Tips and tricks for a successful contract review

The Guinness Brewery in Dublin is one of the best, old-age cautionary tales about contracts. It sits in a prime location in one of the most expensive cities in Europe, yet they only pay £45 per year. This is because a wise Arthur Guinness signed a 9000,-year contract that won’t fall due for renewal until 10,759.

Contracts are the foundations that every industry uses. Getting them right is an arbitrary expectation, but blunders can cost millions. Courts don’t care for subjective intent after they have been signed, so you get zero lenience for a sloppy review process.

1. Start with a High-Level Review First

Legal document review should always start with who the contracting parties are. A contracting party is anyone responsible for the delivery of terms stipulated or anyone who may be liable if the contract is breached. This may be an individual or an organization, but the first step is to ensure that everyone involved has one’s name and address correctly written into the contract.

Once names are clarified, the specific dates agreed and the terms you expected are your next priorities. Think about the calls and emails exchanged. Is everything represented or are there any key pieces missing?

2. Scan for Blanks

No matter how trusted the contracting parties are, there should never be blank spaces left in a contract. Scan the entire document. Highlight anywhere with a blank space, whether it is intended for numbers or words. Consider the contract like a blank cheque and what the worst-case scenario is. By the time you sign, no blanks should be found.

3. Evaluate the Terms, Rights, and Responsibilities

Who is responsible for what? Be detailed in your assessment because the assumption is the mother of all mistakes. Oral agreements or understandings are insufficient.

What are your rights and responsibilities? What are the fine print conditions you need to stand accountable for? Everything from milestone dates, payment amounts, methods, and penalties are vital for you to know.

4. Study the Termination, Withdrawal, and Renewal Terms

If you follow soccer, you will have heard of Jose Mourinho. Mourinho is a famed manager and seemingly a contracts expert. He has collected over £93.5 million in early termination pay. It is a necessity that termination clauses and procedures are constructed to work for all parties.

Similarly, ensure that you have the option to renegotiate if a renewal will be needed. One of the vital benefits of emerging contract AI is the ability to highlight renewal dates as they approach. For companies that sign millions of contracts a year, this is a huge value add as renegotiation could otherwise slip under the radar.

5. What are the Remedies and Resolutions?

Unfortunate circumstances where a contract cannot be fulfilled or disputes arise are rare. Regardless of this fact, you must ensure there is adequate recourse and remedy procedures to handle such instances.

Have each remedy and resolution laid out in the contract ahead of time. Prior planning reduces the potential for legal recourse and the opportunity for disputes to get heated.

6. What does Indemnification mean?

Indemnifying a party in the contract means that they will not be held liable for the loss or any reason the contract goes unfulfilled. In the situation that the other party is requesting indemnity, start by asking why? If the reason is valid, it intuitively suggests that you should also negotiate for like terms.

7. Reading for Ambiguity

Ambiguity is a killer in contracts. Read through your contract and make certain that no alternative interpretations for the important terms exist. Where there is confusion, have the contract author reword for clarity.

Confusing language can often be used intentionally so if the other party fights you on the terminology, be prepared to hold your ground. This should be the first priority in your contract review checklist.

Final Thoughts

Reviewing contracts can be mind-numbing but it is utterly crucial. As the infusion of legal technology continues, we are seeing more contract software because efficiency and accuracy are everything. You don’t want to be stuck in the same contract 9000 years from now with no way to renegotiate.