Best Practices for Contract Redlining
Contract redlining is an essential part of contract negotiation; it helps clarify which contract terms have been revised and, ultimately, solidify agreements between parties. Thanks to advancements in technology, the process of reviewing, revising, and finalizing contracts has evolved significantly.
The newest advancements are helping make contract reviews more efficient for legal and procurement teams. In this article, we will explore the best practices for contract redlining, the benefits it offers, and how to expedite the process using a contract review software like LexCheck.
What Is Contract Redlining?
Put simply, contract redlining is the process of marking up the document with proposed edits, deletions, or comments during the contract negotiation process. The newest redlining software on the market allows users to track changes and markup documents using version control. This helps keep all parties in alignment during contract negotiations.
Why Is It Called Redlining?
Historically, legal teams and stakeholders made document revisions using red ink; this is where the term "redlining" comes from. In current times with digital documents, redlining now refers to any visual method for indicating changes.
This includes strikethroughs, comments, and highlights in red or other colors. The goal is to ensure all parties can see where revisions, deletions, and edits have been made in real time, making the contract negotiation process more transparent and easier to manage.
What Are the Benefits of Contract Redlining?
Contract redlining brings many advantages to the contract lifecycle management (CLM) process, from improving team communication to helping ensure legal compliance.
Efficient Contract Negotiation
Redlining facilitates faster contract negotiations by allowing all parties to make and track changes in real time. When using tools like Microsoft Word’s “track changes” feature, each party can quickly and easily see any proposed revisions without having to manually compare different versions of the contract.
This not only saves time but reduces the likelihood of human error. LexCheck offers contract software that can help expedite certain tedious aspects of the review process, like negotiations, making the contract redlining process more seamless.
Improved Contract Lifecycle Management (CLM)
Contract lifecycle management refers to the entire review process from drafting the contract to final execution and renewal. By incorporating redlining into an existing workflow, legal teams can streamline contract review and approval processes. This helps ensure that each step — from procurement to finalization — is well-documented.
Redlining tools also offer version control. Version control allows stakeholders to access the most up-to-date version of the contract at all times. This helps eliminate the confusion that is often caused when different versions of the same document are floating around.
Provides an Audit Trail
One of the most important features of redlining is the audit trail it creates. Every edit, deletion, or revision is logged, providing a transparent record of changes made during contract negotiation. This helps hold everyone accountable and can also aid in avoiding disputes over the final version of the contract.
Contract management software solutions can also offer AI-powered audit trails that track every change to help ensure that all legal and regulatory compliance requirements are being met.
What Are the Best Practices for Redlining a Contract?
To help ensure an efficient and error-free contract redlining process, it is a good idea to follow best practices. Paying close attention to the following strategies and implementing them could be a game changer during negotiations.
Read It All Before You Start Editing
Before diving into revisions, it’s important to take the time to read the entire contract. This will help all parties understand the full scope of the document. This is also an opportunity to identify any sections that may require edits or changes.
During this step, notes can be made, but it’s a good idea to avoid submitting formal revisions right away. Understanding the full picture should be the first priority. Jumping into redlining too quickly can lead to improper revisions and misunderstandings later in the contract negotiation process.
Define Pertinent Contract Terms
Another important step in the contract redlining process is to ensure that all of the contract terms are clearly defined. Terms often include pricing, deliverables, timelines, and compliance obligations, for example. Clearly defined terms can help all parties remain aligned and facilitate smoother negotiations as well.
During the redlining phase, changes can be proposed to any terms that might be considered unfair or unfavorable. It’s crucial that both parties agree on all elements of the contract before attempting to move forward.
Involve Key Stakeholders Directly
It’s essential to involve all necessary stakeholders. This could mean legal teams, procurement departments, key decision-makers, or all of the above. Involve them as early in the contract redlining process as possible. This helps ensure that everyone who needs to review or approve changes is on the same page at all times.
Failing to involve key stakeholders and keep them in the loop can lead to delays — causing revisions to have to be redone later. AI contract collaboration tools make it much easier for all stakeholders to be kept in the loop, allowing the contract review process to move along faster.
Don’t Redline at the Same Time as the Counterparty
Simultaneous editing by both parties can lead to confusion, conflicting revisions, and even errors in the final version of the contract. It’s a good idea to establish an organized workflow where only one party redlines at a time.
This gives the counterparty the opportunity to review the redlined version before making their own edits to the document. This approach helps promote clarity and minimize the likelihood of misunderstandings.
Practice Version Control
Maintaining version control is crucial in contract redlining, especially when using tools like Microsoft Word. Always ensure that the most recent version of the contract is being reviewed to avoid the risk of someone making revisions to an outdated document.
Contract lifecycle management software can automatically track different versions of the contract and also provide everyone with clarity regarding which document is the current version. Version control helps eliminate confusion and reduces human error.
Pay Attention to Compliance
Legal and regulatory compliance is a major aspect of any contract negotiation. When redlining a contract, ensure that all changes comply with the relevant legal, regulatory, and industry standards.
This is where an automated contract management software like the one we offer at LexCheck can be particularly useful, as it helps identify potential compliance issues and flag revisions that could lead to problems down the road.
How Can Contract Review Software Help?
In today’s fast-paced business environments, contract review software that offers redlining functionality is slowly but surely becoming a necessity. With perks like the ability to streamline daily workflow, minimize human error, and free up time for more strategic tasks — these softwares come with a lot of value.
An AI-powered contract review solution that offers features designed to simplify the redlining process is key to getting to the closing table faster, freeing up more time for legal teams to focus on their other clients.
Facilitate Contract Reviews
Contract review software like we offer at LexCheck enables faster and more efficient contract reviews by automating the redlining process. LexCheck’s AI technology automatically flags issues in contract terms and proposes edits based on customized, predetermined contract playbooks.
It even ensures that all proposed changes are clearly visible to stakeholders. This makes the review process faster and more accurate, empowering legal teams to focus on other, more complex aspects of the contract negotiation process.
Track Changes
Tracking changes is essential with contract redlining because it helps everyone remain on the same page. With LexCheck’s review software, all edits and revisions are tracked automatically, creating a clear trail.
This makes it easier to review edits, compare past and current versions, and make certain that the final version of the contract is accurate. Additionally, LexCheck’s AI-powered features can suggest smart changes, reducing the amount of manual labor required by in-house legal and procurement teams.
Streamline Your Workflow
One of the most significant benefits of using contract review software during negotiations is the ability to streamline existing workflows. With LexCheck, stakeholders can collaborate in real time.
Minimize Human Error
Manual redlining can sometimes lead to mistakes, such as overlooking critical changes or misinterpreting proposed revisions. LexCheck’s AI-powered redlining tools help minimize human error by providing automated suggestions.
The software tracks every edit and documents all changes for future reference. This not only helps ensure accuracy but also improves the overall contract negotiation process by prioritizing clarity.
Free Up Time for In-House Legal Teams
With contract redlining software like LexCheck handling many of the repetitive and time-consuming tasks, legal and procurement teams can focus on higher-value activities.
With some portions of the contract review process on autopilot, legal and procurement teams can reduce the time they spend on revisions and dedicate more resources to tackling the complexities of drafting and other elements of the negotiation stage.
A Final Word on the Contract Redlining Process
Contract redlining is a vital part of the contract negotiation process. Redlining helps with clarity, compliance, and transparency for all parties involved. By adhering to best practices — reading the entire contract before making edits and involving key stakeholders, for example — teams can streamline the redlining process and avoid common mistakes.
Leveraging contract review software like LexCheck can further improve the review process by automating redlines, tracking all document changes, and helping to reduce human error. In a fast-paced business environment, these tools can free up time for legal teams, ensure compliance, and make the entire contract lifecycle flow more seamlessly.
By adopting these best practices and expediting the deal with LexCheck’s smart review software, legal and procurement teams can achieve better outcomes in contract negotiations.
Sources:
Audit trail Definition & Meaning | Merriam Webster
What is Procurement? | Investopedia