Contract Renewal Process and Best Practices for 2025

The differences between contract renewal and contract extension are key when considering agreements.

For example, service contracts often require renegotiating terms like service levels or pricing, while non-disclosure agreements (NDAs) may simply need an extension of their validity period if no substantial changes are necessary.

Renewing a contract typically involves creating a new agreement based on the terms of the old one, possibly with some modifications. Extending a contract, on the other hand, simply prolongs the duration of the existing agreement without making significant changes to its terms.

Contract Renewal Process

The contract renewal process is a structured approach to ensure agreements remain effective and aligned with current needs. It typically involves reviewing the existing contract, evaluating performance, negotiating terms, making necessary adjustments, obtaining approvals, and formally renewing or signing the agreement.

1. Review the Current Contract

You can prepare for a contract renewal by reviewing past performance, gathering feedback, and assessing current needs. The best approach is to understand market rates and trends, draft potential changes or renewals, and set up a meeting to discuss terms with the other party early.

Preparation starts with a detailed review of the current contract to identify key terms, obligations, and performance metrics. Analyse whether the terms have been beneficial, outdated, or misaligned with current business goals.

A thorough review of the executed contract before renewal can lead to more favourable terms and a stronger, more effective partnership moving forward.

2. Gather Feedback

Gathering feedback from stakeholders involved in the contract's execution is important. Collect input from teams or departments that interact with the agreement regularly. This helps identify pain points, understand successes, and determine changes that could improve future collaboration or operations.

Gathering feedback is invaluable during the contract renewal process. By incorporating lessons learned and addressing challenges faced during the current contract, organisations can refine terms, improve efficiency, and ensure better alignment with the goals of all parties.

3. Initiate Renewal Discussion

Reach out to the other party to initiate discussions about contract renewal. Schedule a meeting to review the current agreement, share feedback, and outline potential changes. This is an opportunity to align expectations and ensure both parties are prepared for negotiations.

4. Negotiate Renewal Terms

Engage in discussions to refine the contract terms. Consider factors like pricing, duration, service levels, and responsibilities. Negotiations should be transparent, addressing any concerns while striving for a mutually beneficial agreement. Document all proposed changes for clarity.

Furthermore, during the contract negotiation and renewal process, it is important to revisit past performance and outcomes under the executed contract. This review helps both parties understand what worked well and where improvements can be made.

5. Draft the Renewal Agreement

Once terms are finalised, prepare a revised agreement incorporating the agreed-upon changes. Ensure the document reflects the new terms accurately, complies with legal requirements, and includes necessary clauses to address future contingencies.

Key phases in drafting the renewal agreement process include preparing the renewal document or amendment to the original contract, ensuring all changes and extensions are accurately reflected, and obtaining a legal review to confirm clarity and enforceability.

Further reading: Addendum vs. Amendment in Contracts

6. Execute the Renewal

Obtain formal approval from all relevant stakeholders before proceeding. Both parties should review and sign the renewal document, ensuring all necessary signatures are captured to validate the agreement. Utilising digital signing platforms, like Pocketlaw Contract Signing Software, can expedite this process, ensuring timely execution and enhancing overall efficiency.

When a contract is renewed, the agreement is extended for a new term. Terms may remain the same or be updated based on mutual agreement. Both parties continue their obligations as defined in the renewed contract.

7. Update Records

Update internal systems to reflect the new agreement details. Archive the old contract appropriately and ensure the renewed document is accessible to relevant personnel. Clear record-keeping helps avoid confusion and supports compliance and accountability.

Contract Renewal Best Practices for 2025 - 10 Tips

Efficient contract renewal is essential for maintaining business continuity, reducing risks, and maximising value.

Here are ten actionable tips to optimize your contract management process:

1. Store Contracts in a Centralised Repository

A centralised repository ensures quick access to all agreements, such as consulting agreements or employee contracts, allowing teams to identify renewal opportunities and review existing terms. It eliminates delays caused by misplaced documents, ensuring renewals are processed efficiently and deadlines are not missed.

2. Regular Reviews and Updates

Renewals require evaluating whether contracts still meet business goals and compliance standards. Regular reviews highlight outdated clauses, unnecessary terms, or new opportunities for negotiation, ensuring contracts evolve alongside business needs.

3. Train Your Staff

A well-trained team is better equipped to handle the complexities of contract renewals, such as reviewing terms, negotiating favourable conditions, and adhering to legal compliance. Training minimises errors that could derail the renewal process.

4. Define Clear Roles

Contract renewals often involve multiple stakeholders. Defining roles ensures each team knows its responsibilities, such as who negotiates terms, who approves renewals, and who manages deadlines. This clarity reduces delays and confusion.

5. Monitor Contractual Compliance

Contracts that are up for renewal must be reviewed for compliance with their terms. Monitoring compliance ensures all obligations have been met, providing a stronger position during renewal negotiations and reducing the risk of disputes.

6. Set Reminders for Key Dates

Missing renewal deadlines can lead to unfavourable terms or lost opportunities. Automating reminders for key dates ensures teams act on renewals promptly, avoiding lapses in service or unintentional renewals on undesirable terms.

7. Encourage Department Collaboration

Renewal decisions often require input from multiple departments, such as legal for compliance, finance for cost implications, and operations for performance metrics. Collaboration ensures that renewal terms are aligned with the organisation’s goals.

8. Conduct Regular Audits

Auditing existing contracts reveals trends, inefficiencies, or risks that can inform better renewal decisions. For example, an audit may uncover recurring issues in contracts that should be addressed during the renewal process.

9. Seek Legal Advice

Renewals are an opportunity to renegotiate terms or address evolving legal requirements. Legal experts provide insights into clauses that could be updated, ensuring renewed contracts are both compliant and advantageous.

10. Utilise AI and Contract Management Tools

Utilise AI-powered solutions and contract lifecycle management (CLM) software, such as Pocketlaw CLM, to streamline the renewal process by maintaining a centralised contract repository, automating reviews (reviewing contracts with AI), identifying risks, and suggesting improvements. These tools also provide insights into past contract performance, helping to negotiate better terms during renewal.

By following these practices, organisations can enhance their contract renewal strategy, reduce risks, and create value in 2025 and beyond.