A comprehensive overview of contract checklists

What is a contract checklist?

A contract checklist is a list or framework that helps legal teams identify and organise critical parts of a contract. A contract checklist is helpful when creating, analysing or reviewing a contract. Each process will alter the contents of the checklist. For example, a contract review checklist will focus on the clauses in a contract. A contract creation checklist may detail what information should and should not be included in a drafted document.

Contract checklists may also differ for each contract type, as there will be alternating focus areas. The terms and conditions may also require different clauses and terminology, so the contract checklist must reflect this.
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Why are contract checklists important?

Contract checklists are useful tools that help with many contract processes, including contract reviews and contract creation. It is a formal process to ensure that you take all the steps.

Introducing contract checklists into the contract lifecycle is crucial to reduce legal or financial risk. They help reduce miscommunication between the parties involved and make it less likely that a breach will occur. A contract checklist can improve accuracy while removing ambiguity for the people working on the agreement.

A contract checklist will cover the most crucial aspects of a contract for the business, ensuring that all relevant provisions are correct.

How does a checklist contribute to compliance and risk mitigation?

In the video below, the Summize team explains how Summize serves as a central source of truth for your contract management.

What should I Include in my contract checklist?

Before getting into the appropriate clauses and terminology in a checklist (whether it’s for contract review or contract creation), it is important to consider the following:

• What is the purpose of the contract and what are the expectations? - It is crucial to consider what the business expects to gain or achieve through the contract. Depending on what stage you are at, you can either direct your contract creation to meet these aims or determine whether the current contract does this efficiently or not.
• Are there any recent changes in regulation or company policy that need consideration? - Changing contract terms as per regulations can impact the obligations of a contract. It is vital to keep this in mind.
• Who are the other parties? - What might they want to achieve from the contract and what are their biases? If the contract exists, are they delivering on their obligations, or will expectations need further clarity?
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Contract checklist template

For most employees, our contract checklist will cover most commercial contracts or contract renewals. It is helpful when reviewing a contract or creating a new contract. Depending on the type of contract you are using and how bespoke the agreement is, you can adapt this template.

Parties and purpose

1. Parties
   Ensure each individual or corporation name (and addresses where relevant) is in the contract in full form and a shortened version, which should be referred to throughout the agreement. It should also be clear who will sign the contract on behalf of each organisation, their roles within the company, and why they are legally authorised to sign. The contract will include the type of company alongside the trading name. Usually, a credit check is part of the process to determine legitimacy.
2. Purpose
   The contract's primary purpose should be listed with minimal legal jargon to ensure that all parties understand why the agreement is being completed.
3. Obligations
   The contract can contain zero ambiguity regarding obligations, warranties, and each party's rights. All penalties are clear in the event of a breach or incomplete obligations. Promises that are not in the contract are also open to examination.
4. Entire agreement
   The entire agreement clause references all locations and documents that include information about a specific agreement. The clause is crucial to avoid any confusion or miscommunication at a later date.
   

Terms

1. Payments
   Payment terms include payment triggers and the start date of payments. Ideally, this should outline a full payment schedule. The contract should also list the currency, how often payments are made (for example, in a lump sum or instalments), and the payment method (for example, via bank transfer). Taxes, fees, and interest from incorrect or missed payments will be available in the contract. Teams should also ensure that for the relevant contracts, commercial protection is detailed.
2. Duration
   Each contract should state the initial term, standard notice period and general termination provisions. Many contracts will range up to 12-months in length, but more bespoke agreements can be longer. A contract may describe the renewal and termination arrangements requirements between parties for full transparency.
3. Force majeure
   Given the current global climate, including a force majeure clause is vital to describe the delivery of services or products (or the compensation if this cannot be achieved) if there are delays or restrictions in operations.
   
4. Data protection
   All data regulations (e.g. GDPR) should consider the location of the parties involved within the agreement. It should be clear who owns the data and restrictions on the use of the data. Additionally, details of consent requirements should be available in the contract.
   
5. Intellectual property
   The owner's IP rights of a product, design or idea should be identified, along with the creation of value from any services. A contract must clarify whether the terms change for any consultants vs. full-time staff.
   
6. Indemnities
   Indemnities are helpful in intellectual property, regulation compliance, confidentiality provisions, and loss/destruction of data. Any caveat indemnities should also only be reasonable costs for direct claims.
   
7. Limitation of liability
   Limitation of liability is a clause for breach of obligations or warranties and the enforcement of indemnities. It should be limited to the contract amount and include any indemnity obligation.
   
8. Confidentiality
   Any listed confidentiality needs to be mutual and should include descriptions of the information likely to be disclosed.
   
9. Variations
   All variations must include the original contract when carrying out a contract review, and it should be in writing and signed by both parties. A variation by email, phone, or in-person is not legally applicable.
   
10. Governing law and jurisdiction
    Local government laws and regulations determine the process for handling legal disputes. The local jurisdiction is essential when creating or editing clauses.
    

What to include in a commercial contract checklist

While the template above should cover the majority of steps in a traditional contract checklist, for any commercial contracts, it's worth focusing on the following sections in detail:

• Parties
  It is crucial to identify the involved parties within a contract, as a legally binding contract cannot confer rights or obligations to anyone else. Be sure to mention the company or person's full name and a shortened version for reference.
• Performance obligations
  Contracts only work effectively when both parties perform. Be sure to identify who has to do what, when, and where.
• Remedies for breach
  Unfortunately, not every contract will be successful, and some parties may breach the contract. Remedies for breach of performance obligations will establish if the contract should be terminated or if the party can incur damages.
• Indemnities
  The indemnities clause will indicate what happens when any claims are raised in relation to the performance of the contract.
• Payment terms
  The payments clause will establish who is to pay, what, when, by what method and in what currency. It will also include if a local VAT is to be paid as part of the balance, and what happens in the event of a missed or late payment.
• Termination
  The termination establishes how and when the contract should be terminated. It will also include the circumstances and manner in which the process should be carried out.
• Dispute resolution
  The dispute resolution clause will lay the groundwork for the process of resolving a dispute that may arise between the involved parties.
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Contract checklists for contract drafting and reviews

Using the initial steps above, create the rest of your contract checklist based on the contract types and requirements of the project. It may need extra checks depending on the process you complete - contract review, creation or analysis - and it’s crucial to examine your objectives.

With so many key aspects of the contract lifecycle, it can be easy to make mistakes. That’s why having a framework like a contract checklist is particularly beneficial, as it can guide you and ensure you haven’t missed anything.

When creating, reviewing or analysing your contract, work steadily through your checklist, making notes (where relevant) as you go. It may be an idea to add checkboxes, which will display for each criteria to help track your progress.
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Summize's helpful contract checklists

To get started, download Summize's helpful contract checklists, one for contract authoring, and one for contract reviews.