As a Contracts Professional, how do you go about quickly and easily gaining a high-level understanding of the legal documents you have to review? Do you need to read the contract and carry out a comprehensive contract review? Is it obligatory to get a contract review lawyer to assist you?
Keep in mind that contract automation software may help you to review contracts and carry out a thorough contract review, but it is important that you learn this core skill so you can carry it out at any time, including on a printed out contract.
Here’s how to read a contract and gain a high-level overview
If you are wondering how to review contracts, and you don’t have a legal degree, there are certain steps you can take:
Determine what industry the contract relates to, so you know the features the contract is likely to have
Identify what type of contract it is, so you can find the similarities with other like contracts
Scan the Table of Contents (looking for provisions like indemnities, limitations of liability, KPIs, liquidated damages, etc)
Read the relevant clauses and consider the risk allocation
Look at the Contract Particulars
Review the Technical Documents
Read the contract – your previous contract review ensures you will understand it better.
By carrying out the above steps, you can ensure you carry out a thorough contract review, whether it is a simple or a complex contract and regardless of how much legal jargon the contract contains.
How to gain a high-level overview of the contract
Here are some steps to take in order to quickly gain a high-level overview of the contract and review contracts regardless of their type or industry:
1. Determine what industry the contract relates to
There are similarities between many contracts in the same industry:
Contracts in the Construction Industry generally have similar features to other contracts in the Construction Industry (eg a defects liability period, the concept of practical completion, construction works insurance, a Statement of Requirements/Specification etc); and
ICT contracts generally have similar features to other ICT contracts (eg Acceptance).
2. Identify what type of contract it is
After identifying the relevant industry, ask yourself what type of contract it is. This will help you work out the likely contract terms.
Services Contracts have similar features to other Services Contracts (eg fitness for purpose, professional indemnity insurane, etc. So, if you’ve read a Services Contract before, you’ll have a good idea what will be in this one.
3. Scan the Table of Contents (looking for provisions like indemnities, limitations of liability, KPIs, liquidated damages, etc)
Have a quick scan of the Table of Contents. Once you’ve read a few contracts, you can start to identify the more unusual clauses in the contract you have to review from a glance at the Table of Contents.
Most contracts have standard “boilerplate” clauses which are pretty similar – particularly at the end of the terms and conditions of contract. These often don’t change during contract negotiation.
You’ll be more interested in the less-usual clauses. For example, any clause with “indemnities” in the title. The Table of Contents give you a quick overview of what unusual clauses are in the contract.
4. Look at the Contract Particulars
Have a look at the Contract Particulars or Contract Details (often in Schedule 1).
Usually, the Contract Particulars contain the variable terms in a contract, as well as the important dates for each of the parties involved. For example, the payment clause in the terms of the contract will say that the Contractor gets paid, but the Contract Particulars will say what amount the Contractor gets paid and the timing of the payment (ie the specific payment terms that apply to the contract and the contract parties).
5. Read the relevant clauses and consider the risk allocation
Follow each Contract Particular item back to the relevant clause to see what that clause says. Often, clause numbers are on the left side of the Contract Particulars table, so it is easy to find relevant clauses. Alternatively, reference the clause you want to look at (eg payment clause) in the Table of Contents or do a word search for “payment”.
Also read the clauses that you identified from the Table of Contents – the clauses with the greatest potential ramifications. In each clause, consider the risk allocation of the clause, and which of the parties involved is favoured by the drafting.
6. Review the Technical Documents
Check out the documents in the schedules or annexures. These are the technical requirements that say what must be done and to what standard, and are present in most contracts.
7. Read the contract
Depending on the task you are carrying out, you will likely still need to read the contract.
However, the above steps will help you get a high-level overview of the legal agreement first – this will make it easier for you digest the contract when it comes time to reading it.
