Contract Review Checklist for Commercial Agreements

icon-contractAn effective and efficient contract review process is essential for successful business relationships. Once an agreement is signed, both parties are legally bound to its terms, which is why it’s critically important to ensure that clauses and provisions are clearly and accurately stated. During a typical review process, errors and omissions can occur. Many legal teams rely on a contract review checklist as a safeguard to standardize the process. This guide outlines a helpful checklist and discusses recent developments in contract review technology that have enabled legal teams to ensure 100% compliance while accelerating and automating the review process.

A contract review checklist can be helpful in the short term, but artificial intelligence software is more effective in the long run

What Is a Contract Review Checklist?

A contract review checklist helps legal departments standardize their contract review processes. Whether the reviewer is a junior associate or an experienced senior attorney, a checklist can help the legal team ensure consideration of essential agreement elements.

Sample Contract Review Checklist 

The following contract review checklist items are categorized according to key contract elements.

Agreements 

  • Are the purpose of the contract and the desired outcome clearly stated?
  • Are all obligations, warranties, and rights of each party identified without ambiguity?
  • Are the beginning and termination dates clearly stated?
  • If the parties reside in different locations, has legal jurisdiction been named?

Standard Clauses 

  • Confidentiality: Is all confidential information outlined?
  • Force Majeure: Is a clause in place for appropriately handling unforeseen events?
  • Termination Triggers: Are clear conditions laid out for termination?
  • Dispute Resolution: Is arbitration mandatory, or are court proceedings allowed?
  • Damages: What is each side entitled to in breach of contract? Who pays legal fees?

Rights and Responsibilities 

  • Are the rights of each party clearly expressed? 
  • Is a timeframe defined for remedying quality issues after a complaint is received?
  • Who is responsible for covering the cost of delay and work remedies?
  • Is the duty of care a standard definition or alternately defined?
  • Does the contract allow for termination? If so, does it apply equal force to both parties?
  • Are “default” events described clearly and with specificity? 
  • Is written notification necessary to initiate default proceedings or termination?

Risk

  • Does your team understand the scope of the contract and all expectations?
  • Is the schedule reasonable, with some flexibility to accommodate change?
  • Are the paths that trigger critical clauses clearly communicated? 
  • Are risks clearly stated for failure to uphold contractual terms?
  • Are risks allocated to the parties most capable of managing them?
  • Are all dates correct? Do you have a reminder set for renegotiation before renewal?

How Can I Improve My Contract Review Process?

While a contract review checklist may help legal teams uncover outdated provisions, highlight areas for improvement, or expose risky pitfalls, the checklist still relies on humans to execute the review. People can succumb to fatigue, make mistakes while reviewing, or miss crucial words or phrases that make all the difference in terms of legal liability. 

Modern legal tech and AI-powered solutions can automate the contract review process to ensure all terms and clauses align with company playbook standards. Cloud-based software leveraging AI and Natural Language Processing (NLP) can perform complete and flawless reviews in minutes—something that even the best checklist cannot accomplish with human review. 

Consider the advantages of an AI-powered contract review and negotiation solution for your legal department:

Agreements 

  • Includes context-based suggestions to direct negotiations.
  • Inserts playbook-compliant, pre-approved language wherever appropriate.
  • Flags sections that deviate from the AI Digital Playbook or contain ambiguous language.

Standard Clauses 

  • Maintains a repository of contracts and playbook rules.
  • Redlines and annotates with context-based suggestions for revision.
  • Alerts reviewers to risky and vague language, omissions, and deviations.

Rights and Responsibilities 

  • Assesses the draft based on preconditions set by attorneys.
  • Compares a draft to the corporate playbook, past contracts, and best practice standards. 
  • Becomes smarter as the playbook evolves.

Risk

  • Redlines contracts where risk is high and provides context for concerns.
  • Automatically escalates the riskiest contracts to senior attorneys for review.
  • Reminds you when contracts are due for auto-renewal, so no opportunity is missed.

Implementing a contract review checklist will provide immediate results and strengthen your reviews. However, be sure to consider the advantages of an AI-powered contract review platform and how an automated solution accelerates the contract approval process while programmatically ensuring that every reviewed contract is 100% playbook compliant.

LexCheck’s AI-powered contract review solution enables corporate legal departments and procurement teams to automate and accelerate the contract review and approval process. Request a demo or contact us at sales@lexcheck.com if you’d like to go beyond contract review checklists.

gary-sanghaGary Sangha | Founder & CEO

Gary Sangha is the Founder and CEO LexCheck. He's a serial entrepreneur and an academic. Gary previously founded Intelligize, a legal technology company that was acquired by LexisNexis. He's affiliated with the University of Pennsylvania and Stanford University and started his career as an attorney at Shearman & Sterling and White & Case.