Contracts are a vital part of any business transaction. These documents outline the rights and commitments of all parties involved in a contract. However, understanding and interpreting these legal agreements can be complex and time-consuming.
This article will explore the key steps and considerations involved in contract analysis. It will also give you the knowledge and tools to analyze contracts and make informed decisions confidently. By the end of this post, you will have learned crucial analytical skills to augment your contract management process.
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What Is Contract Analysis?
Contract analysis involves interpreting legal agreements to identify and understand each party’s rights, obligations, and responsibilities. The purpose of contract analysis in business is to determine the legal and strategic implications of the terms and conditions outlined in the contract. Furthermore, it helps to identify any potential issues or areas of concern.
Organizations can then use this information to inform decision-making and risk management strategies, such as negotiating better terms, avoiding disputes, and ensuring compliance with laws and regulations. It also helps in identifying potential revenue or cost savings opportunities.
Differences Between Contract Analysis and Contract Review
In contract management, analysis and review are both critical processes related to legal agreements, but they refer to slightly different things. Contract analysis is more of a strategic and in-depth examination of the contract, whereas contract review is more of a technical and administrative process.
A contract analysis goes beyond just reading the contract; it involves understanding the legal and business implications of the terms and conditions outlined in the agreement. It also involves identifying any potential issues or areas of concern.
On the other hand, reviews are the process of reviewing legal agreements for accuracy, completeness, and compliance with laws and regulations. It typically focuses on the technical aspects of the contract, such as grammar, punctuation, formatting, and legal jargon. The main objective of a contract review is to identify and correct any errors or inconsistencies in the contract before it is signed.
Organizations can then use this information to inform decision-making and risk management strategies, such as negotiating better terms, avoiding disputes, and ensuring compliance with laws and regulations. It also helps in identifying potential revenue or cost savings opportunities.
How to Analyze a Contract the Right Way
Analyzing a contract requires careful planning and execution. It would be best to follow current best practices for the best results.
That said, the contract analysis process typically involves the following steps:
1. Review the terms and conditions
This step involves reading through the entire contract and paying close attention to the key terms and conditions, such as payment terms, delivery dates, and termination clauses.
2. Identify potential risks or issues
During this step, the contract analyst will look for any areas of concern or problems, such as ambiguities, inconsistencies, or areas where the contract may not align with the organization’s policies or legal requirements.
3. Research and verify
Research the laws, regulations, industry standards, and case law that may be relevant to the contract, and also verify the parties, their capacity, and any representations or warranties they have made.
4. Identify and analyze key clauses
Identify the critical provisions crucial to the contract, such as the governing law, dispute resolution, and termination clauses, and analyze their impact on the organization and its ability to fulfill its obligations under the contract.
5. Negotiate any necessary changes
Based on the analysis, the contract analyst will identify required changes, such as renegotiating payment terms, delivery dates, or other vital clauses.
6. Finalize the contract
After the necessary changes have been made, the contract is ready to be signed. A reliable eSignature platform will help you sign your contracts electronically.
7. Review the contract periodically
As per the contract terms and laws, review the agreement periodically to ensure that it complies with the new rules and regulations and to check if the parties are fulfilling their obligations.
Contract Analysis Systems: Our Top Picks
Today, there are several tools and resources that you can use to analyze contracts. These include the following:
Westlaw
Having a rich and reliable legal research database can significantly improve your contract analysis process. Westlaw provides access to a wide range of legal materials, including case law, statutes, and legal commentary. These tools can help you understand the legal context of a contract.
Kira Systems
Kira Systems is an AI-based contract analysis tool that can help automate the contract analysis process by identifying key clauses, extracting data, and flagging potential issues. Instead of spending hours going through each document, this tool can review them for you for half the time.
Fill
Fill is an all-in-one tool that can streamline your contract analysis processes. Not only is it an eSignature tool that lets you sign contracts and documents online, but it’s also a reliable contract management software that offers tools for reviewing, editing, and storing contracts in a centralized location.
Fill is great for all industries. Whether you’re in real estate, accounting, legal services, or healthcare, it’s a useful tool that boosts efficiency. Fill also has a wide array of templates that you can use for drafting contracts, agreements, and other documents.
Try Fill for High-Level Contract Analysis
There are tons of contract management software in the market, each more complicated than the last. Rise above the noise with Fill, the world’s leading eSignature platform.
Fill lets you create and request electronic signatures while empowering you to manage contracts easily and precisely. On top of that, Fill features sought-after security features such as 256-bit end-to-end encryption and signer ID verification. Secure cloud storage and cross-platform functionality ensure you always have access to your files.
Sign up for a 7-day free trial now and take your contract analysis to new heights.
