During the negotiation process, contracts often go through several rounds of revisions. Some clauses might have been written ambiguously and need to be clarified. Other times, certain stipulations must be modified when they give an unfair advantage to one party.
While contract redlining can be time-consuming, this step is crucial. It ensures that the agreement is ironclad and fair. No matter the size of your business or the industry you’re in, this should be a common practice.
Let’s walk through the whole process, from learning how to redline a contract to implementing best practices.
Table of Contents
- What Is Contract Redlining?
- How to Redline a Contract
- 3 Common Challenges of Contract Redlining
- Best Practices for Redlining Contracts
What Is Contract Redlining?
Redlining contracts refers to the process of reviewing and editing written agreements. It aims to produce a document that everyone is completely satisfied with. During this process, all contracting parties collaborate and discuss the terms, conditions, and obligations.
Why is it called redlining?
People often use a red pen to mark up or underline the parts of the contract that require revisions. The bright color made it easier to spot the alterations made in the document.
At present, you can use contract management software to facilitate the process digitally. Unlike the traditional redlining method, you do not accumulate tons of paperwork when you use digital solutions.
Previously, it was quite difficult to keep track of the changes in redlined documents. With a digital approach, you can manage everything in one platform. It also enhances collaboration and speeds up revisions.
When should you redline contracts?
The need for contract redlining arises when you or the other party aren’t happy with the first drafts. When this happens, certain parts of the agreement may need to be revised or removed. Redlining a contract is an integral part of the negotiation process.
How to Redline a Contract
Redlining contracts is a highly collaborative process. The key is to communicate effectively with all the contracting parties. You all have to be on the same page when it comes to the details included in this legal document.
Here’s how redlining usually works:
- Party A sends Party B the first draft of the contract.
- Party B goes through it and redlines or edits the document.
- Once done, they send it back to Party A.
- Party A will then check the revisions. They can either approve or reject the edits.
- Party A can also suggest their own changes if they wish.
The process goes on until everyone involved is completely satisfied with the agreement. Once both parties find the draft satisfactory, they can then go ahead and finalize the process.
If the contract is ready for signing, it means that the contract redlining process has concluded.
3 Common Challenges of Contract Redlining
Now that you have an idea of how to redline a contract, you probably think that it’s a pretty straightforward process. In reality, it can be quite complex, especially if you encounter these challenges:
1. Slow turnaround time
As you are dealing with some important legal documents, receiving revisions and feedback might take a while. The other party might have a completely different deliberation process than yours. They could also have other pending redlined documents with other business partners. Sometimes, your method of document transmission might cause further delays.
2. Incompatible file formats
Another common challenge when dealing with redlined agreements is issues with incompatible file types. Since people use a myriad of word processing software, it’s fairly common to receive contracts that you can’t open or redline. In some cases, you might be able to access the document, but the formatting is broken.
3. Untracked changes
With printed documents, there was a chance of misplacing redlined drafts or forgetting to update documents with specific changes. It was also difficult to tell who made each revision and when it was done.
With digital redlining, however, you have to rely on tools to ensure that all markups are visible and recorded. On this note, there are times during redlining when it’s difficult to ascertain the edits from the original version.
Best Practices for Redlining Contracts
Contract redlining is not an easy task to undertake. It requires the right set of skills and tools to make the process go smoothly. Let’s go over some of the best practices to ensure a seamless process:
1. Do in-depth research
Before you even begin the process, make sure that you do extensive research. Find out the history of the company you’re dealing with. You can also look into basic industry practices. It also pays to familiarize yourself with industry standards and practices.
2. Get your legal team involved
From the get-go, you need to get your legal team on board. It always pays to have someone who’s well-versed in laws, guidelines, and compliance. They can also provide counsel to ensure that you get a fair deal.
3. Set a timeline
If it’s taking you forever to come up with a satisfactory draft, you need to learn to let go and walk away. This especially applies when the negotiation is increasingly becoming unfavorable.
4. Don’t rush the process
Take your time. Contracts are legally binding. If breached, there are serious consequences and fines. You have to make sure that all details are fair and clearly stated. The terms and obligations written should be what you have agreed to beforehand.
Typically, the whole process takes at least 30 hours to complete. Of course, there are certain factors, like the examples stated above, that can cause delays. It’s important not to rush.
5. Provide different versions
Looking at a redlined contract filled with edits and notes can be quite an eyesore. You might even have a hard time following the changes made or ascertaining the newer version. To make things simpler for everyone involved, draw up three different versions of the document:
- A copy with all the redlines
- An unmarked and updated copy of the contract
- A clean one that’s ready for revisions and feedback
6. Be mindful of compliance issues
Knowing how to redline a contract isn’t just about making sure that your terms are met, and the clauses are unambiguous. For example, the contract may mention an amount without specifying the currency. You also need to monitor any compliance issues closely. Ensure that the contract has all the essential elements for it to be enforceable and valid.
Finalize Redlined Contracts Using Fill
Redlining contracts can be long and painstaking. But by following these best practices and having the right set of tools, you can simplify the entire process. One solution that’s particularly handy to have is Fill.
Online signature requests
Fill helps you finalize your redlined contracts. Not only that, but it also makes it easier to request signatures from other parties. There’s no need to print and mail physical documents as everything can be done digitally.
With just a few clicks, you can upload your contract, add fillable fields, and send them to the signatories. They can sign the document on Fill even if they don’t have an existing account.
Robust security
Fill uses military-grade encryption and complies with federal and international standards like HIPAA, GLBA, and GDPR. You are rest assured that unauthorized parties cannot access your contracts.
Other features you can enjoy with Fill include:
- Third-party integrations
- Built-in document scanner
- Cross-platform application
- Signer identity verification
- Custom branding
What are you waiting for? Sign up with Fill and book a demo today.
