The common saying that “anything worth doing is what doing well” applies to every sphere of life. It is often not enough to understand the importance of reviewing a contract. It is even more important to know the proper methods of reviewing such contracts. Reviewing a contract wrong may serve little or no purpose for the necessary party. Sometimes, incorrect reviewing may end up being counterproductive – causing more harm to the contracting party than good. No one apparently wishes for that, which is why reviewing a contract has to be done specifically and professionally.
Many elements of a contract need to be properly examined during a review, from proper use of language to mechanical accuracy. However, as it is best for contracts to be reviewed by legal practitioners, specific aspects need to be focused on with more scrutiny and attention. They are foundational to the viability of a contract, and the absence of one may render such a contract useless.
Top 5 Things To Look Out For When Reviewing A Contract
This article addresses five of these important elements, highlighting why they remain vital to a contract and its survival.
1. Grammatical And Technical Errors
As basic as this may sound, you do not want your contract or your client’s contract to contain any grammatical errors. Besides being naturally off-putting, grammatical errors can alter the intention of the contract, and in turn, affect the interest of the contracting parties. When looking out for grammatical and technical errors in a contract, the review can either be done manually or by the use of legal document review software.
Reviewing grammatical and technical errors manually may be slower and relatively inaccurate compared to the use of review software, but it certainly has its advantages. Certain languages are peculiar to the law and are used by lawyers. When used in legal documents, these words take up slightly different meanings.
Under contract review software, the use of these words and language patterns will most likely not be flagged, as they are grammatically correct. A lawyer reviewing the contract manually has a higher chance of noticing such misuse and effect on the necessary changes.
Using software to fish out grammatical and technical errors has an overwhelming number of advantages. The general and encompassing advantage is that they capture grammatical issues which the human eye may be blind to. They also obviously save a lot of time, as they go through the documents at faster rates, highlighting the necessary issues.
2. Key Contractual Clauses
In any contract, some clauses are way important than others. They are foundational to other terms and conditions, and any defects with these clauses will not only affect other contractual terms, but they may also affect the entire contract quite negatively, making it lose its viability. Key contractual terms and clauses are particularly important to look out for, due to the difference in companies and industries.
The key contractual clauses and terms in a contract are also different in nature and serve different purposes. Main terms and clauses in a contract include terms of confidentiality, indemnification, dispute resolution or arbitration, and termination. They are the terms in a contract that take precedent over others and must be expressly followed when the need arises.
Lawyers (and even the parties represented) must look out for the language used in these areas of the contract, ensuring that they are acceptable and that they are in line with the interests of the parties. Apparently, they are important aspects of the contract and are worth spending extra time reviewing. Undoubtedly, it is better to spend the time reviewing them than to bear the consequences of applying them incorrectly.
3. Renewal and Termination Terms
Unfortunately, most people and companies truly come to understand the implication of checking a contract’s termination and renewal terms after failing to take them seriously. Renewal and termination clauses in a contract set the time and period for which the contract lasts and the parties remain bound to its terms.
They also set whether or not the contract continues to be in effect after the end of the expected period of validity – whether it will be renewed. Tenancy and lease agreements are perfect examples of contracts that may include renewal clauses or have issues with their termination dates.
Lawyers should include express termination periods in the clients’ contracts, or demand that they be included. The period of termination can either be included by expressly stating a date, or attaching it to completing the contract’s obligation. If anything can be categorized as being unfortunate in contractual relations, it is being stuck in a contract after you have done your part and performed your end of the deal.
Lawyers should also be particularly detailed in checking out renewal terms, as they sometimes appear in cryptic languages that may not seem harmful on the surface. Lawyers should look out for automatic renewal languages in contracts, and get their clients out of them when unsuitable.
4. Default Terms
Regardless of the good intentions, a party has before entering into a contract, there is always a possibility of not performing your contractual obligations as agreed. While this may not be a direct fault of the party in question, the fact remains that there are contractual obligations that have not been fulfilled.
Many contracts contain terms that outline the repercussions to be suffered by either party that fails to deliver as promised. Lawyers need to look out for these terms and draw their clients’ attention to them. If these terms endure in a contract, then the parties will have to be extra careful as the contract unfolds.
Another alternative is adding a clause to the contract, to cater for situations where the default is out of the party’s hands. Rather than going through a litigation process in trying to determine if the party’s default was unavoidable, it is safer to add clauses that protect the parties in case an obligation cannot be fulfilled due to unforeseeable and uncontrollable circumstances.
This apparently cannot be done through automated review software. They, therefore, need to be included manually through normal editing software, the most prominent of which is Microsoft Word for lawyers.
5. Important Dates and Deadlines
Certain contracts require performing different stages or layers of obligations by the parties. They contain specific dates, attached to the completion of specific duties, and may contain a final deadline for the final stage of the obligation to be performed.
These terms are quite tricky, and many parties end up violating them due to their specificity. Some parties focus only on completing the task or duty before the final deadline in the contract and fail to comply with the previous dates stipulated.
Lawyers should be thorough in these sorts of situations. They should expressly lay out the terms of the contract to their clients, highlighting each obligation and their accompanying dates. The dates contained in the contract mustn’t be disadvantageous to a party, because there is no going back once the agreement is completed.
The parties must expressly stick to the dates and deadlines in the agreement, until its final date. It will be such a pain to get stuck in a series of successive deadlines without adjusting them to your advantage beforehand.