How to Review a Contract: Contract Review Checklist

The contract review process protects the interests of your business and ensures the agreement is legally binding and enforceable. By preventing future disputes or termination of the contract, you safeguard your business from potential legal issues.

To review a contract, follow a systematic approach: prepare by gathering necessary documents and setting clear objectives; analyse specific provisions; review key terms; ensure legal and regulatory compliance; address technical aspects; develop contract negotiation strategies; conduct a final review; and manage post-review processes.

Contract review is important because it safeguards against unfavourable terms and legal pitfalls. By seeking legal advice and thoroughly reviewing the contract before signing, you mitigate risks and ensure transparency. It ensures all parties understand their commitments and that the contract aligns with their business goals.

Contract Review Checklist

• Gather necessary documents

• Set review objectives

• Ensure parties are correctly identified

• Verify all dates are accurate and properly recorded

• Examine contract language for clarity, structure, and ambiguity

• Identify rights and obligations

• Assess risk allocation and indemnification

• Evaluate payment terms and financial implications

• Review termination, renewal, and modification clauses

• Check confidentiality and intellectual property provisions

• Verify governing law and jurisdiction

• Ensure compliance with industry standards

• Address technical aspects of contract execution

• Develop negotiation strategies

• Conduct final review and approval

• Manage post-review processes

• Confirm the contract aligns with business goals

• Identify and resolve any conflicting terms or ambiguities

1. Prepare for the Review Process

Begin by organising all relevant legal documents, including drafts and related agreements. Defining your objectives and understanding the contract's purposes will align the review with your business interests. Proper preparation sets the foundation for a thorough examination.

Gather Necessary Documents

Collect the contract, related agreements, and reference materials like industry regulations. Ensure you have all relevant legal documents, including previous drafts and amendments. Having everything at hand helps understand the full scope of the agreement.

Set Review Objectives

Define clear goals for the review, considering the products or services involved and potential liabilities. Understand the contract's purpose, what you expect to gain, and any concerns. Clear objectives focus your review on critical areas aligned with your interests.

2. Analyse Key Provisions in the Agreement

Examine specific clauses and provisions to identify potential issues and confirm each term is appropriate. Focus on clauses that may result in a breach or impose excessive liability. This detailed review ensures the contract aligns with your business objectives.

Examine Contract Language and Structure

Scrutinise the wording and organisation, ensuring the elements of a contract—such as offer, acceptance, consideration, and mutual agreement—are present and the language is legally sound

Clear language prevents misunderstandings, while a logical structure enhances readability. Look for ambiguous terms or poorly drafted clauses that could lead to disputes.

Identify Rights and Obligations

Outline what each party is expected to do by identifying all rights and obligations in the contract terms. Understanding these responsibilities ensures you're aware of your commitments and can hold the other party accountable. Note any provisions that might limit your legal rights.

Assess Risk Allocation and Indemnification

Evaluate clauses that assign risk and liability, including indemnification provisions. Ensure the risk distribution is fair and doesn't expose you to undue liability. This assessment helps mitigate risks and protects your interests in case of unforeseen events or breaches.

3. Review Important Clauses in Business Contracts

Focus on essential clauses that significantly impact the agreement. These terms require careful consideration to ensure they meet your needs and expectations.

Evaluate Payment Terms and Financial Implications

Review the payment schedule, amounts, and conditions. Confirm the financial terms are clear, feasible, and aligned with what was negotiated. Ensure transparency in payment terms to reflect agreed compensation for products or services.

Check for penalties, fees, or hidden costs that could affect the overall cost and impose additional financial obligations or liabilities.

Review Renewal, Modification and Termination Clauses

Understand the conditions under which the contract can be ended, extended, or changed by reviewing termination clauses and provisions for renewal and modification. Knowing these terms provides flexibility and prepares you for future adjustments.

Ensure any amendments to contract terms are agreed upon by all parties and documented to prevent unwanted obligations or disputes when terminating a contract.

Check Confidentiality and Intellectual Property Provisions

Ensure clauses protecting sensitive information and proprietary rights are comprehensive. Confirm your confidential data and intellectual property are safeguarded against unauthorised use or disclosure.

Review how breaches of confidentiality will be handled and what remedies are available. These clauses are crucial for protecting trade secrets and sensitive business information.

4. Think About Using AI for Contract Review

AI contract review streamlines the entire process, identifying risks, ensuring compliance, and reducing review time. It automatically flags issues like ambiguous terms, unenforceable clauses, and non-compliance, helping focus on critical areas like termination clauses and indemnities.

AI tools extract key data, track deadlines, and compare contract versions, automating repetitive tasks and enabling legal teams to focus on strategic decisions. They also provide insights for contract negotiation and ensure contracts align with regulations and industry standards.

AI-powered tools like Pocketlaw Contract Review & Redlining Software, incorporate AI contract review capabilities, offering efficient risk analysis, automated reviews, and centralised contract management. Using the right tools ensures accuracy and consistency throughout the contract review process, enhancing contract lifecycle management.

5. Ensure Legal Compliance and Address Potential Disputes

Verify the contract adheres to all applicable laws and regulations. Non-compliance can lead to legal disputes and financial penalties. Consulting with a solicitor or lawyer ensures the agreement complies with contract law, is legally binding, and is enforceable.

Verify Governing Law and Jurisdiction

Check which laws govern the contract and where disputes will be resolved. Jurisdiction affects contract interpretation and enforcement. For example, laws differ between the U.S. and the U.K., impacting obligations and remedies.

Being aware of these differences helps assess risks and understand how legal issues will be handled. Ensure the dispute resolution clause aligns with your preferences and is practical for all parties.

Ensure Compliance with Business and Industry Standards

Confirm the contract aligns with industry regulations and your company's policies. Compliance ensures ethical practices and avoids regulatory fines, enhancing your reputation within the industry.

Ensure all contractual obligations meet regulatory requirements and legal documents are drafted accordingly. This helps mitigate legal risks and fosters trust with clients and partners.

6. Address Technical Aspects of Contract Review

Pay attention to formalities and tools that streamline the review process. Technical details are crucial for validity and efficiency.

Review signature blocks and execution formalities to ensure all parties can legally sign the agreement. Proper execution makes the contract legally binding and enforceable.

With the rise of electronic contracts, leveraging digital tools is increasingly important. Electronic signature software, such as Pocketlaw contract signing tool, enable secure and efficient signing processes, ensuring compliance with legal requirements for e-signatures.

7. Develop Negotiation Strategies

Prepare to address terms needing modification during the contract review process. Reviewing and negotiating clauses ensures the agreement aligns with your interests and satisfies all parties involved.

To review and negotiate a contract effectively, identify clauses requiring adjustments or clarification. Propose alternative terms that protect your interests while addressing the other party's needs. Clear communication and a collaborative approach are crucial for achieving mutually beneficial outcomes.

Present your points clearly during discussions and listen to the other party's perspective to find common ground. Aligning the interests of all stakeholders helps build trust and strengthens the agreement, reducing potential risks and disputes.

Understanding the other party's needs enables you to propose solutions that work for both sides, ensuring a balanced contract. Consulting a solicitor or lawyer during the review process provides valuable legal insights and ensures all modifications are enforceable and legally sound.

8. Conduct Final Review and Approval with a Solicitor or Lawyer

Before finalising, ensure all issues are addressed and the contract is ready for execution.

Perform a thorough final review with your legal team or in-house counsel to catch overlooked errors or ambiguities. This confirms all agreed changes are reflected and the contract is legally sound.

Legal teams and advisors ensure all legal aspects are covered during the final review. They identify risks, verify compliance with laws, and confirm terms are enforceable. A solicitor, lawyer, or in-house legal team should review a contract to protect your interests and ensure clarity.

Finalise and sign the contract, ensuring all formalities are completed. Signing the contract correctly ensures it's legally binding and enforceable. Using contract management software like Pocketlaw helps prevent oversights and streamline tracking.

9. Manage Post-Review Processes

After signing, ongoing management ensures the contract remains effective and relevant throughout its lifecycle. Proper post-review processes help maintain compliance and avoid potential disputes, ensuring all parties adhere to their obligations.

Contracts should be reviewed periodically, especially if circumstances change. Regular reviews identify the need for amendments due to evolving laws, market conditions, or business objectives. This proactive approach reduces risks and ensures the agreement continues to serve the interests of your business.

Handle amendments promptly and oversee the contract lifecycle. Monitoring performance and compliance ensures all parties fulfil their obligations, maintaining a healthy business relationship.

AI-powered tools like Pocketlaw Contract Management Software, streamline post-review processes by automating compliance checks, tracking deadlines, and flagging risks such as potential breaches or inconsistencies. They also support proactive management by identifying opportunities for amendments and improving overall transparency.