At this stage of the Contracting process, either you are using a precedent or a template document to prepare the Draft Contract, or you have undertaken Contract Planning with your Lawyer and worked with them to draft the Contract.
The Draft Contract is now with you to review.
But how do you go about the Contract Review process if you don’t have a Law Degree or dozens of years of experience?
Anyone can simply read the words of a Draft Contract. But how do you know what to focus on, what you’re looking for, and what provisions you need to discuss with your Lawyer?
Read on to find out. And if you’d like to download a copy of this helpful how-to list, click on the link below:
Grab your free download of this How-To Review a Contract post
How should Contracts Professionals approach Contract Reviews?
Contracts Professionals need to take particular steps to review a Draft Contract during the Contract Drafting process, and there are various issues that they often need to consider.
Keep in mind that the steps below assume that you, as the Contracts Professional, have been actively involved in the Contract Planning and Contract Drafting stages up to this point. If not, read our Guide on Contract Planning, then come back here once you’ve considered that process.
Many of the steps to be taken by Contracts Professionals will be the same. For example, determining the risk allocation of certain clauses, considering whether the Draft Contract as a whole reflects their instructions, and assessing whether the Contract Documents properly describe the scope of the Draft Contract.
However, there will often be steps that will differ depending on the type of contract that is being drafted (and reviewed). For example, a Services Agreement for a small and low risk scope of services may not need as much review and analysis as a large draft Construction Contract.
What actions should you take when you are sent a Draft Contract?
Here are some of the key actions that a Contracts Professional should take when they are sent the Draft Contract by their Lawyer (for review before the Draft Contract is sent to the other party for their comments).
Keep in mind that the individual actions listed below will depend on the specific project – some of the points below are more appropriate for the larger projects (including those with international elements).
1. Check the scope of work, goods, or services as detailed in the Draft Contract
- Ensure the scope aligns with the parties’ agreement
2. Thoroughly read the entire contract
- Ensure you understand all of the provisions
- Check for inconsistencies or contradictions
- Lawyer input: Not required, but consult your Lawyer for any clarification about the meaning of provisions
3. Confirm the parties’ correct identification
- Check legal names and proper titles have been used and spelling is correct
- Your Lawyer may have undertaken this step, but many Lawyers expect their Instructing Officer to perform this task
- Lawyer input: Not required, but consult your Lawyer if unsure about a party’s legal status
4. Verify the contract’s effective date and term
- Ensure the start and end dates are accurate
- Confirm if there are any renewal provisions
- Lawyer input: Not required, but consult your lawyer if the term structure is complex
5. Review payment terms and invoicing details
- Check the payment schedule and any late payment penalties
- Confirm the invoicing process and required documentation
- Lawyer input: Not required, but consult your lawyer if payment terms are complex
6. Check for performance obligations and milestones
- Ensure all parties’ obligations are clearly defined
- Confirm that milestones align with the project timeline
- Lawyer input: Required to verify enforceability and compliance with relevant laws
7. Verify the termination clause is fair and reasonable
- Review the grounds for termination and notice periods
- Check for any termination fees or penalties
- Lawyer input: Required to ensure the clause complies with applicable laws
8. Examine warranties and representations
- Ensure they accurately reflect the parties’ agreement
- Confirm any limitations or exclusions
- Lawyer input: Required to verify that warranties and representations are legally enforceable
9. Review dispute resolution mechanisms
- Ensure the mechanism is fair and reasonable
- Consider alternative dispute resolution methods
- Lawyer input: Required to confirm the clause’s compliance with relevant laws
10. Ensure compliance with applicable laws and regulations
- Confirm the contract adheres to industry-specific regulations
- Review any employment or intellectual property law implications
- Lawyer input: Required to ensure legal compliance
11. Assess confidentiality and non-disclosure provisions
- Ensure the provisions adequately protect sensitive information
- Confirm the scope and duration of confidentiality obligations
- Lawyer input: Required to ensure the provisions are legally enforceable
12. Review indemnification and liability clauses
- Ensure both parties are adequately protected
- Confirm the extent of each party’s liability
- Lawyer input: Required to verify that the clauses comply with applicable laws
13. Check for force majeure provisions
- Review the entire agreement for consistency and coherence
- Ensure all sections, attachments, and exhibits are in harmony
- Confirm there are no contradicting provisions
- Lawyer input: Not required, but consult your lawyer if you find inconsistencies
14. Does the contract use clear and concise language
- Avoid ambiguity and jargon
- Ensure the contract is easy to understand
- Lawyer input: Not required, but consult your lawyer for any unclear provisions
15. Identify any missing clauses or provisions
- Ensure all necessary clauses are included
- Review the contract against a template or checklist
- Lawyer input: Required to confirm the completeness of the contract
16. Consider the contract’s impact on both parties’ financial positions
- Assess potential risks and opportunities
- Review any cost-sharing or financial responsibility provisions
- Lawyer input: Not required, but consult your lawyer and CFO if financial provisions are complex
17. Evaluate the contract’s alignment with business objectives
- Ensure the contract supports your organisation’s goals
- Review any performance metrics or targets
- Lawyer input: Not required, but consult your lawyer if unsure about specific provisions
18. Identify industry-specific regulations and standards that need to be stated in the contract
- Ensure the contract complies with relevant industry regulations
- Review any certifications or standards that apply
- Lawyer input: Required to confirm compliance with industry regulations
19. Review any intellectual property rights and licensing arrangements
- Ensure IP ownership and licensing terms are clear and acceptable
- Confirm any restrictions on IP use
- Lawyer input: Required to verify that IP provisions are legally enforceable
20. Understand the consequences of breach or default for this project
- Review any remedies, penalties, or consequences for breach
- Confirm the process for addressing breaches or defaults
- Lawyer input: Required to ensure the provisions comply with applicable laws
21. Ensure that any subcontracting or assignment provisions are appropriate
- Confirm the process and requirements for subcontracting or assignment
- Review any restrictions or limitations on subcontracting or assignment
- Lawyer input: Required to verify that the provisions are legally enforceable
22. Consider any potential tax implications for the project
- Assess the contract for possible tax consequences
- Review any tax-related clauses or provisions
- Lawyer input: Not required, but consult your lawyer if tax implications are complex. Also consult your CFO
23. Identify correct jurisdiction and governing law provisions
- Ensure the governing law and jurisdiction are appropriate
- Review the implications of the chosen jurisdiction and governing law
- Lawyer input: Required to confirm selected jurisdiction is acceptable to your organisation
24. Review any non-compete, exclusivity, area limitations or non-solicitation clauses
- Ensure any scope, duration, and geographic limitations are reasonable
- Assess the impact on your organisation’s operations
- Lawyer input: Required to advise on risk and verify that the provisions are legally enforceable
25. Assess the contract’s flexibility and adaptability, particularly if there are scope changes
- Review any provisions for amendments or modifications
- Confirm the process for addressing changes in circumstances
- Lawyer input: Not required, but consult your lawyer if the provisions are complex
26. Examine provisions related to amendments and modifications
- Ensure the process for amendments is clear and reasonable
- Confirm any required approvals or notifications for amendments
- Lawyer input: Not required, but consult your lawyer if unsure about specific provisions
27. Consider the potential impact of currency fluctuations or exchange rate risks
- Consider the potential impact of currency fluctuations or exchange rate risks on the contract and the parties’ ability to perform
- Review any provisions related to currency or exchange rate issues
- Lawyer input: Required to ensure that the provisions comply with applicable laws and regulations. Also discuss with your CFO.
28. Establish clear communication channels and points of contact
- Identify primary points of contact for both parties
- Confirm the process for communication during the contract term
- Lawyer input: Not required, but consult your lawyer if communication provisions are complex
30. Document any red flags or concerns for future reference
- Keep a record of any issues identified during the review
- Share concerns with relevant stakeholders, including your lawyer
- Lawyer input: Required to address and resolve any identified issues
31. Understand the implications of change orders or variations
- Review the process for managing changes in scope, timeline, or costs
- Confirm the parties’ rights and responsibilities related to change orders
- Lawyer input: Required to ensure the provisions are legally sound
32. Verify that any performance guarantees or bonds are appropriate
- Ensure the contract includes necessary performance guarantees
- Confirm the terms and conditions of any bonds or guarantees
- Lawyer input: Required to verify that the provisions are legally enforceable
33. Involve relevant stakeholders in the contract review process
- Collaborate with internal departments and external partners
- Obtain input from all parties who will be affected by the contract
- Lawyer input: Required to ensure all stakeholder concerns are addressed
34. Verify that any insurance requirements are appropriate and can be met
- Review the contract for required insurance coverage
- Confirm that both parties have the necessary coverage in place
- Lawyer input: Required to verify that insurance provisions are legally enforceable
35. Assess any provisions related to data privacy and cybersecurity
- Ensure the contract addresses data protection and security
- Review any provisions related to data breach reporting and remediation
- Lawyer input: Required to confirm compliance with data privacy laws and regulations
36. Be mindful of cultural differences in cross-border contracts
- Consider the impact of cultural differences on contract negotiations and performance
- Review the contract for potential misunderstandings or misinterpretations
- Lawyer input: Not required, but consult your lawyer if there are concerns about cultural differences
37. Confirm that the contract’s structure and formatting are professional
- Review the contract for a consistent layout and formatting
- Ensure the use of clear headings and numbered sections
- Lawyer input: Not required, but consult your lawyer if there are concerns about the contract’s presentation
38. Analyze any provisions related to environmental, social, and governance (ESG) factors
- Ensure the contract addresses ESG risks and opportunities
- Review any provisions related to sustainability and corporate responsibility
- Lawyer input: Required to confirm compliance with relevant laws and regulations
39. Assess any potential impact of the contract on your organization’s reputation
- Consider potential reputational risks and benefits
- Review the contract for provisions related to public relations and communication
- Lawyer input: Not required, but consult your lawyer if there are concerns about reputational impact
40. Understand the potential consequences of contract disputes
- Consider the financial, operational, and reputational implications of disputes
- Review the dispute resolution provisions for fairness and reasonableness
- Lawyer input: Required to ensure the provisions comply with applicable laws
41. Review any provisions related to quality control and inspection
- Ensure the contract includes appropriate quality control measures
- Confirm the process for inspecting goods or services
- Lawyer input: Required to verify that the provisions are legally enforceable
42. Assess the contract’s potential impact on your organization’s supply chain (including Modern Slavery impacts for Australian organisations)
- Consider the contract’s implications for suppliers and customers
- Review any provisions related to supply chain disruptions or contingencies
- Lawyer input: Required to ensure the provisions comply with relevant laws and regulations
43. Verify that any subcontractor or third-party obligations are clearly defined
- Ensure the contract addresses the use of subcontractors or third parties
- Review any provisions related to third -party performance or liability
- Lawyer input: Required to confirm that the provisions are legally enforceable
44. Consider the potential impact of international laws and regulations
- Research the applicable international laws and regulations that may affect the contract
- Ensure that the contract complies with those laws and regulations
- Lawyer input: Required to confirm compliance with international laws and regulations
45. Assess the potential impact of economic and political factors on the project and your organisation
- Consider the potential impact of economic and political factors on the contract and the parties’ ability to perform
- Review any provisions related to force majeure or other contingencies
- Lawyer input: Required to ensure the provisions comply with applicable laws and regulations
46. Confirm that any required licenses or permits can be obtained in the right time
- Review the contract for any required licenses or permits
- Confirm that both parties have obtained the necessary licenses or permits
- Lawyer input: Required to ensure that the provisions comply with applicable laws and regulations
47. Assess the potential impact of environmental issues
- Consider the potential impact of environmental issues on the contract and the parties’ ability to perform
- Review any provisions related to environmental regulations or obligations
- Lawyer input: Required to ensure that the provisions comply with applicable laws and regulations
48. Confirm that any required safety or regulatory standards can be met
- Review the contract for any required safety or regulatory standards
- Confirm that both parties have met the necessary safety or regulatory standards
- Lawyer input: Required to ensure that the provisions comply with applicable laws and regulations
49. Assess the potential impact of labor and employment laws
- Consider the potential impact of labor and employment laws on the contract and the parties’ ability to perform
- Review any provisions related to labor and employment issues
- Lawyer input: Required to ensure that the provisions comply with applicable laws and regulations
50. Assess the potential impact of technological changes or advancements
- Consider the potential impact of technological changes or advancements on the contract and the parties’ ability to perform
- Review any provisions related to technological issues or requirements
- Lawyer input: Not required, but consult your lawyer if there are concerns about technological provisions
51. Confirm that any required certifications or qualifications can be obtained by Key Personnel
- Review the contract for any required certifications or qualifications
- Confirm that both parties have obtained the necessary certifications or qualifications
- Lawyer input: Required to ensure that the provisions comply with applicable laws and regulations
52. Consider the potential impact of economic sanctions or embargoes
- Consider the potential impact of economic sanctions or embargoes on the contract and the parties’ ability to perform
- Review any provisions related to economic sanctions or embargoes
- Lawyer input: Required to ensure that the provisions comply with applicable laws and regulations
53. Verify that any required permits or approvals can be obtained within the required time
- Review the contract for any required permits or approvals
- Confirm that both parties have obtained the necessary permits or approvals
- Lawyer input: Required to ensure that the provisions comply with applicable laws and regulations.
54. Consider the potential impact of political instability or conflict
- Consider the potential impact of political instability or conflict on the contract and the parties’ ability to perform
- Review any provisions related to political instability or conflict
- Lawyer input: Required to ensure that the provisions comply with applicable laws and regulations
55. Confirm that any required environmental or safety permits can be obtained
- Review the contract for any required environmental or safety permits
- Confirm that both parties have obtained the necessary environmental or safety permits
- Lawyer input: Required to ensure that the provisions comply with applicable laws and regulations
56. Verify that any required inspections or audits are appropriate
- Review the contract for any required inspections or audits
- Confirm that both parties have completed the necessary inspections or audits
- Lawyer input: Required to ensure that the provisions comply with applicable laws and regulations
57. Consider the potential impact of natural disasters or other emergencies on the project
- Consider the potential impact of natural disasters or other emergencies on the contract and the parties’ ability to perform
- Review any provisions related to natural disasters or other emergencies
- Lawyer input: Required to ensure that the provisions comply with applicable laws and regulations
58. Assess the potential impact of cybersecurity risks
- Consider the potential impact of cybersecurity risks on the contract and the parties’ ability to perform
- Review any provisions related to cybersecurity issues or requirements
- Lawyer input: Required to ensure that the provisions comply with applicable laws and regulations
59. Verify that any required permits or licenses for intellectual property are obtained
- Review the contract for any required permits or licenses for intellectual property
- Confirm that both parties have obtained the necessary permits or licenses for intellectual property
- Lawyer input: Required to ensure that the provisions comply with applicable laws and regulations
60. Consider the potential impact of supply chain disruptions
- Consider the potential impact of supply chain disruptions on the contract and the parties’ ability to perform
- Review any provisions related to supply chain disruptions or contingencies
- Lawyer input: Required to ensure that the provisions comply with applicable laws and regulations
61. Assess the potential impact of privacy and data protection laws
- Consider the potential impact of privacy and data protection laws on the contract and the parties’ ability to perform
- Review any provisions related to privacy and data protection issues
- Lawyer input: Required to ensure that the provisions comply with applicable privacy and data protection laws and regulations.
62. Assess the potential impact of changes in laws or regulations
- Consider the potential impact of changes in laws or regulations on the contract and the parties’ ability to perform
- Review any provisions related to changes in laws or regulations
- Lawyer input: Required to ensure that the provisions comply with applicable laws and regulations
Consider the use of digital tools and AI for contract review
You may wish to use technology to enhance the contract review process, such as Contract Review Software or AI automation. These software programs can help you to identify risks and opportunities, and speed up the contract review process.
But we always recommend that you learn how to review a contract manually, before you begin to use software or programs that may not give you the complete picture during your review.
And you should always be careful about the accuracy of AI-generated insights (and not trust the results given to you without close examination and verification).
Lessons Learnt
And don’t forget to continuously improve the contract review process by implementing lessons learned from previous contract reviews and seeking feedback from internal and external stakeholders.
Conclusion
These 50 tips, along with strong collaboration between Contracts Professionals and lawyers, will help ensure a comprehensive and effective contract review process. By following these guidelines, you can protect your organisation’s interests, maintain compliance with applicable laws and regulations, and foster positive relationships with other parties.
