The Ultimate Contract Management Review Checklist

Contract management involves the supervision of all aspects of contract request, negotiation, creation, approval, execution, and tracking. Any misstep at any point in the process can result in unwanted risk or an unprofitable relationship. 

It’s important, then, to put together a contract management review checklist that helps make sure all the proper steps have been followed in your process and all contingencies considered. It’s a matter of dotting all the i’s and crossing all the t’s to mitigate risk and ensure compliance – which can be facilitated by the use of automated contract management software such as Contract Logix. 

Key Processes

  • Contract initiation
  • Contract generation and negotiation
  • Contract approval and execution
  • Contract tracking

Checklist for Contract Initiation

Contracts are typically initiated when you or another party are interested in entering some sort of business relationship. Here are the key points to consider when initiating a new contract.

Justify the Contract

When someone in your organization undertakes an activity that requires a contract, that person needs to justify the activity. The justification might require approval from a manager higher in the organization. 

Identify Supporting Documents and Required Information

The justification process should require a little homework. This typically involves identifying past contracts and other relevant documents necessary to corroborate the purpose behind the new contract.

To make this process smooth and efficient, you can use standardized yet required contract request forms that are completed by anyone who needs to request or submit a contract. This ensures you get all of the required information right from the start such as names, dates, values, insurance requirements, contact information, etc. From there, workflows can be triggered to approve the requests and get the contract creation process started.

Checklist for Contract Generation and Negotiation

If the person requesting the contract is okayed to proceed, you now enter into the generation and negotiation process. This is one of the most involved parts of the contract management process with the biggest opportunity for mistakes. That’s why in-house legal teams including Counsels and Contract Managers are involved. 

This process starts with the generation of the first draft of the contract. The draft needs to be vetted by appropriate staff within your organization before it is sent to the other party. At that point, your organization and the other party negotiate specific terms and language

Create the Contract

Manually authoring a contract is a time-consuming and error-prone process. Contract creation can be streamlined by using an automated contract management system, which bases new contracts on language and clauses already approved for previous contracts. CLM software lets you populate clauses and leverage templates based on your business rules. It will aslo merge fields from all the required information you secured in your request forms. 

Evaluate the Risks

At this point, your organization needs to assess the risks associated with the new contract. While no contract is totally without risk, you want to minimize overall risk and make sure it is fairly shared between parties. (This is also something that can be achieved via the use of contract management software.) As you evaluate the risk associated with a particular agreement, it’s a good practice to score the probability and consequence of it occurring. Then, you can establish risk thresholds to determine if the score is acceptable to your business or not.

Approve the Terms and Conditions Internally

The terms and conditions proposed in the contract need to be approved by appropriate authorities in your organization. If the terms and conditions are unacceptable, for any reason, changes should be requested. Once again, you can use contract management software like Contract Logix to build contract approval workflows that automatically route the agreements to the appropriate personnel in your company to approve.

Examine Renewal and Termination Terms

Some of the most important terms in the contract concern the contract’s renewal or termination. Look especially at the termination date and whether the contract is set to automatically renew via an evergreen clause. If the contract specifies automatic renewal, consider what actions your organization has to take to not renew the contract. 

Negotiate Final Terms and Conditions with All Parties

Negotiating contracts externally with third parties can be a complicated and time-consuming process that can often derail a deal. To help remove friction from the process, contract management software can facilitate concurrent contract collaboration, edits, messaging, and comments directly in the system. This eliminates the need to email attachments back and forth. It also gives you great visibility into where the contract is in the negotiation process. Finally, it automatically tracks all edits and changes so you have a complete history of everything in the event of a dispute or audit. 

Checklist for Contract Approval and Execution

After negotiations conclude and both parties agree on the contract’s terms, it’s time for final approvals and getting the contract signed. This is your last chance to check for mistakes, and for language or clauses to which you can’t adhere.

Fill in All the Blanks

Sometimes a few details are left out of a contract during negotiations. Look for them and fill in the blanks and check for accuracy. You should proofread for spelling, grammar, and punctuation errors, and to ensure that all the details – names, prices, amounts, durations, due dates, and so forth – are accurate.

Ensure Internal and Legal Compliance

At this point another check is necessary to make sure the contract complies with all your internal procedures and policies. Your legal staff should also review the contract to ensure that it is fully legal.

Read All Supporting Documents

Someone should carefully read any attachments or documents supporting the contract. Make sure that the details in the supporting documents are accurately reflected in the contract itself.

Get All the Signatures

With all checklist items to this point okayed, the contract needs to be signed. Make sure that all necessary signatures from both parties are obtained, preferably via electronic signature. Features such as Collaboration Room from Contract Logix not only let you negotiate contracts fast and easily, they also let you launch the e-sign process from the system and then marry the contract back in once executed.

Checklist for Contract Tracking 

The contract management process doesn’t end when the contract is executed. You need to ensure that the deliverables specified in the contract are actually delivered.

Track All Obligations and Deliverables

It’s important that all contractual obligations are met by all parties. This requires setting alerts for when your own deliverables are due and when the other party’s deliverables should be received – and following through if and when obligations are not met. 

As mentioned earlier, contract management software can ensure you never miss obligations and deliverables as well as track your vendors’ ability to meet theirs. It’s done for you automatically in the software.

Flag Renewal and Termination Dates

Finally, you need to be aware when contractual end dates are coming up or if a contract is subject to automatic renewal. You should also know what you need to do to manually terminate contracts you do not wish automatically renewed.

This is another area where contract management software can play an important role. Through the use of automated alerts and reminders, you can have the software notify the appropriate people well in advance of a renewal deadline so that they can evaluate whether or not to proceed with it. This way, you will never miss another important contract date again. 

Let Contract Logix Help You with the Contract Management Review Process

You want to be able to check all the items on this list for every contract you execute. That is a daunting task – made less daunting by the use of contract management software (CMS) such as that offered by Contract Logix. We’ve been helping businesses with their contract management since 2006. Our robust CMS solutions can supplement, improve upon, or even replace your existing contract management processes. The goal is to quickly generate accurate and compliant contracts, which you can do with our automated CMS solution. 

Contact Contract Logix today to learn more about automating the contract management review process.