Negotiating a contract is one of the most important processes for a business. A free contract review checklist template like the one below can be important. You’re entering into a legally binding agreement with at least one other party, and if either of you fails to fulfill your obligations, the other party gets a legal cause of action to sue you. Effective contract management requires a thorough review of key terms and each word in the entire contract.
Why Contract Review Procedures are Important
A contract review procedure is necessary for at least two reasons. First, to protect your interests – review the contract language to ensure that you’re getting the goods or services you need. Second, to protect your business – examine the entire agreement to understand your remedies in case the other party doesn’t perform.
Implement a comprehensive contract review policy for your staff. At a minimum, always ensure that the 6 elements of a valid contract are present.
Contract Review Checklist
A quality contract checklist should provide peace of mind that you can both meet your obligations and access remedies as necessary under the contract. When reviewing a contract, make sure the document is concise, accurate, unambiguous, and in line with your company’s needs. The review process should enable each contracting party to prepare for important dates and renegotiation as well.
Here’s what to look for when reviewing contracts:
Basic Contract Information
Before moving to more complex terms, initially review the contract’s basic information. This includes:
- Reading the entire contract, any attachments, all exhibits, and any other information.
- If there are separate attachments, does the contract incorporate them by reference or otherwise?
- Does the contract include the correct name of all contracting parties?
- Do the specified dates align with your understanding of the contract?
- What are the payment terms? Does the contract discuss the attorney fee?
Legal Issues
After approving the basic information, move on to the essential legal issues, such as:
- Is the party named and signing the contract legally authorized to do so?
- Does the contract accurately and clearly explain the offer and proposal terms?
- What constitutes a formal acceptance of the offer?
- Make sure that the contract clearly states what constitutes the consideration: What does each party receive?
- Is the entire agreement in written form?
Contract Length
You can’t perform the contract unless you know the timeline for performance:
- What is the effective date?
- When does the contract expire?
- What are the renewal terms? Is there an opt-out window?
- Is there an automatic renewal provision?
Liability Provisions
One of the most important sections of any contract details terms of breach, remedy, and liability:
- Are there any warranties?
- Does the contract disclaim any implied or explicit warranties?
- How will the parties resolve any disputes? Must there be alternate dispute resolution or arbitration?
- Does either party require insurance or is there an indemnification provision?
Free Contract Review Checklist Template
Below, you’ll see a free contract review template. This contract checklist template provides everything you need for contract revisions. In addition, you can learn more about a joint venture agreement here.
Contract review checklist pdf | Contract review checklist Word |
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How to Review a Contract Using This Contract Review Process Checklist
If your business requires the review of contracts but you aren’t sure how to begin, learn below how to review contracts.
1. Decide Who Should Carry Out Contract Reviews
The key to any contract review is a detailed plan. You can’t review a contract if you don’t know what you’re looking for. Depending on the size of your business, you may have an Office of General Counsel (OGC), contracting officers, or financial analyst who reviews your contracts. In a smaller enterprise, someone with a business background may conduct the contract review.
Either way, it’s essential to designate a particular person or office for agreement review. If attorneys in OGC review contracts, for instance, then they should outline the process for your organization.
Relatedly, you’ll want to make sure that the procurement process occurred through whatever mechanism the contract specified, if any.
2. Ensure Clear and Unambiguous Language
Next, you’ll want to ensure that the contract is written in clear and unambiguous language. Even if both parties agree to a specific understanding of a given term, you two may have a later falling out.
If a dispute went to arbitration, alternate dispute resolution, or court, the third-party administrator could very well have an entirely different understanding of that same ambiguous term.
Regarding payment terms, you’ll want to make sure that both parties understand when one pays the other. If there’s any ambiguity, you’ll want to revise.
3. Review Key Terms and Clauses
Just as you need clear and unambiguous language, you also need comprehensible terms and clauses.
Every line in the entire contract is important. But some clauses, of course, carry more weight than others. What’s important for your business may vary based on your industry, but the most significant items typically include the:
- Confidentiality clause or non-disclosure language
- Indemnity clause
- Assignment clause
- Termination clause
- Dispute resolution and arbitration clauses
4. Check for Any Default Terms or Blank Spaces
Your general counsel or office of general counsel (OGC) should provide guidance on contract drafting. This typically includes a contract template to manage the business’s contracts. This brings efficiency to an area that can be quite monotonous. However, using default terms can also create room for errors.
When you use a template or default terms to negotiate a contract with a new partner or vendor, for instance, review each section to ensure its applicability to this new situation. Similarly, review any default terms in a contract provided by the other contracting party.
Templates also facilitate contract drafting. But this can leave you with blank spaces if you forget to fill in any sections. Review each new contract for completion – while both contracting parties may enter the agreement with good intentions, a dispute could turn a simple non-completion error into a costly mistake.
5. Pay Attention to Terminations and Renewals Clauses
Another vital component of your original contract is the termination and renewal section. During your review, ensure that your legal team entirely understands the term of the contract. You don’t want to commit to an agreement until you understand your obligations.
Review the renewal language. Is there a clear contract renewal term? Any automatic renewal language? What about an opt-out window?
The terminations clause should specify whether any events terminate the agreement.
6. Note Any Important Dates and Deadlines
Make sure you agree to the contract’s effective date, expiration date, and any other major timelines. For example, ensure that you can meet all deliverables according to any prior verbal agreements. If you can track the timeframe for all duties you’re responsible for, you can reduce the likelihood of a breach.
7. Review Any Instances of Breach and Note the Remedies
The contract should also include general instances of breach of contract. These may be included as default terms or boilerplate language. Conversely, you may also have specific instances of breach particular to a given contract. For example, is there a force majeure clause?
In the same vein, review specified remedies. If there are no specified remedies, the common law of contracts may impose remedies. Also, consider imposing specific remedies governed by the doctrine of unclean hands.
If this contract is governed by Florida law, you’ll also want to make sure you understand the Florida cooling-off period.
8. Have a Professional Double-Check Your Contract Review Forms
Even if your business has an OGC or internal attorney(s), an outside attorney can provide a fresh perspective. An effective contract review process can prevent expensive litigation that could occur due to a breach. At Cueto Law Group, our attorneys have the contract review experience necessary to ensure that your agreements meet your needs. A standard contract review form like the one in this article can help.
Contact us today for a free consultation on your needs regarding state of Florida contracts.
FAQs
What is contract review checklist?
A contract review checklist outlines the items you should review before signing off a given contract. Although the list can be extensive, it’s much better to prepare a thorough agreement according to your preferred terms on the front end rather than to litigate a breach on the back end.
How long does a contract review take?
The amount of time a contract review takes depends on the complexity of the contract and the skills of the particular reviewer. For instance, reviewing an uncomplicated form contract with boilerplate language that your business uses in several transactions may take anywhere from a few hours to a week.
How long does it take a lawyer to review a contract?
It can take a lawyer anywhere from an hour to a few hours or even several days to review a contract. Factors affecting the timeline include contract length, the complexity of the clauses, whether the contract includes boilerplate language, and the lawyer’s familiarity with the contracting parties.
