6 Items to Review Before Signing the Dotted Line

Welcome to our blog series on navigating the wild world of legal reviews, audits, and due diligence. In part one, we explored ways to navigate your contract review process. In part two, we outlined how to prioritize contracts by importance level. In this third installment, we’ll close out this series by reviewing the boxes to check before you sign a contract. 

The key to proper due diligence is familiarizing yourself with every element of a deal, including the company, product, stakeholders, financials, risks, and rewards. Legal is responsible for vetting these details, which can get pretty gnarly without a centralized contract repository.

But contract management best practices don’t have to be overwhelming. In addition to implementing a CLM solution, there are some key elements you can add to your process that will help reduce liability and ensure success. Below, I share six items to check before signing the dotted line:

#1: Run a company background check

You can never be too careful as a GC - especially when it comes to due diligence. One of the most comprehensive ways to learn about a company is by running a thorough background check.

#2: Identify critical dates

Contracts often have an evergreen renewal date instead of an expiration date. If you have special terms or payment preferences, consider providing prescriptive rules like only paying in installments or when work is completed to your satisfaction.

#3: Ensure you have the correct contacts 

Make sure the correct legal names of the parties are in the contract so that it’s clear who is responsible for what. If one or more of those people leave, establish whether or not the agreement is terminated ahead of time.

#4: Outline clear obligations

Obligations should be clear, simple, and plainly stated. Avoid complicated legalese, and ask for clarification if needed. Most importantly, establish the circumstances under which the parties can terminate the contract and ensure both sides have the same expectations.

#5: Double-check the financials

Check for any out-of-place decimals, commas, extra zeros, or other possible oversights in your contracts. Unfortunately, the effort level involved in the negotiation process does not always translate to the proofreading stage.

#6: Understand the Risks

After items 1-5 have been reviewed, the last remaining step is a high-level summary. Review the contract with all relevant teams, providing the opportunity for them to ask questions to make sure you are all on the same page. If you make any verbal agreements during this conversation, make sure those are reflected in the final version of the contract.

Whether you’re just starting your career as a general counsel, contract manager, or legal operations, these tips can help you start developing your own CLM best practices. You’re not alone on your due diligence journey! 

If you want to learn more about how to make your contract review process more efficient, request a demo today.