Here’s Our Comprehensive Guide on How to Review a Contract

Helpful Summary

• Overview: We give you a step-by-step process to follow when reviewing contracts, as well as some best practices for successful reviews.
• Why you can trust us: We’ve helped more than 61,000 businesses streamline their contract workflows without sacrificing contract security.
• Why it matters: Thorough contract reviews prevent legal issues, clarify terms, and ensure mutual understanding.
• Action points: Check key details, before moving on to dates, termination and renewal clauses, language, and blank spaces.
• Further research: Check out the SignWell blog for more insights on contract management and e-signatures.

A Contract Review Safeguards Your Interests

Reviewing contracts is an integral part of contract lifecycle management. These reviews play a crucial role in assuring the quality of your business assets, minimizing risk, and preventing disputes. 

According to Gartner, contracts govern 60 to 80% of business operations. But, many professionals don’t take contract review seriously, leading to potential legal, professional, and financial consequences.

Not sure where to start? In this SignWell guide, we give you a step-by-step process to follow when reviewing contracts to ensure they’re accurate. 

Let’s get started.

Why Listen to Us?

We’ve helped more than 61,000 businesses streamline their contract signing processes, improving efficiency and boosting compliance. 

So far, SignWell has processed more than 4,000,000 documents, contracts, agreements, and more. We know a thing or two about contract reviews and how they can make or break a business.

Why Is Contract Review Important?

It Protects You From Disputes

Contract disputes are much more common than you might think.

Carefully reviewing contracts helps protect you in two ways. For starters, it catches potentially confusing language and mistakes before they lead to disputes. In the event of a dispute, it helps ensure that there are no loopholes or discrepancies that could harm your chances of winning.

It Helps You Manage Risk

All transactions involve some degree of risk. Contracts exist to help minimize this risk by clearly outlining the responsibilities and obligations of each party involved. But… not all contracts are equally good at minimizing risk. 

A careful contract review can surface your riskiest clauses and terms. This lets you accurately understand how much risk you’re taking on and whether it’s a risk you’re comfortable with

It Leads to Better Outcomes

Clear contract terms are a win-win. 

Take a service provider contract, for example. With a clearly defined set of terms, the provider knows exactly what they need to work on, when it needs to be delivered, and what overall quality the deliverables need to meet.

The client also benefits from this clarity. They know what they’re getting (and when) and their rights if the provider fails to deliver. This leads to a smoother working relationship and better outcomes for everyone involved.

How to Review a Contract

1. Check the Most Important Details

The very first thing you want to do is to pull out the contract’s most important details.

The specifics will vary, but this often includes:

• Contact information
  • Name(s)
  • Address(es)
  • Phone number(s)
  • Email address(es)
• Payment terms
  • Amount
  • Schedule
  • Method(s)
  • Late penalties
• Indemnification clauses (i.e., clauses that assign liability)

These are the baseline details that should be correct in the contract. If these are incorrect, there’s no point in continuing the review until they’re fixed—a contract isn’t worth the paper it’s written on until these details are ironed out.

2. Confirm All Principal Dates

Almost all contracts operate within specific timeframes. This might be a timeline for delivering a product or service, a period of time during which a non-compete is in effect, or a date by which payment needs to be received. 

The point is, that dates are crucial.

Carefully review all dates to make sure they’re accurate, agreeable, and consistent throughout the contract before you move on to signing. This also involves making sure there is a specific process to follow if there will be any changes in these dates or schedules. Having this flexibility protects all parties involved.

3. Check Termination and Renewal Clauses

Let’s start with a quick refresher:

• Termination clauses outline the reasons a contract can be ended (if it can be).
• Renewal clauses outline how the contract can be renewed (if it can be).

At this stage of the review process, you should identify all of these kinds of clauses in the contract. Then, make sure you’re happy with what they say.

For example, are you comfortable forgoing a termination clause that lets you back out within a certain number of days if you’re not happy with the deliverables? Most people’s answer to this question would be, “Definitely not!” If you feel the same, make sure this clause is present.

In a similar vein, check the renewal clause for details on:

• The ability to renew (if that’s important to you)
• The auto-renewal policy (if there is one)

To illustrate the importance of this step, consider a case involving a company that entered into a two-year health and safety service agreement. Their contract had an autorenewal clause, but the company overlooked it. After two years, they were automatically invoiced (and forced to pay) for a third year​.

4. Audit Contract Language

For this next review stage, we’re moving into more nuanced territory—language. Contracts should ideally be easy to understand and unambiguous for everyone. But, if you’ve ever read a contract, you’ll know that this isn’t always the case.

Read through the contract and highlight any confusing or ambiguous language, like:

• Words with Multiple Meanings: Take the term “services”, for example. Does this refer to all the tasks being performed? Or just the specific tasks listed in the contract?
• Vague Terms: A common example in contracts is “reasonable efforts.” This is a very vague term that doesn’t really mean anything  (unless you add more details).
• Undefined Terms: The term “event” is a good example of this. It needs to be defined at the start of the contract in order for it to make sense in context later on.
• Overly Complex Sentences: These are super common in contracts. An example would be something like, “The first party shall undertake, in consideration of the second party’s performance, to deliver the aforesaid goods….” This needs some heavy editing.
• Subjective Phrases: Look for anything that could be a matter of debate—like “high-quality materials.” 

Also, highlight any instances of inconsistent language. These are places where words are used interchangeably to the point of causing confusion. Once you’re finished, reach out to the other parties with your concerns and work together to address them.

5. Spot Blank Spaces

Whether you are working with a contract template that helps you draft your agreement or reviewing a deal that another party has drawn up, identify all the blank spaces. If you don’t, it could lead to an incomplete contract, resulting in a contract that’s not legally sound.

Some blank spaces are fine. They are often spaces that another party will fill in with basic details (like their names and addresses) after you’ve signed the contract. However, you should always avoid signing a contract with blank spaces that will change the terms or obligations.

Best Practices for Reviewing Contracts

Here are some best practices to follow when reviewing a contract:

• Work from templates: Working from contract templates is a great way to cut down on the amount of review time required. With a tool like SignWell, you can easily save contracts as templates (complete with fields for signatures, dates, etc.) so that they’re automatically set up correctly when you need them next.

• Keep audit trails for your records: Whenever you sign (or send) a contract, make sure to keep an audit trail of the process. Tools like SignWell create these automatically, so you don’t have to worry about keeping track.
• Review collaboratively: The more eyes you have reviewing your contracts, the better. It increases the chances that issues (like the ones we covered above) are caught before they become problems.

Conclusion

A contract review is necessary to ensure that all terms in a deal are fair and risk-free, thereby protecting your business’s assets. It also helps you avoid legal battles by making sure your contracts are watertight.

SignWell streamlines contract review by offering legally binding e-signatures, custom templates, detailed audit reports, document tracking, and seamless integration with popular apps, enhancing efficiency and compliance. Our tool is integrated with over 5,000 of your favorite apps. 

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