One of the most critical parts of creating any kind of business or legal contract is the review process. Anyone who works in creating contracts will be the first to say that drafting a contract is only the first part of creating the contract as a whole. The next, and arguably more important, part is to review that contract to make sure it works for each party involved. 

This is where having a contract review checklist comes into play. A checklist ensures businesses can carefully review their contracts for accuracy and compliance and avoid making organizational errors.

By not having a contract review checklist, a business runs the risk of committing to obligations it cannot fulfill or even violating the law. In other words, a review checklist is an insurance policy to ensure that each contract a business executes is both fair and legal. 

So, how can a business create the perfect contract checklist? In this guide, we’ll cover what a contract review checklist needs to consist of and some key tips to keep in mind. 

We’ll also dive into how LexCheck’s software can help make a business’s contract reviews much more efficient and streamlined than they otherwise would be. 

What Is a Contract Review Checklist?

Contract review is the process of reading and revising contracts to ensure they comply with the law and the terms of the negotiation at hand. It involves carefully analyzing the provisions of the contract to ensure they are legally binding and fair for each party involved. 

There should be absolutely no irregularities, confusion, or vague terminology in the contract that could later create potential issues after it has been executed. The goal of reviewing contracts is simple: to identify any issues or risks in the contracts and fix those issues before the contracts are executed. 

Conducting a thorough contract review, therefore, ensures the terms of the contract are not only agreeable but also fair and in compliance with the law. Businesses that do not conduct a contract review before executing could have financial or legal consequences down the road. To ensure they can conduct a successful contract review, they need to have a good checklist. 

Why Do Businesses Need a Contract Review Checklist?

In short, there are more reasons than one. A contract review checklist ensures that all of a company’s legal, financial, and business considerations are included in the contract. It also ensures the contract is compliant with all existing regulations and laws. 

Businesses that fail to have a contract review checklist face several potential consequences, including:

• Insufficient Financial Protection: Contracts that have not been reviewed properly could contain inadequate protection provisions in the event the terms of the contract are not completed by the other party, which could mean they’ll suffer from serious financial liabilities later. 

• Missed Deadlines: Businesses may also miss certain deadlines, which could result in financial or legal liabilities down the road. 

• Legal Liabilities: If a contract has not been properly reviewed, it may contain terms of provisions that are non-compliant with local, state, or Federal laws. Ensuring legal compliance is arguably the most crucial aspect of the contract review process as a whole. 

Now that we understand why it’s so important for businesses to have a contract review checklist, let’s dive into how to create the perfect checklist. 

Creating the Perfect Contract Review Checklist

There’s no one standard checklist that all businesses can use. This is because each business will need to have certain or unique provisions depending on their industry and other circumstances. Nonetheless, there are definitely certain elements that each contract review checklist should contain. 

These include:

• Identification of Parties: The contract must clearly indicate each of the parties who are involved in the contract. It should also include their addresses and any other information that’s relevant. 

• Purpose of the Contract: The purpose of the contract must be clearly defined and in alignment with the objectives of the company. 

• Terms of the Agreement: This includes the start and end dates of the contract, and any provisions for renewal or termination of the contract. 

• Obligations: The legal obligations of all parties involved in the contract must be clearly defined as well. Make sure that these obligations are fair to each party involved. 

• Confidentiality Provisions: Any confidentiality provisions must be clearly defined and in compliance with all relevant regulations and laws.

• Dispute Resolutions: This includes meditation and arbitration provisions. The party that is responsible for handling disputes should be clearly indicated as well. 

• Liability Provisions: The limitations of liability must be clearly written out and properly defined as well. 

• Amendment Provisions: The process for amending a contract should be clearly spelled out and indicated.

• Indemnification Provisions: The indemnification provisions must be clearly indicated and ensured that they can provide adequate protection for the company.

Besides ensuring the above elements are included in the contract checklist, there are additional considerations and provisions that legal teams of companies will want to keep in mind, too. 

What To Keep in Mind While Creating a Contract Checklist

Businesses should keep the following in mind when creating a contract checklist:

Thoroughly Review All Clauses and Terms 

Businesses need to review all clauses and terms that are included in the contract. These serve as the fundamental rules of the contract. All clauses and terms, including the ones indicated above, must be clear without any hint of vagueness. They also must be legally binding. 

Terminology 

The clarity and legal bindingness of a contract largely come down to the terminology. Every sentence must be clear and concise, and nothing can be left to interpretation. 

If there are any confusions on behalf of either party in the contract, these need to be addressed and the contract amended accordingly. Ensuring that the contract contains clear wording throughout is key to preventing conflict or miscommunication after the contract has been executed. 

Termination and Renewal Provisions 

No contract is complete without having the provisions for the renewal and termination of this contract. To that end, businesses should look for opt-out timeframes and auto-renewal clauses. If either party cancels the contract before the predetermined date in the contract, the provisions should be clearly written out.

Deliverables 

Any deliverables and dates of delivery for those deliverables must be clearly written out in the contract as well. This is one of the most important things to help prevent a potential future breach of contract later on. 

Every deadline and timeline for the completion of different deliverables must be written. The provisions for what will happen in the event of a deadline being missed (such as one arising from an unexpected circumstance) also needs to be clearly indicated. 

How Can LexCheck Review Your Contracts?

It’s no secret that lawyers and the legal teams of businesses have to spend long hours manually checking their legal contracts. Businesses regularly encounter several problems during the contract review process. 

Besides the obvious bandwidth issues (as the teams of many businesses simply have little time to manually check contracts while also engaging with customers), they may also have to deal with many different types of contracts or documents and lack a standardized practice for reviewing those contracts. 

LexCheck’s AI-powered contract review software, however, can greatly reduce the time that lawyers and business teams need to spend reviewing contracts. This is because LexCheck largely automates the entire process of contract review. 

It takes a standardized playbook that businesses and legal teams can customize and applies that playbook to all contracts that are run through it. The playbook can be carefully edited in regard to fallback positions, provisions, terminology, and so on. 

This playbook can be customized, ensuring that all contracts are checked and edited to comply with that checklist. Alternatively, LexCheck can generate a client’s playbook by sweeping the first-round document and then determining the ideal language and provisions.

Furthermore, LexCheck makes the process of editing and tracking changes to a contract very easy as well. All changes will be tracked, and previous versions of the contract will be saved so they can be referred back to later. 

In short, using AI-powered contract review software greatly speeds up the contract review process while also ensuring accuracy. Businesses can apply a standardized practice to checking their legal documents; a review process that would have normally taken several hours or days is instead reduced to a matter of minutes. 

This frees up businesses to spend more time performing tasks that are relevant to their operations, such as engaging with customers and handling other issues that may arise. 

Conclusion

Contract review is rarely a fun or easy process, but it is a very important one. It is vital that any business or legal team is very careful about how it goes about creating its checklists, and then it must adhere strictly to this checklist for each contract review it undergoes.

LexCheck’s AI-powered contract review software can serve as an indispensable part of any business’s contract review process for the reasons we’ve covered above. Businesses can apply a standardized practice to the process of checking and reviewing their contracts while ensuring full compliance with all relevant laws and regulations. 

In the process, they’ll ensure that all of the terms and provisions of the contracts they generate are fair to themselves and to the other parties that are involved. 

Sources:

AI Tools for Lawyers: A Practical Guide | Bloomberg Law

Contracts & Compliance| SCPD

How Contracts Can Protect You And Your Business | Forbes

Basic Guidelines for Contracts and Contract Risk Management | Harvard