Reviewing Contracts: 6 Things To Look For

Performing a contract review is an essential part of the contracting process and provides you an opportunity to completely understand everything you and your business are agreeing to before signing.

A contract review can help reduce organizational risks and increase the likelihood that an agreement will make a positive impact for you, your business and any other parties involved.

Without a comprehensive contract review, there is a risk of committing to obligations that you can’t fulfill, wasting valuable time and financial resources resolving disputes that could have been prevented, and damaging your company’s brand and reputation.

A contract review is a thorough examination of a legal agreement before it is signed to ensure that everything stated in the document is clear and accurate, and that your company is comfortable moving forward according to the terms of the agreement.

After the agreement is signed initially, contract reviews are also crucial leading up to specific contracting events, such as re-negotiation or opt-out windows. Often contract review is your last opportunity to identify and request needed changes before getting locked into an agreement.

Here are six things you should look for in your contract review:

1. Important Dates & Deadlines

In addition to ensuring that all the dates and deliverables listed are in alignment with any previous verbal agreements, the contract review stage also provides an opportunity to start tracking anything your team or organization is responsible for executing. Planning ahead helps reduce the chances of a breach of contract and help avoid significant consequences for your organization.

2. Key Clauses & Terms

Every line in a contract is important and must be reviewed closely, though some clauses and terms are clearly more significant than others. Because every company and industry is different, the most important contract terms are likely to vary as well; however, there are a few to pay close attention to across the board. Terms like termination, confidentiality, indemnification, and dispute resolution are all important sections in a contract and are worth spending extra time reviewing to completely ensure the language is acceptable.

3. Default Terms

While both parties often have good intentions when entering a contract, there is always a possibility that one side won’t deliver according to the terms of the agreement, leading to a breach of contract. Search for default clauses so you know the potential consequences of not fulfilling your obligations - or the options available to you if you’re the non-breaching party.

4. Termination & Renewal Terms

Before signing any legally binding agreement, you’ll want to confirm that you completely understand the contract’s termination and renewal terms. This can help you avoid getting locked into an agreement longer than originally anticipated. Check on things like automatic renewal language and opt-out windows so you know up front how and when you can cancel the agreement and what the repercussions are if the other party is not notified by a certain date.

This is another reason to start planning sooner so you don’t get caught off guard when those important dates and deadlines come around. Put those dates in your calendar so you and your team don’t miss opportunities to renegotiate or cancel the agreement within the stated parameters.

5. Clear, Unambiguous Language

As you read through a contract, pay close attention to how each sentence is worded, and look for language that could be left up to interpretation. Even if unclear terms are interpreted the same way by both parties, it’s best to revise the language to be more cut and dried if possible to prevent potential conflicts once the contract is signed and active. Be sure all terms are laid out explicitly, because significant conflicts may require a third-party to determine next steps based on how they interpret the contract.

6. No Blank Spaces

Contract templates are a great way to save time during the contract drafting process, but they require special consideration during the contract review phase. Any blank spaces should be either filled in or removed before signing the final contract. While it may seem harmless, failure to fill in a blank space in your agreement could lead to costly consequences for you and your business.

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