Why strategically placed contract review is critical to having a great year
06 Feb 2024
Businesses should realise that their style and strategy in managing business relationships should not be confined to marketing material only, but to their contracts as well. Contracts are the compasses of many key relationships and therefore there should not be a disconnect between the messaging.
Contract review is more valuable than just dealing with outdated agreements or contracts even being authored by different legal partners. It is, therefore, a good idea to review contracts (including the templates used) regularly.
Contract reviews have a range of objectives and may include identifying and protecting the business and its owners against risk and further ensuring strategic alignment to the business objectives, vision and mission.
- Checking for conflicts with other third-party agreements or internal governance frameworks and documents.
- Verifying overall legal and regulatory compliance.
- Mapping exit strategies and processes for agreements that are about to lapse, terminate or need to be exited from.
Furthermore, performing legal due diligence on the acquired assets, assignments, rights, obligations, or other liabilities is essential.
Planning and preparation are the keys to project management or thorough contract review. Although this could be an internal exercise to some degree, it is crucial to consider outsourcing this function or parts thereof.
Critical steps for effective contract review
1. Consider who is involved:
It is essential to identify all the parties involved in the contract, including those indirectly impacted by it, such as the finance team, logistics team, and legal partners. To ensure effective communication, it’s crucial to have a clear communication plan that includes all stakeholders.
2. Consider contract deadlines and other timelines:
Contracts may have specific dates for payments, actions, or agreement extensions. Besides, stakeholders may want to complete the deal before an upcoming board meeting, shareholders meeting, tax submission, or financial year-end. It is critical to gauge internal intent and obtain external approvals from government or state organs if required.
3. Identify any non-conforming or problematic terms:
It is essential to identify terms that do not conform to the company’s brand guidelines, policies, or approved forms and clauses. Additionally, cross-referencing the agreement with the available playbook and creating one, if necessary, is crucial. Outsourced inputs may be helpful in this regard.
4. Establish priorities/negotiation strategy:
The overall desired outcome, considering the interests of the contracting parties and the terms of the negotiations, should determine which revisions are necessary. This is where outsourcing could be valuable.
5. Gather ancillary documents and information:
Gathering all relevant legal documents and critical information is essential. It may involve verifying specific facts to support contemplated representations and warranties or including items as an exhibit or on a schedule. Outsourcing could be valuable in this regard.
Contract review as an outsourced exercise can be precious as an external firm can identify issues from experience or simply because of the unbiased distance they have from the subject matter. Contact an expert at SchoemanLaw Inc. to assist you today.
Article sourced from SchoemanLaw Inc.
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