No matter how small or large the project, every business relationship starts with a client contract. It’s an important document that lists the terms, conditions, and agreements for all involved parties, so crafting a contract is not something anyone can write and sign on a whim.
Agreeing to the contract without analyzing its contents can result in you getting the shorter end of the stick; that’s why conducting a contract review is a critical part of every contracting process.
What is a Contract Review?
Contract review is the stage where you assess the impact it will have on your business and the possible organizational risks, so you can sign the contract with full confidence that you can meet all the obligations.
Without understanding the implications of the contract, there’s a high risk of agreeing to something that can essentially harm your business in more ways than one — from wasting your time, financial resources to compromising your reputation as a credible brand.
What Does a Contract Review Generally Contain?
When writing a contract review, be sure to cover all the essential elements you need. The details will vary depending on your working conditions, business relationship, and other factors, but it should have the following components:
- Mentioning and identifying all relevant parties;
- Ensuring all terms and conditions are clearly defined;
- Including all important signature blocks;
- Including all exhibits, schedules, and other reference materials;
- Ensuring all mathematical formulations are correct;
- Ensuring that the term expiration is explained;
- Including instructions for early termination if applicable;
- Identifying the rights of all parties in regards to the terms of the contract;
- Checking that all of the performance obligations are accurate;
- Verifying the accuracy of payment terms;
- Clarifying any expenses that are reimbursable and how to go about it;
- Verifying the accuracy of warranties and representations;
- Checking for a well-drafted NDA provision;
- Verifying the presence of a non-compete and non-solicitation;
- Checking who will own intellectual property;
- Verifying for indemnification;
- Checking to see if insurance is required or should be;
- Checking for boilerplate provisions;
- Agreeing to govern law and legal jurisdiction;
- Verifying provisions for attorney fees;
Keep in mind that everything in your contract is important, but some clauses and terms hold more weight. Be on the lookout for critical worlds like “confidentiality,” “indemnification,” termination, and “dispute resolution.” Don’t hesitate to ask for further clarification, especially when you spot these key terms.
The Bottom Line: The Importance of Contract Reviews and Management
Crafting clearly defined contracts is not as straightforward as it seems, especially since it involves a myriad of legalities that are tricky to understand without any law background. Before you refer to generic, pre-made contract templates online, we can help personalize and ensure your contract data management system is compliant.
Are You Looking for the Best Contract Management Software for Small Businesses?
Don’t sign blindly and explore our enterprise contract lifecycle management solutions dedicated to small and mid-sized businesses. Here at Anapact, we strive to reduce your risks, empower your team, and streamline your workflow with our contract management software. Get a demo today!