Contract Redlining: Definition & Challenges

Contract Redlining: Definition & Challenges
by ContractPodAi

Are you an administrative or legal professional or contract manager? If so, document and contract redlining should be as familiar as taking that first sip of coffee or tea in the morning.

Or perhaps you have carried out the redlining task but simply do not understand why your boss or customers insist on the process during the contract versioning and negotiation process? If that is you, it is important to know the benefits that redlining offers every professional who interacts with legal documents throughout their lifecycle.

Let’s explore.

What is Contract Redlining?

Contract redlining is when you make changes to text within an agreement, independently or collaboratively. The process involves two or more parties working together to create or finalize a draft contract, which incorporates all of the correct terms, clauses, and dates.

It is during the early stages of the contract management lifecycle when contract negotiations truly begin. And they invariably involve some form of redlining, so that each party can add their own terms before coming to an agreement.

When Does it Occur?

As mentioned above, contract redlining occurs during the negotiation stage. And the negotiation process happens following the contract drafting phase and internal approval workflow. And after all of these stages, you still need to manage agreements right through to electronic signature, contract storage — and, lastly, deadline tracking and contract renewals.

Challenges While Redlining a Contract

Some of the biggest contracting challenges can arise during the redlining and negation process. Some of these challenges include:Some of the biggest contracting challenges can arise during the redlining and negotiation stage

  • Incorrect tracking errors
  • Difficulty keeping track of updated versions
  • Formatting issues
  • Security problems

Issues with formatting can occur whenever someone performs an edit. Due to a lack of compatibility between different versions, formats can change subtly or drastically. Tracking issues associated with redlining tools can result in data security problems, too. This happens when one party forgets to delete internal revisions, and sensitive information is sent outside the company.

The good news is that AI-augmented contract automation —  in the form of a contract review system — can accelerate the process of identifying potentially problematic contract terms. Contract redlining software functionality is ideal during the negotiation process. And using a document comparison tool like Workshare can provide an extra level of confidence that legal terms were not changed along the way without being called out. Also, such tools can parse through multiple versions of a contract file and flag any missed changes, which could cause undue risk, cost, and pain later on.

How To Redline a Contract Effectively

To ensure that you are performing contract redlining efficiently, consider the following steps:

  • Get all parties on the same page to avoid any misunderstandingsRedlining a specific contract or legal document effectively requires all parties to be on the same page
  • Do not rush the process. Proper review takes time.
  • Stay compliant when it comes to security issues
  • Track all changes to keep tabs on all versions
  • Know your contract management software

At the end of the day, redlining a specific contract or legal document effectively requires all parties to be on the same page. Contracts can vary in terms of goals and terms, so it is important that all parties understand all of their nuances. It is also important to remember that contract redlining is a crucial stage in the contract lifecycle. You should take the time that is needed to ensure that all terms within the agreement are acceptable.

Legal Teams Rely on Smart Contract Software

As mentioned above, contract redlining software is absolutely vital to preserving all versions of files, together with redlined text, during the life of a contract. Even beyond. If contract terms are ever called into question, a tracked change can be key in demonstrating when a modification was accepted during the negotiation — before the contract was signed and executed.

So, are you looking for ways to streamline your contract review and redlining process — while safeguarding your new and ongoing customer relationships? ContractPodAi would be happy to show you the document and contract redlining functionality in a pressure-free discussion. Request a demo and start the scheduling process.

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