What Is a Business Contract Review?
A business contract review is a thorough examination of a business agreement between two or more parties prior to signature. Reviewing the contract ensures that its terms are clear, fair, and statements are accurate.
Reviewing a contract before moving forward helps prevent issues that could lead to future disputes. When both parties agree upon the terms and conditions of the draft, they can move forward to signatures and have a sound executed contract.
Here is an article with the legal definition of a contract.
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What Is the Business Contract Review Process?
Like all contracts, the business contract review process looks closely at the terms and conditions, warranties, and statements within the document. The person reviewing the document goes through the draft of the agreement line by line.
A lawyer reviews a contract to determine whether it’s both legally enforceable and fair to everyone involved. They pay close attention to wording, terms, and structure of the document. They also check whether all the necessary provisions are included, so the final contract will hold up in a court of law.
The purpose of the contract review process is to ensure that the document follows all legal requirements and protects the interests of both parties fairly. Whether it is a lease agreement or employment contract, every business agreement must be equal and fair to the signees.
Here is an article with ContractsCounsel’s guide to the contract review process.
What Do Lawyers Look for When Reviewing a Business Contract?
Lawyers are trained to review contracts and determine their accuracy, fairness, and legal enforceability. They ensure that there is a clear legal agreement presented, and that the terms of the agreement do not violate any laws or another person’s rights.
They also check that the document uses appropriate terminology and structure based on its purpose. For example, a 1099 independent contractor agreement will have different necessary components than a partnership agreement.
A professional business contract review from a lawyer can prevent oversights and legal errors; it can also provide you with greater protection based on the attorney's recommendations.
Before they assess the details, a lawyer will make sure a business contract contains its most essential components. Key elements of business contracts include:
- Offer. The document must clearly express what is being offered or exchanged.
- Acceptance. Both parties express agreement to the terms listed within the contract.
- Consideration. The price of the contract (or transaction it details).
- Mutual obligations. All parties have equal interest and investment in the contract.
- Legality. A statement that ensures the contract becomes void if one or more parties fail to fulfill their obligations.
- Lawful material. The document does not break any laws, regulations, or policies.
- Capacity. Each party affirms their review and understanding of the contract, and they are all legally competent to enter a contractual relationship.
Specific components a lawyer will look for include:
- Terms and conditions. These provisions outline the obligations of both parties, the terms of the contract, and conditions that must be fulfilled in order for it to be legally valid.
- Warranties. Warranties are protections for buyers that guarantee their product or service is not defective. It also offers a repair or replacement under certain conditions, and within a certain period of time.
- Indemnification. An indemnity clause protects a party from litigation by requiring the other to pay for legal fees if they sue them.
- Termination agreement. Termination clauses reserve either party’s right to end the contract prematurely or break it according to certain terms.
- Dispute resolution. Dispute resolution clauses and a dispute resolution agreement outline the steps parties agree to take to avoid litigation and minimize potential damages.
The lawyer will also closely examine the language of the document. Without the appropriate structure and phrasing, contracts can easily be disputed in court, and lengthy legal battles can result in damages to both parties.
The best way to protect yourself or your business is to ensure that your agreements all have the strongest wording, clearest terms, and protections in place.
Here is an article with what to look for in a business contract.
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How Long Does It Take to Review a Business Contract?
A business contract review can take anywhere from a few hours to over a month. The duration of the review process depends on the length and complexity of the agreement. For most contracts, you should be able to have a professional lawyer fully review your document within a week’s time.
Reviewing the business agreement on your own can take longer, as you need to not only review it for accuracy but also ensure it aligns with relevant laws and regulations. The additional research process can add hours of work to your review process.
One way that you can reduce the review process time is by using a contract sample from a reliable legal resource. Contracts that have been successfully written and executed can illustrate the language, form, and elements to look for in your own.
Here is an article with dozens of free contract samples on ContractsCounsel website.
Who Should Review a Business Contract?
The best person to review a business contract is a business lawyer, also known as a corporate lawyer. These legal professionals specialize in all elements of business law, so they know exactly what to look for in a contract.
In addition to professional legal review, business contracts should also be carefully discussed by all the involved parties. These are the people who will be directly influenced by the document, so they need to be fully aware of what is in the contract and agree to its terms and conditions.
A thorough examination will ensure that every party’s interests are considered, and the final document supports a mutual desired outcome.
Here is an article about who should review a business contract and what to look for.
How Much Does It Cost to Review a Business Contract?
Based on ContractsCounsel’s marketplace data, the average cost of a contract review is $608. A typical business contract review cost will likely be between $300 to $650. The more in-depth a contract is, the more it will cost to fully review.
You will also have to consider the cost of a business lawyer’s services; most business attorneys charge between $150 to $750 an hour.
Here is an article with a step-by-step guide on how to review a contract.
Common Types of Business Contracts
- Business formation agreements. These documents establish the structure of a business, such as an LLC, partnership, or corporation. It can be a single-party business or multi-party agreement.
- Customer agreements. A customer agreement governs business transactions between a buyer and seller/provider. They include terms and conditions, as well as a termination agreement to protect each party’s interests.
- Employment agreements. An employment agreement outlines the nature of a person’s role within an organization, and includes all the details of their employment arrangement, including expectations, obligations, and benefits packages.
- General business contracts. There are many types of business agreements that you may use, including a bill of sale, service agreement, and indemnity agreement. These documents have unique structures, but their purpose is to establish a professional relationship between two or more parties and outline the scope of their agreement.
Learn more about the different types of business agreements.
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