deceived by the words saying one thing and the numbers saying something different.
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