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What Is Contract Review?

Contract review is the process of a lawyer reading and understanding a written legal contract on behalf of a client to analyze the legality of the terms to make sure they are fair. This process is typically done on a line-by-line basis, and may include redlines or comments by the lawyer to improve the terms for their client. Contract review lawyers also look for loopholes to make sure clients are protected once you sign the contract. A lawyer reviewing a contract may complete a few different key tasks, including:

  • Initial consultation to learn about your priorities
  • Reading and analyzing the contract
  • Explaining the contract to a client
  • Answering client questions
  • Suggesting changes that would be in your best interest
  • Giving tips on how to best negotiate with the counter party

Who Typically Needs Contract Review?

Contract review services can be used by many different parties, since legal contracts are used in everyday life for businesses and individuals. Reviewing a legal contract on behalf of a business or an individual consumer will protect their legal interests and rights.

Contract Review for Businesses

Businesses routinely review legal contracts to make sure the contracts being signed between their business and another party are sound and do not create too much risk. Businesses often have lawyers they work with that understand the in-and-outs of their business, so that reviewing contracts on their behalf is consistent and puts the business in the best position to succeed. Below is a list of common party’s businesses contract with where they need to have contracts reviewed:

  • Customers. Businesses will have customers who buy their products or services. These transactions will typically be governed by a legal contract or website agreements. If customers review a businesses’ contract and provides redlines, a business will need to get these redlines reviewed by a lawyer to make sure the suggested changes do not put the business in a position of risk before signing.
  • Vendors. Businesses typically use a lot of vendors to help deliver the product or service to their customers. These vendors will all have legal contracts (e.g., vendor agreement) they ask the business to sign to provide them with support that will need to be reviewed before signing.
  • Employees. If a business has employees, there will need to be an employment contract signed between the business and the employee. This will often trigger the need for contract review to make sure the terms of the agreement align with the businesses’ interest and are legal.
  • Contractors. Businesses often employ contractors to preform services and will often need to put an independent contractor agreement in place that governs their relationship, which may trigger the need for contract review.
  • Investors. If a business raises outside capital from investors, there will typically be an investment contract that governs the terms of the investment (e.g., convertible note, SAFE note, stock purchase agreement, etc.) that may trigger contract review.
  • Lenders. If a business needs a loan, there will typically be a loan agreement provided by the lender the business will need to get reviewed.

Contract Review for Individuals

Individuals and consumers will also have many needs for contract review. There are many instances where they have a large transaction that require legal contracts which should be reviewed to make sure their interests are protected. Some examples of these transactions are below:

  • Real Estate. When purchasing or leasing real estate, there are legal contracts that govern the transactions. For purchasing, there will typically be a real estate purchase agreement that defines the terms of the purchase. For renting or leasing, there will be a rental agreement or lease agreement that sets the terms of the deal. These legal contracts are often reviewed by lawyers on behalf of the individual(s) to make sure they are protected.
  • Employment. If an individual is starting a new job or has an issue with their current job, they may hire a contract lawyer to review their employment contract. The lawyer will advise on the legality of the terms and make recommendations to the client on how to proceed.
  • Marriage. Marriage can often involve legal contracts if couples decide to use a prenuptial agreement or postnuptial agreement. Family lawyers will help review these contracts to make sure individual rights are protected.
  • Estate Planning. Estate planning documents, like a living will or living trust, may be drafted, and reviewed by estate planning lawyers. These documents govern what happens to someone’s estate if they pass away.

Who Reviews Contracts?

Contracts are typically reviewed by licensed attorneys and lawyers. Some of these legal professionals may only work with contracts and call themselves transactional lawyers, having the training and experience to guide clients through a transaction and make sure they are best protected.

Given contracts can range across different practice areas (e.g., employment, business, family, etc.), many contract lawyers have specific areas they focus on. For example, a lawyer may be very well versed in finance and investment, and only help clients that are raising money from investors or dealing with lenders to finance their business. Another example would be a family law lawyer who only works with clients on a prenup or postnup.

All these lawyers will have the specific training and knowledge that will be valuable to their client, especially with larger transactions with big implications.

Contract Review Process

The contract review process can vary depending on the lawyer and the type of project involved. For example, one client may only have a few specific questions about a contract with no need for redlines. Another client may want to hire a lawyer to review the contract, redline it, and help with negotiations until it is signed. This process will be driven by the type of work needed and size and importance of the transaction.

Below are some common steps you may find in the contract review process:

  1. Initial Consultation: A lawyer will typically want to set up an initial consultation with a client to learn about their requirements. They may want to understand details about the transaction the client is involved in, as well as their priorities and concerns about the contract. This information is valuable to a lawyer so that they know what to focus on during their review and how they may edit it to fit their client’s priorities.
  2. Reviewing the contract: A lawyer will review the contract, typically line-by-line, to learn what each clause includes and terms that are outlined.
  3. Call to discuss findings: One a lawyer has reviewed the contract; they may want to have a call with their client to go over their findings. At this point, they can answer any questions the client has, discuss the details of the contract terms, or address any specific concerns. The lawyer may also ask if the client wants them to redline the agreement to make the terms more favorable or legal.
  4. Redlining and commenting : Once a lawyer has discussed with their client, they may be asked to insert redlines or suggested edits using tracked changes that may be more favorable to the client or better protect their rights.
  5. Negotiating the contract: When redlining is complete, a lawyer may negotiate a contract on behalf of their client. This is called contract negotiation. This involves the lawyer working with the counter-party (e.g., other side of the transaction) to negotiate terms until they both mutually agree on the final version of the contract. Note, this can go on for multiple rounds and take a while.
  6. Signing the contract: After all parties to the agreement understand the terms of the contract and agree, everyone will sign the contract.

What Types of Contracts Should Be Reviewed?

It's a good idea to have any type of contract reviewed before you sign it. It is particularly important if the contract has big implications, like a house purchase, so that you are legally protected. Some common kinds of legal documents that require review include:

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Employment Contracts

Employment contracts involving hiring someone to begin a new job or position. Key details of these contracts include:

Here is an article about employment contracts.

Freelancing Contracts

Freelancers may want to review larger contracts or contracts they plan to use frequently. Details reviewed will include:

  • Deadlines
  • Ownership of work
  • Payment amounts
  • Revisions
  • Scope of work
  • Termination

Real Estate Contracts

Many documents are involved with the selling, purchasing, or leasing of property. Examples include:

Here is an article about real estate contracts.

Purchase Agreements

Purchase agreements are contracts that transfer property such as vehicles, real estate, or other tangible assets from one party to another. Purchase agreements may involve many of the documents listed under real estate contracts as well.

Contract review

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What a Contract Review Lawyer Looks for During a Contract Review

A lawyer will look for many key details when reviewing a contract. Their goal is to make sure their client is legally protected and happy with the terms after they sign the contract. This includes:

  • Deadlines: If a task or tangible asset is due at a certain point, the contract should make this clear.
  • Dispute resolution: A contract should clearly explain how parties can resolve disagreements that might arise over the course of the agreement.
  • Blank spaces: A contract review will ensure you have not left any blanks unfilled in the contract. Though that may seem obvious, checking that all blanks have been filled in is very important. If you leave a space blank, someone could go back in and fill in something you would not otherwise agree to.
  • Indemnification: Most contracts should have mutual language when it comes to indemnification. If a contract review reviews that only one party to the agreement is indemnifying, a lawyer will usually recommend you have that clause removed unless indemnification can be made mutual. Mutual language is important to include even in cases when one party could not be the cause of liability.
  • Renewals: If a contract could be renewed automatically, the contract should specify whether or not you agree to automatic renewals.
  • Representation: A contract should not give or accept any information that you do not know to be true.
  • Responsibilities and rights: A contract should clearly explain what each party is entitled to as well as the obligations each party must fulfill.
  • Risk allocation: A contract should detail how risk is allocated. Otherwise, you could run into a financial problem or another type of problem without clear guidance about who is at fault and how to fix the issue.
  • Parties involved: A contract should use complete names to avoid confusion and list everyone involved in the agreement.
  • Termination: A contract should specify possible causes for termination, detailing when, how, and under what specific terms a contract may end. A contract review will make sure the document contains appropriate language that defines the terms and process for breaking that contract.
  • Terms: A contract is only a starting point, opening the possibility for further negotiation. You can negotiate terms you are not satisfied with. A lawyer reviewing the contract can point out terms that are not in your best interest. A lawyer will also check that all business terms used in the contract are accurate and legal.
  • Warranties: Likewise, warranty terms should be clear in the final contract.

Common Mistakes Made During Contract Review

There are many common mistakes that can be made throughout the contract process. Below is a summary to review to make sure you do not make any of these mistakes:

  • Signing a contract without reviewing its terms.
  • Using a non-lawyer to review a high-value contract.
  • Hiring a lawyer to review a contract without getting an idea of costs ahead of time.
  • Thinking all contracts aren’t negotiable.
  • Redlining and pushing back on non-important terms, which can blow up deals or trigger high legal bills.
  • Filling out a contract template incorrectly without having a lawyer look at it.

Contract Review Checklist

Having a checklist to go through when reviewing a contract is important to make sure nothing is missed. Below are some steps to follow that may be helpful:

Understand Most Important Clauses

Before reviewing a contract, make sure you understand what the most important terms are and where those terms live in the contract. For example, if you’re reviewing an employment contract, some important terms may include the compensation rate, benefits being offered, how the employer can terminate you, and roles and responsibilities.

Understanding what is more important will allow you to focus your efforts and make sure all the key language is correct.

Flag Any Complicated Language

Contracts are much better when written in clear and concise language. If you read anything that is overly complicated, flag it so that you can get clarity on its meaning and make the language simpler.

Confirm Important Dates

If there are any important dates related to the transaction, find where these dates are in the contract to make sure they match your expectations. For example, if you are signing a vendor contract that promises a delivery of products by a certain date, make sure that date is clearly outlined in the contract.

Confirm Important Numbers

If there are any important numbers that are part of the terms of the deal, find them in the contract and make sure they are correct. Important numbers could include the purchase price of a real estate transaction or the interest rate in a commercial loan agreement.

Find Default Regulations

If the contract has any sort of regulations that govern it, find those, and make sure you understand the regulations and what they mean. This is important since the contract may not outline everything you need to know about these regulations, and rather just point to them as regulations that govern the contract.

Find Blank Spaces

If you find any blank spaces in the contract, this may mean someone did not fill out the contract template correctly. These should be flagged and filled out to make sure the contract is complete.

Check on Termination and Renewal

It is always good to look for how the contract can be terminated or renewed. This term is particularly important since you may get to a point where you want to get out of the contract, but the current language does not allow you or may penalize you for doing so. If there is any renewal language, understand what this means so that you know when the contract may automatically renew.

Contract Review Example

To further understand contract review, we have provided a real-life example to read through. Our example will be for reviewing a commercial lease agreement on behalf of a business owners who wants to rent a new retail space for their business.

Paul has recently started a workout class program he has run from his house and finally has enough funds to rent a new space for his business to expand. Paul searches on various websites and finds a space near his house that is perfect, and negotiates with the landlord to come to base-line terms for the rental. At this point, Paul is given a commercial lease from the landlord that outlines the terms of the rental for him to sign to secure the new space.

Paul takes a look at the document, which says ‘Triple Net Lease’ at the top and starts to look at the language which includes clauses about length of the lease, property modifications, utilities and taxes, escalating rent amounts, etc. Paul quickly realizes he needs to hire a lawyer to review the contract since the rent in total over a five year period is a lot of money and wants to make sure he understands all of the implications of the lease.

Paul hires Cheryl who is a commercial real estate lawyer and works daily on commercial lease agreements. Cheryl takes the below steps to help Paul:

  • Sets up initial consultation. Cheryl schedules a consultation with Paul to learn about his business and understand the terms he negotiated with the landlord. This helps her review the agreement to make sure these terms are reflected in the lease. She also wants to understand Paul’s priorities and health of the business to make sure he will be protected if anything goes wrong.
  • Reviews the lease agreement. Cheryl then reviews the lease agreement, clause-by-clause, making notes as she goes for what the lease terms are and what they may mean to Paul and his business.
  • Schedules a call to go over her review. Cheryl then schedules a call with Paul to discuss her findings and shares notes with him. She has several questions for Paul about his plans with the property, current and projected revenues, etc. Paul tells Cheryl he will need to do major renovations to make sure the business has the space needed for his exercise classes. Cheryl advises that the lease limits his ability to do renovations and Paul asks Cheryl to suggest a change in the lease on his behalf.
  • Redlines the agreement. Cheryl then goes back to the agreement and makes redlines to address Paul’s concern about his ability to renovate the property and make modifications. She also makes a few other changes surrounding renewal language.
  • Sends the agreement to the landlord. Cheryl then sends the agreement, with redlines, to the landlord for their review. The landlord’s lawyer reviews the proposed language and makes some additional tweaks.
  • Approves the agreement to sign. Cheryl receives the additional edits back from the landlord and approves the lease for Paul to sign.

Do You Need to Get a Contract Reviewed?

Contract review is an important component of any agreement made using a contract. This includes both business and personal contracts. All in all, if you're making a decision using a contract, you want to make sure you do not have a legal issue later on by having a lawyer review that contract before you sign it. Reasons to obtain a legal review of any contract include:

  • Guaranteeing legality: You want to know your contract will stand up in court if necessary. A contract review will make sure all the terms used in the contract are indeed lawful and legal.
  • Preventing misunderstandings: Having a lawyer review your contract will help ensure that all terms in the contract are clear. That in turn prevents parties to the agreement from misunderstanding what they sign.
  • Minimizing legal problems: By ensuring all terms in a contract are both legally binding and understood by the parties signing the agreement, a contract review makes it less likely that future legal issues will arise.

Whether you need to draft a contract or have received a contract to sign, you want to make sure you completely understand the terms and that the contract protects you legally. This is true of both business and personal contracts. Working with an experienced contract lawyer to review your contract will help you create a contract that does its job.

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