Key Takeaways

  • The contract process involves clearly defined stages from preparation through post-execution management.
  • A strong contract process improves risk mitigation, legal compliance, and operational efficiency.
  • Digital contract lifecycle management (CLM) tools streamline negotiation, approval, tracking, and renewals.
  • Key activities include identifying stakeholders, defining contract goals, redlining, and post-signature tracking.
  • Automation and reporting are increasingly important for scalable contract oversight.

A contracting process is a series of tasks and activities, defined differently by each individual company. Even though each business defines their processes differently, there are certain steps generally included in a normal contracting process.

  1. Understand the need or problem that the contracting process exists to resolve
  2. Complete research and establish requirements. This may include specifications, drawings, statements, or documents.
  3. A list of potential qualified suppliers is identified and pre-qualification is completed to determine which of those suppliers are best suited to do the work needed.
  4. A contracting approach is determined based on the situation and contract documents are prepared. This may include specifications, terms and conditions, or requirements.
  5. The final cost and terms are negotiated and the contract is reviewed and finalized.
  6. Management of the final product through delivery, administration, and performance
  7. Manage any changes and resolve disputes
  8. Manage the close of the contract
  9. Handle and negotiate any claims or warranties. Prepare for litigation if necessary

What Is a Contract?

A contract is an agreement between two or more parties that is legally enforceable. There are certain requirements that should be present in all contracts.

Contracts are made by a variety of agencies, and there are several different types of contracts depending on the need.

Contract Management

A contract is a very important aspect of a business relationship between the parties involved. The contracting process is a major part of determining the success of the arrangement.

The role of the contract is becoming more important as businesses are looking to gain efficiency and productivity without increasing the amount of employees they have.

As contracts become more commonplace, it is important for businesses to consider that they should always save time, and not add extra work. The best way to avoid the pitfall of the contracting process becoming a time-waster is to automate the process as much as possible.

Contract management, or contract administration, are the processes put in place by a business to govern all aspects of a contract. A contract management platform can make the contracting process more efficient, as well as lower risk and compliance concerns.

More businesses are realizing the advantage of contract management platforms and are turning to these programs for the efficiency gains, cost reduction, and risk mitigation.

Prepare the Contract

  • It is important to be organized and prepared, and to remember that contracts are legally binding documents.
  • Identify the needs and goals behind why the contract is being made. This will make decisions easier to make.
  • Contracts should be made to mitigate risk, so it is important to think ahead to any potential problem situations and make sure that the contract solves these problems.
  • It is also important to make sure the business is protected financially on every level, and to set any pricing structures for customers.

Define Roles and Identify Stakeholders

An essential early step in the contract process is identifying internal and external stakeholders who will influence or be affected by the contract. This may include legal counsel, finance teams, procurement managers, or third-party vendors. Clarifying roles ensures accountability during each phase of the contract’s lifecycle.

Additionally, it's important to establish a contract owner—typically the individual responsible for moving the agreement forward, monitoring deadlines, and coordinating revisions.

Write the Contract

  • In order to make sure that all necessary parts are included, it is best to use a template drafted by your legal team, or to consult with an attorney.
  • Word your document carefully and precisely. Anything that may potentially be open to interpretation could cause problems in the future.
  • Don't forget to take local and state laws into consideration.

Include Key Clauses and Terms

While templates are helpful, each contract should be tailored with specific clauses to manage risk and define expectations. Common key terms include:

  • Termination clauses – define when and how a contract can be ended.
  • Confidentiality clauses – protect sensitive information.
  • Indemnification clauses – allocate liability between parties.
  • Force majeure – cover unforeseeable events that prevent performance.
  • Dispute resolution – specify mediation, arbitration, or litigation procedures.

Proper clause selection helps minimize ambiguity and legal exposure.

Negotiation

  • No matter how well written a contract is, there will likely still be a negotiation phase.
  • Researching and anticipating any concerns that the other party will likely have ahead of time will make the negotiation phase easier.
  • A contract management platform can be used by both parties to edit and view changes on the document.

Approval

  • Once all parties agree on the contract, the next step is for the appropriate parties to approve the contract.
  • You can set up an automatic task in most contract management platforms to alert the appropriate parties of the need to review and approve the contract.

Redlining and Version Control

During negotiation and review, parties often propose changes directly in the document—known as redlining. Managing these edits carefully is critical to avoid conflicting terms or overlooked obligations.

A version control system, often available in contract management platforms, ensures transparency, tracks who made changes, and enables a clean, final contract draft to emerge.

Signature

  • When all parties agree to the contract, signatures are collected to execute the contract. This can often be done electronically.

Keep Up with Changes

  • Often contracts will need changes and revisions over the lifespan of the agreement.

Monitor Performance and Compliance

Once executed, the contract process continues with performance monitoring. This involves:

  • Tracking deliverables and service levels
  • Ensuring payment schedules are followed
  • Logging performance metrics for compliance
  • Setting alerts for important milestones

This post-signature phase is where many contracts succeed or fail. Effective monitoring reduces missed obligations and enhances vendor or client accountability.

Renewals

  • Missing renewals can affect business relationships and lose profit for businesses.
  • It is important to initiate the renewal process with enough time to make sure all steps can be completed in time.

Reporting and Data Analysis

Analyzing contract data can uncover patterns and improve future agreements. Many businesses now use contract lifecycle management software to track:

  • Renewal rates
  • Missed obligations
  • Standard clause usage
  • Approval bottlenecks
  • Negotiation cycle lengths

These insights help refine the overall contract process and inform organizational strategy.

Frequently Asked Questions

  1. What is the main purpose of the contract process?
    The contract process ensures agreements are legally sound, meet business objectives, and protect against risk by following structured steps from drafting to execution and beyond.
  2. Why is stakeholder identification important in contracts?
    Stakeholder input ensures that all affected parties' requirements and risks are considered, reducing disputes and aligning business goals.
  3. How do contract lifecycle management (CLM) tools help?
    CLM tools streamline workflows, automate approval chains, track obligations, and reduce the risk of errors or missed deadlines.
  4. What should be included in a contract performance review?
    Key items include fulfillment of deliverables, adherence to timelines, compliance with clauses, and handling of disputes or changes.
  5. What are common pitfalls in the contract process?
    Lack of stakeholder involvement, poor version control, missing clauses, ignored renewal dates, and failure to track post-signature obligations are among the most common.

If you need help with the contracting process, you can post your legal need on UpCounsel's marketplace. Upcounsel, only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.