The contract review process is a mission-critical part of every organization’s contract lifecycle. Do it the wrong way, and you might expose your company to a minefield of risks—costly disputes, revenue leakage, regulatory penalties, and all kinds of avoidable chaos.

On the flip side, if you do it right, you set the stage for seamless business operations, executing ironclad contracts that guarantee sustained growth for your organization.

Here’s a guide that reveals everything you need to know, starting from the basics.

What is the contract review process?

The contract review process refers to a thorough examination of a contract document prior to its execution. During this process, both parties read between the lines to identify errors, areas of non-compliance, and sections that need renegotiation. This helps them ensure their interests are sufficiently represented within the contract.

Multiple rounds of revision might be made at this stage, but at the end of the day, it is generally less expensive than being trapped in unfavorable terms or going to court for a breach of contract.

Source: Gemma Nugent via LinkedIn

How to review different contracts

A thorough contract review process doesn't have a one-size-fits-all formula. Every binding agreement comes with unique priorities, business goals, and risks which must be addressed using a tailored approach.

Here, we’ll cover a few major contract types alongside important areas you must focus on while reviewing them.

Source: Tom Meagher via LinkedIn

1. Employment contracts

An employment contract is an enforceable agreement between a business entity and its employees.

Areas to focus on include:

• Compensation and benefits
• Job duties and responsibilities
• Term of employment
• Confidentiality and non-compete clauses
• Termination provisions
• Dispute resolution

Also read: How to Review Employment Contracts

2. Lease agreements

A lease agreement is a deal between a property owner and a renter.

To review contracts like this, pay attention to:

• The lease term (i.e. duration of the lease)
• Rent amount and payment terms
• Authorized use of premises and limitations
• Repairs and maintenance
• Insurance requirements
• Subleasing provisions
• Renewal terms

Also read: How to Review Leasing Contracts

3. Sales Agreement

A sales agreement is simply a contract between a seller and a buyer.

To review contracts like this, focus on:

• Product description
• Price and payment terms
• Delivery terms
• Warranty and guarantee
• Intellectual property rights
• Limitation of liability

Also read: Everything You Need to Know About Purchase and Sale Agreements

4. Non-Disclosure Agreements (NDAs)

Also called confidentiality contracts, NDAs are contractual agreements that protect sensitive information from being disclosed to third parties without express permission.

Here are major areas to review:

• Definition of confidential information
• Obligations of the receiving party
• Exceptions to confidentiality:
• Duration of confidentiality
• Remedies for breach

Also read: How to Review Non-Disclosure Agreements (NDAs)

5. Service agreements

A service agreement is a contract between a service provider and a client, outlining what the two parties should expect from each other.

Key areas to review:

• Scope of services
• Service levels
• Payment terms
• Term of the contract
• Termination provisions
• Intellectual property (IP) rights
• Indemnification

Also read: How to Review Different Types of Contracts

Steps in a contract review process

A comprehensive contract review process encompasses multiple steps, depending on the size and complexity of the contract in question. Regardless, the following procedures are standard and should be incorporated in every review assignment.

Source: Devica Martin via LinkedIn

Step 1: Initial assessment

Start by identifying the contract type. It can be a service agreement, lease, or employment contract, each with unique considerations. Also, determine the objective of the contract and how it fits within the company's overarching business objective.

Furthermore, make sure that the stakeholders involved are correctly named and their roles clearly defined.

Step 2: Terms analysis

Depending on the specific contract (refer to the previous section), you’ll have a wide variety of contract terms to analyze. Your goal here is to:

1. Ensure the contractual obligations of each party are clearly stated.
2. Confirm deliverables, timelines, and quality standards.
3. Uncover any one-sided provisions.
4. Confirm that IP rights align with your business goals.
5. Identify errors and omissions that might pose risks for your organization.

Step 3: Risk assessment

“To me, a risk only matters if it's material. If it’s immaterial, I don’t care about it. If it's likely to occur but it's not very costly, I probably don't care. If it's unlikely to occur but, man, if that meteor hit the earth today, it would be bad — I also don't care. It's just not likely to happen.”

~Jonathan Franz, Head of Legal at Crunchbase
Navigating Economic Turbulence and Thriving in Chaos

This is where you thoroughly evaluate the contract’s risk profile. Here, you will:

1. Review risk allocation between the parties involved, paying close attention to sections covering indemnity, warranties, disclaimers, and force majeur.
2. Ensure that liability caps are reasonable and fair.
3. Check for alignment with applicable laws, regulations, and internal policies.
4. Confirm conditions for ending the contract—notice periods, penalties, and exit strategies.
5. Verify the inclusion and scope of clauses covering unforeseen events.
6. Review the chosen method of dispute resolution (e.g., negotiation, mediation, arbitration) and ensure it is suitable for the type of contract and potential disputes.

Source: Matthew Berkus via Quora

Step 4: Ambiguities and inconsistencies

Source: Tyler Rauert via LinkedIn

Here, you will need to check the contract to identify vague terms that can be misinterpreted. Your goal is to eliminate potential risks associated with the use of language throughout the contract.

• Ensure that all technical or industry-specific terms are defined clearly.
• Make sure that terms mentioned in different parts of the contract, such as timelines, deliverables, or payment conditions, align.
• Check to see if cross-referenced sections (e.g., "as stated in Clause 5") are accurate and match their intended meaning.

Step 5: Finalization

At this stage, your task is to incorporate all negotiated changes and address issues identified during the review process. Make sure that stakeholders can track every edit so they can determine who did what and when. 

Afterward, share the revised contract with your legal team or other relevant internal colleagues in departments like finance and sales for feedback and sign-off.

After internal rounds have been completed, you can send your proposed contract changes to the external counterparties, so the first (or next) round of negotiations can ensure.

Also read: The Perfect Contract Review Checklist for Commercial Contracts

Source: Donna Chesteen via LinkedIn

Benefits of automating the contract review process

The traditional contract review process can be back-breaking and time-consuming, often requiring intensive manual reading and endless back-and-forths between the parties involved. Yet, it is prone to errors, expensive, and difficult to scale.

But thanks to technology, legal teams and other contract-facing departments have been able to streamline this process, consequently enjoying the following benefits:

#1 Faster turnaround times

A manual contract review process lasts an average of 92 minutes. But with automation, you can complete the entire process in a fraction of the time. This, in turn, speeds up negotiations, empowering your organization to close deals significantly faster.

#2 Improved accuracy

Source: Alex Schwarz via Quora

Imagine doing the same mind-numbing work every day. Repetitive and detail-heavy tasks like contract review can put a strain on your mental capacity, increasing your chances of making mistakes, some of which can have oversized repercussions.

Automation tools are far better at spotting errors, and when incorporated into the contract review workflow, they’ll improve your overall accuracy, helping you create a final contract that aligns with legal and organizational standards.

#3 Better scalability

As businesses grow, the volume of contracts they handle tends to rise quickly. In a system where contract management is done manually, this would mean more work for the legal team. 

To keep up with the rising workload, the business will need to hire more people, which is expensive and sometimes impractical.

However, with automation, scalability is a breeze. With the right contract review tool, you can onboard more contracts and close more deals without always requiring new legal team members.

That way, your organization can stay on top of its business relationships, even during busy seasons, without stretching resources too thin.

#4 Increased visibility

A manual contract review process lacks transparency. It’s difficult to track changes, understand who made revisions, or see how a document evolved during review. Automated contract review tools eliminate these blind spots by offering built-in tracking and audit features.

These tools log every change, record user actions, and create an audit trail throughout the contract review process. As a result, they guarantee complete accountability and reduce the risk of disputes.

#5 Reduced burnout

“Our profession is plagued with mental illness, stress, and even substance abuse. A way to mitigate those circumstances is knowing yourself, your values, what you care about, what's not going to mesh with you, understanding the business landscape, and figuring out a way to marry all these elements.”

~ Akshay Verma, COO, SpotDraft
Shaping a Purpose-Driven Career in Law

The repetitive nature of reading, analyzing, and cross-referencing clauses can take a toll on contract managers, exposing them to fatigue, decreased productivity, and, eventually, burnout.

Automation offers an opportunity to outsource the mundane to reliable systems, allowing users to focus on more stimulating tasks. This enhances job satisfaction, improves mental well-being, and ultimately results in better performance.

Streamlining the contract review process with a CLM system

A Contract Lifecycle Management (CLM) system is an ecosystem of tools designed to streamline every aspect of the contracting process—from the initial drafting to execution and renewal.

CLMs have proven capable of transforming contract review, which used to be a back-breaking, error-prone process, into something seamless, efficient, and scalable.

Here’s how:

#1 A single source of truth

CLMs provide a robust, searchable repository where you can store all your contracts. This makes it easy to retrieve documents and reference past contracts during review. This is a critical upgrade, considering that most contract professionals spend a minimum of 2 hours searching for contracts and accessing relevant sections.

Furthermore, with a centralized storage system, all stakeholders have access to the same information, minimizing the chances of errors or miscommunication.

#2 Automated routing

After the initial drafting process, a CLM automatically matches the contract to the right stakeholders for review based on predefined rules. This eliminates the delays associated with manual handoffs.

#3 AI assistance

“I think AI will eventually be a true gift to legal teams by freeing up more time for lawyers to be creative rather than just doing lower-level types of reviews that can be automated.”

~Genevieve Kelly, General Counsel in Residence, Goodwin Procter LLP
Blending Legal Expertise and Business Acumen

Modern CLMs like SpotDraft incorporate Artificial Intelligence (AI) to take contract reviews to another level. When reviewing contracts, these tools can scan entire sections, point out errors, and suggest corrections in a matter of seconds.

Also read: Revolutionizing Contract Review with AI and Manual Validation

#4 Collaboration made easy

During reviews, CLMs streamline collaboration among stakeholders by providing a unified interface where everyone can implement redlines, track changes, and share feedback more productively.

Also read: Enabling Business-Legal Collaboration: Advice from 7 GCs

#5 Standardized templates

Standardization is one of the core selling points of CLMs. These platforms offer an easy process for generating templates with pre-approved language. That way, all contracts are consistent with standard guidelines, reducing the time reviewers spend addressing non-compliant terms.

Enjoy a painless contract review process with SpotDraft's VerifAI

Powered by proven insights from hundreds of industry-leading legal professionals, SpotDraft’s VerifAI is your one-stop shop for taking the pain out of contract reviews.

Imagine having an AI assistant that can run through your contracts, highlight errors and areas of potential risk, suggest accurate changes, and even answer your questions in a conversational yet super-organized manner.

Since its launch as part of SpotDraft's ecosystem of tools, VerifAI has proven capable of helping legal and other contract-facing teams save over 15 hours per week by optimizing contract review.

If you’re ready to experience the thrill of next-level productivity, you’re welcome to try VerifAI for free. Click here to get started.

‍