The Contract Process: Everything You Need to Know

The contract process involves various stages and tasks to manage and organize the contracts that all companies need. A contract is a legally enforceable agreement between two or more parties and can be either verbal or written. Oral agreements are more difficult to uphold and should be avoided, however, specific contracts, such as those involving sizable sums of money, are legally binding.

10 Types of Contracts

There are ten main types of contracts:

1. Express contracts: an exchange of oral or verbal promises that all parties agree to be bound to.
2. Unilateral contracts: a contract where one party makes a promise to a general group of others
3. Bilateral agreements: a contract where an agreement is made between at least two people or groups
4. Contracts with conditions: an exchange with a requirement that certain conditions are fulfilled
5. Joint contracts or several contracts: an agreement between two or more parties for the completion of a specific business operation or transaction
6. Implied contracts: a legally binding obligation where a court determines the existence of a contract based on the circumstances of actions or conduct of a party
7. Unconscionable contracts: are contracts where one party gains such a large one-sided advantage that it is considered unenforceable in court
8. Adhesion agreements: are contracts where one party has greater negotiating leverage than the other, leading to a “take it or leave it” option where the weaker party does not have the ability to negotiate for different terms
9. Option contracts: agreements where the holder is given the right, but not the obligation to buy or sell an underlying asset
10. Contracts with fixed prices: agreements where a buyer and a seller agree to pay a set amount for a job

Seven Steps in the Contract Process

• Planning

Before putting a process into place, it’s crucial to create a system that will best meet the requirements and resources of your business. It’s also essential to create company-wide contract management systems to keep everything simplified and structured.

Your contract management strategy is a flexible road map made up of procedures that consider every type of business agreement, from standard employee contracts to the paperwork associated with complicated and specialized deals. To identify your needs and design your strategy, answer the following questions:

• How many and what type of contracts must you manage?
• Do you frequently use any standard agreements? What information do you need to include?
• Who is in charge of each step of contract management, and what resources are necessary for them to fulfill their jobs?
• What challenges have come up in the past? What problems might develop throughout the administration of a standard contract?
• What materials are needed to carry out your contracting strategy?
  

 

• Implementation

After outlining your contract management procedures, you should move your contracts to a centralized online repository and use contract management software to assist you in carrying out any contract-related operations.

Make sure everyone involved understands your vision and goals for contract management and feels at ease using the technology.

 

• Pre-contract

Now that you have an online contract management system put it into practice for new contracts. Create agreements that will meet your needs and minimize your risks. Then, simply find the appropriate contract type and enter the necessary information – possibly making a few adjustments particular to your needs. 

However, creating a brand-new document may become necessary for more complicated issues. Looking at prior agreements that may be suitable and altering those provisions might make creating a contract from scratch easier. Don’t forget to bring over any requirements, such as branding standards or compliance duties. E-signatures can expedite the process once the terms have been established.

 

• Handover

The people involved in a contract frequently differ from those who negotiated it, especially in larger businesses. Therefore, ensuring a smooth transition is essential to guaranteeing the contract is fulfilled as intended. Spend time reviewing every contract component and checking roles, responsibilities, and deadlines rather than assuming stakeholders have everything they require.

 

• Contractual

If you write your contracts well, your objectives will be realized throughout the contract stage. A large portion of the contract management work you’ve done up to this point has been preparing you to do just that. The contract stage, however, you must pay particular attention to every clause in your agreement and carry out routine checks to ensure everything is going according to plan. It helps to have a plan for achieving this, with a clear understanding of the major turning points and performance indicators that will allow you to confirm that everything is going as planned – or act as an early warning system if any issues occur.

 

• Pre-renewal

It’s crucial to start planning for the end of your contract in a proactive and timely manner because there are frequently specific provisions that can affect the outcome, and even perhaps penalties or default actions should you fail to do anything.  However, there are several ways that your agreements can end, and the pre-renewal period is the time to make this assessment. Contract endings include one-off agreements, contract renewals, or contract terminations.

 

• Post-contractual Period

There is some housekeeping to be done once a contract expires to ensure everything is properly tied up. Check that the conditions for termination have been satisfied, send or pay the last invoices, and archive your contract. Carefully reviewing the contract may improve your future contracts. 

Conclusion

Breaking down the contract lifecycle management (CLM) procedures into manageable phases is a crucial analysis component analysis. The entire process must be broken down into discrete stages, beginning with generation and moving through a clear flow of actions to completion to uncover general trends. Once those steps are identified, they can be separated and examined separately to identify needed improvements.

 

If you are interested in making it easy to search through your contracts, LawInsider’s contract repository makes it easy for you to upload your documents and find the hidden contracts among them. From 100 to 100,000 contracts, there are no limits and no hidden fees for the amount of documents that you can organize. With secure access and encryption for all files, you can be sure that your contracts stay safe and private.

References:

1. https://www.contractworks.com/blog/7-essential-stages-of-contract-management
2. https://procurementtactics.com/contract-management-process/
3. https://www.legalmatch.com/law-library/article/what-is-a-contract.html