Contract Review Checklist: What to Look for When Reviewing a Contract?
Most of us have signed contracts without reviewing the terms, privacy disclosures, consumer rights, etc. Those are all generally low-stakes, but what if your business’s success depends on an agreement? If you want to reduce the risk and maximize the benefits of an agreement, it’s vital to have a comprehensive contract review process as a part of your CLM.
When reviewing a contract, you want to be sure that all the important terms and conditions are included, as well as that all the interested parties have agreed to the contents. A review checklist can help make sure that no important details are missed.
What is contract review?
There are a variety of factors to consider when reviewing a contract. One key area is making sure that all the relevant legal terms and conditions are included in the document. This includes specifying things like governing law, jurisdiction, and venue. You’ll also want to verify that both parties agree to the terms of the contract.
Contract review is the process of thoroughly reading and understanding an agreement before signing it to ensure that all of its terms and conditions are clear and accurate. This process can be conducted either manually or with digital contract review tools. When reviewing a document, you should analyze its fairness and be on the lookout for any loopholes to the obligations since it’s typically your last opportunity to request changes.
When reviewing a contract, there are a number of key things to look for in order to ensure that the contract is fair and accurate. One important step is to use machine learning to help review the contract. Machine learning can help identify specific clauses or words that may be cause for concern. Additionally, machine learning can help compare the contract against past contracts or legal precedent to help identify potential problems. By using machine learning, you can be confident that your review process is as thorough as possible.
The contract review process is an important step in any business deal. By taking the time to review a contract before signing, you can avoid costly legal disputes and other problems down the road.
- The parties involved in the contract. Make sure that all of the parties involved in the contract are listed, and that their roles and responsibilities are clearly defined.
- The purpose of the contract. Make sure that you understand the purpose of the contract, and that it matches your expectations.
- The terms of the contract. Read through all of the terms carefully, and make sure you understand what each one means. If there are any terms you don’t understand, ask for clarification.
- The expiration date or termination clause.
Why not sign a contract without reviewing it first?
A significant number of professionals sign contracts before even reading through them. Maybe the deal is too good to be true, or the contract is simple, so reviewing it doesn’t seem worth your time. However, you should make every effort to review all agreements before signing them so that you don’t get stuck adhering to unfair clauses. Furthermore, ignorance is not a valid defense in a court of law- if you signed it, you’re bound to it.
Contract review checklist
It’s a good idea to have a plan before starting a contract document review. That way, you can ensure that the most important elements have been assessed. This is a chance to identify any issues so they can get resolved before you’re legally bound to the agreement.
Here’s a checklist of what to look for when reviewing a contract:
1. Key Clauses & Terms
Even though you should thoroughly analyze every line in the agreement, some terms and clauses are more important than others. Of course, every company will have various important clauses, but there are also some that everyone should pay close attention to and spend extra time reviewing to ensure that the format is up-to-par.
- Dispute resolution
2. No Blank Spaces
Agreement templates boost productivity during the contract drafting phase but should be paid close attention to during the review process. Scan the document, seek out any blank spaces, and either fill them or delete them before signing the final contract. Failure to fill in a blank space in your agreement can be considered a contract error and could lead to expensive costs for your company.
3. Clear Language
When reading an agreement, analyze the wording of each sentence and look for language that could be up for interpretation. If both parties interpret ambiguous terms in the same way, it’s still wise to edit the language to be more concise to prevent disputes down the road. Disputes sometimes require a third party to determine the outcome, and when the language in a contract isn’t clear, the meaning of certain terms can be up to their discretion.
4. Important Dates & Deadlines
When looking over the dates and deadlines in an agreement, you should ensure that each one matches up with any prior verbal agreements. This is also an opportunity for your company to begin tracking anything it’s responsible for executing. Using the review process to plan ahead will allow you to mitigate the chances of breaching the agreement by missing a critical deadline.
5. Allocate Risks
Each stakeholder wants to minimize risk while maximizing reward, creating tension between contracting parties. However, you should thoroughly consider the risk of entering an agreement before signing to ensure that risk is allocated fairly.
These key provisions are commonly used to allocate risk and should be carefully reviewed:
- Force majeure
- Representations and warranties
- Payment terms
- Express contractual remedies
- Limitation of liability
- Product warranties
The benefits of using artificial intelligence (AI) for contract review
Conducting a comprehensive line-by-line review of an agreement can be a headache when you have to do it manually. The contract review and management process is a task that’s best suited for a smart contract review system, particularly AI contract review software. Automated contract review solutions allow you to scan and analyze large documents with ease. Unlike humans, this software isn’t vulnerable to errors or overlooking critical mistakes due to fatigue.
AI contract review platforms are typically based on these four steps:
The software can sort through thousands of documents and folders at a time, classifying them by file and contract type.
Provisions, party names, addresses, dates, payment details, and other essential contract data is extracted in real-time.
AI offers the ability to track obligations, liabilities, and renewals on one platform. These important details readily available allow you to speed up your review process.
Finally, the AI solution generates an instant report to help with your contract review. The report highlights errors, evaluates risk and performance, and answers benchmarking questions.
Important features to look for in AI contract review tools
With that in mind, automated contract review software should not completely replace manual review. But, when used side-by-side, automated contract review can help human readers complete the task with higher efficiency and accuracy. A platform’s ability to help improve your review process depends on the features it has.
Here are some of the most helpful features to look for when choosing an automated contracting tool:
- Contract search capabilities
- Contract templating
- Customizable dashboard with vital dates
- Document tagging and AI auto-tagging
- Advanced alerts and notifications of deadlines
- Accessible cloud-based repository
- Simple import and integration of related documents
Easier contract analysis is possible through the use of smart contract management tools. AI agreement analysis tools allow you to stop rushing and overlooking significant mistakes by taking some weight off your team’s shoulders during the review process.