Depending on the context, signing a contract may seem like a huge milestone or a simple formality. Yet, every contract represents your agreement to do or not do something, a promise binding yourself to when you sign. It pays to ensure you understand the entire contract, what the contract says, and what you want it to say.
Completing a thorough business contract review can make all the difference in ensuring you have a solid agreement. Many contracts are wordy and buried in legalese, which only those with a law degree can fully understand.
The attorneys at Massingill make contracts simple, explaining the provisions in a way that does not require advanced training. Contact us today for a comprehensive contact review.
What Is a Contract?
Almost everyone will sign a contract at some point in their lives. You do not need a deep understanding of the law to know that a contract is an agreement between two or more people where each person must do or not do something.
To review a contract, you want a deeper understanding. A valid contract includes:
- An offer—a party offers a promise to do or not do a specific action;
- Consideration—in exchange, another party promises to provide something of value;
- Acceptance—the other party accepts the offer; and
- Meeting of the minds—the parties both understood the basic terms of the contract.
Some contracts must be written, while others can be oral. Contracts that must be in writing include:
- Real estate sales;
- Real estate leases lasting longer than one year; and
- Any agreement that will not be performed or completed for a year or longer.
Although many contracts do not need to be in writing to be valid, having a clearly written contract makes everything simpler for all parties involved.
How to Review a Contract
Contracts, like people, come in many forms, so there is no perfect, one-size-fits-all way to review them. Regardless of contract type, there are techniques that may guide you through the review process.
It helps to begin by reading through the entire contract to see if it sounds accurate and makes sense.
Next, break the document down into smaller pieces. Depending on the length and complexity of the contract, you should go line by line, provision by provision, or section by section. You will likely want to make notes directly on the contract covering your questions or concerns.
Read through the entire document again once you have completed your narrow review to see how it reads with any changes you have made.
You can repeat this process many times to get a satisfactory final agreement.
Contract Review Checklist
Using a contract review checklist can help ensure you cover the important points as you go through the basic review process. Your goal when you review the contract should be to ensure it meets the requirements of contract law and reflects the actual terms you and the other party are agreeing to.
Initial Review
During your initial review, consider the overall operation of the contract. Does it appear, on a surface level, to say what you believe it should? Does anything stand out or give you pause?
Write down any questions or concerns you have. Some may be resolved on your deep dive, but broad questions can help you narrow down issues to look out for during your deep dive.
Deep Dive
Have your pen ready if you are reviewing a physical document or redlining mode enabled for an electronic document when you begin the narrow review stage. Again, note anything that you do not understand, confuses you, or gives you pause.
Closely review the following six categories:
- Basics,
- Terms,
- Language,
- Attachments,
- Relationships between provisions, and
- Formatting.
You want to ensure your contract is accurate, readable, unambiguous, and complete.
1. Basics
- All parties are identified
- Party names are spelled correctly
- The listed signatories have the power to make the agreement binding
- No words are misspelled
- Grammar and word usage are correct
2. Terms
- What is being offered is clear
- Consideration is identified
- How to accept is unambiguous
- What each party has to do is explained
- Whether either party can be relieved of their obligations is explained
- When and how a party can be relieved of their obligations is clearly identified
- Timeline expectations are explicit
- Necessary terms are present
- Parties
- Obligations
- Warranties or guarantees
- Assurances
- What happens when a party breaches
- How disputes will be handled is addressed
- If outside documents are incorporated, those documents are clearly identified
3. Language
- Language is accurate and precise throughout
- To the extent possible, the language used is unambiguous
- The meaning of ambiguous words is defined
4. Attachments
- Attachments are clearly identified
- Within the contract
- On the attachment
- The portion of the attachment that is being incorporated is clearly defined
- Attachments are as unambiguous as possible
- Any ambiguity in attachments is explained
5. Relationship between provisions
- Provisions are not contradictory
- If any contradiction appears, it is explained
- Provisions use consistent language
- References to other provisions are accurate
- References to other provisions are logical
- Provisions make sense taken together
6. Formatting
- Pages are numbered
- Headers, footers, and text are consistent
- Signature blocks are separated and accurate
- Sections are clearly labeled
- Sections are accurately labeled
- Cross-references are accurate
- Paragraphs are spaced to be readable
- All font is legible
Overall Review
Finally, review the entire document again with any changes you have made. Going through the checklist again with a view to the entire document may help you catch issues you missed when you went piece by piece.
If you have enough time, it also helps to set the contract aside and revisit it later. Giving your mind distance often allows you to notice different things and identify issues more clearly.
Massingill Can Help
Although this contract review checklist can help you get started, nothing compares to having an experienced attorney review your contract. The attorneys at Massingill make simplicity a priority, allowing you to truly understand the terms you are agreeing to. Reach out today to learn more about how we can help you.
Where You Can Find Our Austin, TX Office Location
Joshua Massingill
Joshua Massingill is an attorney practicing in Austin, Texas. He serves on the Texas State Bar’s Law Practice Management Committee, the Leander Educational Excellence Foundation (LEEF) Board of Directors, and the Success-Werx Board of Advisors. He mentors young entrepreneurs in Leander ISD’s INCubatorEDU program and is active in his church.
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