What's the best way to evaluate contract terms and clauses?

Contract negotiation is a skill that can help you achieve your goals and protect your interests in various situations. Whether you are dealing with a client, a supplier, a partner, or an employer, you need to know how to evaluate contract terms and clauses before you sign anything. In this article, we will share some tips on how to do that effectively and ethically.

1 Understand the purpose and scope

The first step in evaluating contract terms and clauses is to understand the purpose and scope of the contract. What are the main objectives and expectations of each party? What are the deliverables and deadlines? What are the risks and liabilities? How are disputes and changes handled? You should read the contract carefully and ask questions if anything is unclear or ambiguous. You should also check if the contract aligns with your own goals and values, and if it complies with the relevant laws and regulations.

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Tim Casto

CEO & President at The Kleingers Group / Sportworks / Kleingers Creative Agency
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One aspect of contracts one should review is risk allocation. It's important to know if and how risk is being assigned to the parties.

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Luis Scheinkerman, MBA

Negotiation Professor - Conestoga College School of Business. Stakeholder Relations | Strategic Growth, Alliances & Partnerships | CSR | Government Relations | Integrative Negotiations
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Yes, I agree with the statement. To me, the best way to "build" such a contract between the parties is a simple draft document in word where everyone can add or delete clauses or suggest adjustments. Technically, the same could be done with a PDF editor, but not all companies have such a tool. Therefore, it is best to use Word the old-fashioned way.

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2 Compare and contrast

The second step in evaluating contract terms and clauses is to compare and contrast them with other contracts or proposals. If you have multiple options or offers, you should weigh the pros and cons of each one. If you have a standard or preferred contract template, you should see how the current contract differs from it. You should also benchmark the contract against industry standards and best practices. You should look for any gaps, inconsistencies, or unfair terms that might affect your rights or obligations.

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Justin McNaughton

Partner @ CAS | 🗡️ Lawyer for fast-growing tech companies / Photographer / Biking enthusiast / Dad
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The prompt suggests evaluating contracts by looking at other contracts to see how they are different. 🤷♂️ **Know Your Limits:** If you need to keep looking at other contracts because you don't understand yours, you’re in over your head. ⚠️ **Realize When It's Too Much:** If the contract is too complicated, it's important to know that early. Then you can find help. - 🚫 **Don't Assume You Know Everything:** Thinking you can handle a contract when you really can't is a big mistake. Always be ready to ask for help if you need it.

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3 Negotiate and modify

The third step in evaluating contract terms and clauses is to negotiate and modify them if necessary. You should not accept a contract that does not meet your needs or expectations, or that puts you at a disadvantage. You should communicate your concerns and proposals to the other party, and seek a mutually beneficial solution. You should also be flexible and willing to compromise on some issues, but not on your core principles or interests. You should document any changes or agreements in writing, and review them before signing.

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Justin McNaughton

Partner @ CAS | 🗡️ Lawyer for fast-growing tech companies / Photographer / Biking enthusiast / Dad
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😂 “I am a pretty versatile fool when it comes to contracts, and business and such things. I have signed a lot of contracts in my time, and at sometime I probably knew what the contracts meant, but six months later everything had grown dim and I could be certain of only two things, to wit: One, I didn't sign any contract. Two, the contract means the opposite of what it says” ~Mark Twain

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Benjamin Nelson

Sales Manager at Worley Rosenberg | Conventional Energy
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Pdf editing software allows both parties to begin with the drafted contract and then add "comments" with suggestions for new wordings and/or deletions.

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4 Seek expert advice

The fourth step in evaluating contract terms and clauses is to seek expert advice if you are unsure or uncertain about anything. You should consult a lawyer, an accountant, or a professional negotiator if you need legal, financial, or strategic guidance. You should also seek feedback from your colleagues, mentors, or peers if you need a second opinion or a different perspective. You should not sign a contract that you do not fully understand or trust, or that might expose you to unnecessary risks or liabilities.

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5 Monitor and enforce

The fifth step in evaluating contract terms and clauses is to monitor and enforce them after signing. You should keep a copy of the contract and refer to it regularly. You should also track your performance and compliance, and report any issues or problems to the other party. You should also hold the other party accountable for their performance and compliance, and address any breaches or disputes promptly and professionally. You should also review and update the contract periodically, and renegotiate it if needed.

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Benjamin Nelson

Sales Manager at Worley Rosenberg | Conventional Energy
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It may be such, that another party ("operations" or "projects") may be executing the work under the contract, therefore it is imperative that at minimum a good handover is completed, or even better that those other parties are invited into the sales process to the extent possible.

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6 Learn and improve

The sixth step in evaluating contract terms and clauses is to learn and improve from your experience. You should evaluate the outcomes and impacts of the contract, and identify what worked well and what did not. You should also solicit feedback from the other party, and share your own feedback. You should also reflect on your strengths and weaknesses as a negotiator, and seek opportunities to enhance your skills and knowledge. You should also apply your learnings to future contracts, and strive to achieve better results.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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What's the best way to evaluate contract terms and clauses?

1

2

3

4

5

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7

1 Understand the purpose and scope

2 Compare and contrast

3 Negotiate and modify

4 Seek expert advice

5 Monitor and enforce

6 Learn and improve

7 Here’s what else to consider

Contract Negotiation

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What's the best way to evaluate contract terms and clauses?

1

2

3

4

5

6

7

1 Understand the purpose and scope

2 Compare and contrast

3 Negotiate and modify

4 Seek expert advice

5 Monitor and enforce

6 Learn and improve

7 Here’s what else to consider

Contract Negotiation

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