Contract Review Guide 2023 (for Non-Lawyers)
All Contracts Professionals and Non-Lawyers need to know how to review a contract
Sometimes your Lawyer is too busy to help within tight timeframes. Sometimes your organisation does not have an In-House Lawyer, nor the budget to engage an external Law Firm.
Often, your role requires you to review, analyse, and understand contracts on a day-to-day basis, even when you work closely with a Lawyer.
Unfortunately, not all Professionals, even Contracts Professionals, are well-versed in the legal language and concepts that contracts contain.
And as a Non-Lawyer, it can be challenging to know what to look for when reviewing a contract, or even how and when to carry out the Contract Review process.
In this Guide, we will:
- discuss when you should review a Contract;
- provide an overview of the key steps that Contracts Professionals and Non-Lawyers should take when reviewing a Contract; and
- provide other useful information.
What is Contract Review?
Contract Review is the process of reading and analysing a contract, whether it is in draft form or already signed. The review should be in-depth, and you should keep an eye out for clauses that alter your organisation's preferred risk allocation or impose obligations on your organisation that you either disagree with or need to ensure compliance with.
There are 4 common stages of The 7 Pillars of Contracting when Contract Review is required:
- while the Contracts Professional and their Lawyer are working together to plan the Contract and draft the Contract;
- when a redlined Draft Contract is sent by the other party back to the Contracts Professional and their Lawyer for review and comment during the Contract Negotiation stage;
- after a Contract has been executed, before or during the performance of the Project; and
- before a major change to the Contract Terms, including a Contract Change Process, a Variation, a renewal and an extension.
Check out our post on Mastering the In-House Contract Review and Legal Document Review process: A Comprehensive Guide for Contract Professionals and In-House Lawyers.
Lawyers also have their own Contract Review process, which we will discuss in a later post.
What is the purpose of Contract Review?
A. Before Contract Execution
A Contracts Professional reviews a Draft Contract is to ensure that the terms and conditions of the Draft Contract are clear, reasonable, and that they reflect the instructions of the Contracts Professional and protect the interests of the organisation. An in-depth analysis of various components of the contract, such as the payment terms, confidentiality, intellectual property, performance obligations, indemnities, warranties, termination clauses, and dispute resolution mechanisms should be undertaken.
Before signing a Contract, the Contracts Professional (and their Lawyer) will need to make sure that there are appropriate termination terms to avoid their organisation being locked into an unfavorable Contract. They will also need to ensure that the Draft Contract contains clear language, so as to prevent potential conflicts.
This review process is critical to allow the Contracts Professional to make sure that the Draft Contract is able to be signed. There may be a few rounds of Contract Review required during this stage, before the Draft Contract is executed (including review of the Contract during the Contract Negotiation process). [Check out the diagram at the start of this Guide].
B. After Contract Execution
The aim of reviewing an executed Contract (whether before a Project begins or during the term of a Project) is to allow the Contracts Professional to gain an in-depth understanding of the obligations under the Contract, the processes that must be followed during performance of the Contract, and any risks for their organisation that need to be managed. Contract Managers are often required to undertake this Contract Review step.
C. Before making major changes to the Contract
It's important before making any major change to the terms of the Contract, and before agreeing to change, extend or renew a Contract, that the Contracts Professional carefully reviews the Contract. In particular, you need to make sure that the change, extension or renewal is possible, and that timeframes are being met. You will also need to understand any contingencies or requirements for that change, extension or renewal, including the correct form of notice to use.
Without reviewing the Contract at this stage, you risk missing an important detail, not taking the necessary steps, and potentially disqualifying your organisation from being able to take the action it has decided to take.
Why is Contract Review Important?
While it is the responsibility of your Lawyer to draft the Contract, it is important for the Contracts Professional to add their Commercial, Operational, Procurement, Sales and Projects (and other relevant) perspective to the document. Your Lawyer will need your instructions on whether or not the Draft Contract meets your brief (given during the Initial Instructions Meeting), and whether it reflects the commercial and operational needs of the Project for which it is being drafted.
It is the responsibility of your Lawyer (unless you are drafting the Contract yourself based off a precedent or template) to make sure that your organisation is protected legally. But factors other than Legal are also important - like commercial, operational, and financial - and that is why we place so much emphasis on Contracts Professionals working with their Lawyers during the Contract Planning process.
By reviewing the contract before signing, Non-Lawyers can ensure that the contract accurately reflects their instructions, and later the negotiated terms of the arrangement and protects their organisation's interests.
A tip is to allow ample time to carry out a thorough review (or potentially more than one read-throughs), with multiple people looking over your Draft Contract to increase chances of catching errors or typos.
The Contract Review Process
Have a read of our post about How Contracts Professionals can Review a Contract during the Contract Drafting process.
Our post on How to Review a Contract (for Non-Lawyers) gives more information. And our more detailed Guide discusses our step-by-step method for Contract Review for Contracts Professionals and Non-Lawyers. The Contract Review Checklist in that post is set out in more detail here, and you can download it FREE for your own records.
And the following is a step-by-step guide to reviewing the basics of reviewing a Contract as a Non-Lawyer during the Contract Drafting process:
1. Identify the Parties
The first step in Contract Review is to identify the parties involved in the agreement. Make sure that the names of the parties are correctly spelled and that they are identified by their legal names. If a party is a corporation or other legal entity, make sure that the entity is properly identified.
2. Define the Scope of the Agreement
The next step is to review the scope of the agreement. This includes the goods or services to be provided, the timeline for delivery or completion, and any other relevant details. Make sure that the contract accurately reflects the scope of the agreement and that there are no ambiguities or misunderstandings.
3. Review the Payment Terms
The payment terms of a contract are a critical component to review. Make sure that the price to be paid for goods or services is clearly defined, including any additional fees or charges. Ensure that the payment terms are fair and reasonable and that they reflect the agreement between the parties.
4. Check for Performance Obligations
Performance obligations are the obligations of each party under the agreement. Make sure that the contract accurately reflects the obligations of each party and that they are fair and reasonable. Consider any contingencies that may affect performance and make sure you've allowed for these in the Contract Planning process.
5. Identify the Termination Clause
The termination clause specifies the circumstances under which the Contract may be terminated. Review this clause carefully to ensure that it reflects the agreement between the parties and that it is fair and reasonable. You also want to understand the implications of if your organisation breaches the Contract, as well as options available should the other party be in breach.
6. Look for Warranties and Representations
Warranties and representations are statements made by one party to the other that certain facts are true. Review these statements carefully to ensure that they are accurate and that they reflect the agreement between the parties. Make sure that any limitations or exclusions to these statements are clearly defined.
7. Consider Dispute Resolution Mechanisms
Dispute resolution mechanisms specify the process by which disputes between the parties will be resolved. Make sure that the dispute resolution mechanism is fair and reasonable and that it reflects the agreement between the parties. Consider whether alternative dispute resolution mechanisms, such as mediation or arbitration, may be appropriate.
8. Fill in Blank Spaces
Remove or fill any blank spaces in the Draft Contract to reduce costly consequences.
Contract Review after Execution
This task commonly falls to Contract Managers, who need to understand the Executed Contract so they can properly manage it and ensure compliance by their organisation.
Actions that Contract Managers should take include:
1. Learning from the Document Title
It's amazing how much information a Contracts Professional can learn from the title of a legal document.
2. Finding out Key Dates
You will need to make a note of important dates and deadlines so you don't breach the Contract by forgetting about them.
Global Contract Reviews
Global Contract Reviews are also carried out here and there by organisations - often with help from Contracting Consultants such as Rachelle Hare. These Global Contract Reviews help you to refresh your memory on the key Contract terms, to consider how the other party is performing, and to analyse then decide whether steps should be taken to optimise or adjust terms of the Contract.
Using AI to help with Contract Reviews
It is becoming more and more common for Contracts Professionals to use technology, such as AI Contract Review Solutions, to help them carry out a faster and more efficient Contract Review process.
Some of these Contract Review Programs can be a fantastic help to Contracts Professionals (and Lawyers) in carrying out their roles.
A word of caution, however.
Unless you know how to review a contract yourself, and understand the steps and intricacies in reviewing a contract, it is impossible for you to tell whether an AI Software Program has carried out an accurate Contract Review. It is also difficult to know whether any recommendations made by the AI are correct or not.
So, here is our recommendation:
- Learn how to review a Contract yourself (we can teach you how here at Blaze Professional Learning); and then
- If you wish, make use of Contract Review Software to help perform your role into the future.
Common Contract Pitfalls to Avoid
There are several common pitfalls to avoid when reviewing a contract as a Non-Lawyer. These include:
- Failing to understand the legal language used in the contract
- Failing to review the entire contract, including any attachments or exhibits
- Failing to ensure that the contract accurately reflects the agreement between the parties
- Failing to negotiate terms that are fair and reasonable
Contract Review Checklist
See how easily you can review Contracts with our Contract Review Checklist!
Check out our Contract Review Checklist so you can keep track of all the things you need to do to review a Contract as a Non-Lawyer.
When should I seek Legal advice during the Contract Review process?
Some other useful posts on Contract Review
Check out these other useful posts:
Hi, I'm Rachelle Hare
I've been a Contracts Lawyer and Construction Lawyer in Australia for 20+ years. I've also worked in multiple Non-Legal roles and have advised many organisations on Commercial, Projects, Operational, Procurement, Sales, Compliance, and Finance matters as well as Legal and Contracting.
I run my own businesses - Blaze Business & Legal (a combined Management Consultancy and Law Firm) and Blaze Professional Learning (this website), where my goal is to teach Non-Legal Professionals how to work better with Contracts.
I'm so excited to come along this journey with you!