Contract Review Process: Everything You Need To Know
The contract review process is a rational analysis that forecasts contract risks, measures the feasibility and enforceability of the contract.3 min read
The contract review process should not be undertaken lightly. It is a rational analysis that forecasts contract risks, measures the feasibility and enforceability of the contract, and clarifies contract-related facts.
Legal review is one of the most important steps of closing a sales deal. It involves an exhaustive amount of back and forth among members of the legal, sales, and security teams.
The contract review process is done to control risk. It prevents problems from occurring by predicting and avoiding contract-related issues and minimizing business, financial capital, and legal risks.
Since contracts play a crucial role in the operations, management, and business activities of an enterprise, the contract review process impacts and decides the enterprise's interests and rights.
Contract review is divided into the following:
- Prior and post review.
- Operation and legal review.
- Formal and substantive review.
A formal review consists of the following:
- Subject matter review.
- General information review.
- Qualification review.
- Review of contractual capacity and credibility.
While a substantive review assesses the following:
- Lease Term.
- Product quality and inspection.
- Rent and payment.
- Delivery and transportation.
- Quality inspection and acceptance on delivery.
The methods, deadline, and confirmation of inspection and acceptance must be stipulated as well as punishment for failure.
The review process also assesses the following:
- Preservation and maintenance.
- Confidentiality clause.
- Relenting and disposition of leasehold upon expiration.
- Advance deposit clause.
- Deposit limit.
- Intellectual property rights.
- Enrollment payment.
- Breach of contract responsibility.
- Dispute settlement.
- Method of dispute settlement.
- Selection of law court.
- Termination, cancellation, and modification of the contract.
- Signature and seal.
- Signatory (Authorization).
- The relationship between seal and signature.
The obligations and rights of the contracting parties are determined by each provision in the terms of the contract. As such, a thorough review of the provisions stipulated in the contract is crucial.
Force Majeure Clause
Since contract fulfillment is a continuous process, the signing of the contract doesn't mean the end of the entire procedure. Once the contract is signed, the contracting parties should undertake contract management and monitor contract performance, especially in the following areas:
- Archiving original contract documents.
- Following up on contract fulfillment.
- Developing a system for governing and supervising projects as well as an early warning mechanism.
- Preserving evidence pertaining to the fulfillment of contractual obligations.
It's best to submit contract documents for review as soon as possible. A thorough review process, especially where complex agreements with major companies are concerned, takes a substantial amount of time.
When reviewing a contract, you should use a checklist.
Read the Entire Agreement
Although you don't need to comprehend all of the legalese, you should be able to assess whether the terms of the contract accurately reflects the deal you negotiated and whether there are obligations you, or your organization, are unwilling or unable to provide.
Fill in the Blanks
Whether it's a description of the services you are supposed to provide or the yearly rates to be charged, review the contract and fill in any blanks with accurate and up-to-date information. If you're supposed to provide a service or deliver a product, ensure that you describe the service or product in full detail.
At this point, you can send the contract to your attorney for advanced review. Discuss suggested edits with the other contracting party and request that the edits be incorporated. Once the edits have been added and reviewed, forward the contract for endorsement.
You should send in the original version of the contract document to the business's office and retain a copy of the signed contract in your archives.
If you decide to end a contract before its expiration date or discontinue an agreement with auto-renewal terms, ask the other contracting party to review the terms of the agreement and ensure compliance. This helps to avoid liability related to non-renewal or premature termination.
You should remember that the cost of a poorly drafted, unfavorable, or ambiguous contract far outweighs the cost of hiring an attorney. It's best to hire an attorney from the onset to draft and review the terms of the contract to avoid potential disputes and issues in future.
If you need help with the contract review process, you can post your legal need on the UpCounsel marketplace. UpCounsel accepts only the top 5 percent of lawyers on its site. Lawyers on UpCounsel come from prestigious law schools like Yale Law and Harvard Law and usually have 14 years of legal experience, including work on behalf of or with companies like Airbnb, Menlo Ventures, and Google.