A contract review policy is a set of guidelines and procedures that an organisation uses to ensure that all contracts and agreements are thoroughly examined and evaluated before they are finalised and signed. 

A contract review policy ensures that legal documents and decisions adhere to established standards and practices. This helps maintain consistency across the organization and ensures that all legal outputs meet a high quality threshold. 

A well-developed and well-implemented contract review policy is a key component of an optimized legal function, contributing to its effectiveness, reliability, and strategic value within any organization.

A well-defined contract review process helps organizations mitigate legal risks, avoid unfavorable terms, and ensure that contracts support their strategic objectives. 

The scope of a contract review policy defines the boundaries and extent of the contract review process within an organisation. 

It should specify which types of contracts need to be reviewed, when and by whom, the criteria for review, and any exceptions or limitations. Here's a breakdown of what is typically included in the scope:

◼️ Types of Contract Covered: procurement, supply, HR-related, finance, NDA, acquisition etc.

◼️ Thresholds and Criteria: e.g. value based, complexity, risk, jurisdiction or business activity

◼️ Reviewers: who reviews what and when e.g. legal, finance, risk & compliance etc

◼️ Exceptions/Exclusions: e.g. routine, low value, high volume arrangements on approved templates

◼️ Frequency: differentiate between new contracts and renewals, and periodic compliance reviews

◼️ Review Process: what is needed for the review process and to what standard are reviews conducted

◼️ Approval Workflow: defines the process for obtaining approvals and sign-off

◼️ Escalation Pathway: what is escalated, when and to whom 

In GLS legal ops speak – the Contract Review CRE is a “stand-alone” resource within the process ecosystem of an in-house legal team.

This means that it has value in and of itself, but it is not a “Foundational Resource” or a “Repeater Resource”.

The best practice features of a contract review policy are as follows: 

◼️ Scope of Review: defines what is reviewed (agreements/business documentation etc.) and when

◼️ Objectives: defines clear goals, e.g risk management, legal compliance, organisational strategy etc.

◼️ Review Process: outlines the steps involved in the review process and who conducts the review

◼️ Roles and Responsibilities: assigns responsibilities for different aspects of the review process

◼️ Criteria for Review: specifies the factors to consider during the review

◼️ Evaluation Metrics: establishes standardized criteria for assessing contracts

◼️ Risk Assessment: defines a systematic approach for identifying and managing potential risks 

◼️ Approval Authority: who has the authority to approve or reject a contract after review

◼️ Approval Levels: specifies the levels of authority required based on factors like value, risk etc.

◼️ Sign-Off Requirements: details the necessary sign-offs required from stakeholders

◼️ Record-Keeping: requirements for documenting the review process and maintaining records

◼️ Timelines: deadlines for completing the review process to ensure timely execution of contracts

◼️ Priority: consider whether certain reviews require priority or expedited review

◼️ Uniform Application: ensure consistent application of review processes and procedures

◼️ Compliance Checks: regular checks to ensure compliance with internal procedure and laws etc.

◼️ Training: ensures that those involved in the contract review process are properly trained and briefed

◼️ Periodic Review: regularly reviewing and updating the review policy to reflect required changes

◼️ Continuous Improvement: incorporate feedback to continuously improve the review process

◼️ Amendments and Updates: how the review policy itself will be updated and when (how often)

◼️ Exception Procedure: process for handling exceptions or deviations from standard review process

◼️ Emergency Reviews: procedures for expedited reviews in urgent situations e.g. time critical scenario

◼️ Audit Process: define the record keeping process associated with the contract review process

◼️ Compliance Monitoring: monitor and evaluate compliance with the review policy

A well-defined and implemented contract review policy delivers the following value to the Business: 

◼️ Mitigates Risks: thorough review processes identify potential risks preventing liabilities and disputes

◼️ Ensures Compliance: ensures that contracts comply with applicable laws and regulations

◼️ Streamlines Processes: establishes a clear and consistent process for contract review

◼️ Prevents Bottlenecks: avoids confusion and bottlenecks, enabling faster decision-making.

◼️ Optimises Terms: helps in negotiating favorable terms and conditions improving contract outcomes

◼️ Avoid Cost Overruns: identifies cost overruns or unfavorable terms before they become an issue.

◼️ Business Alignment: ensures that contracts align with the organisation’s strategic objectives

◼️ Enhances Position: provides a framework for negotiating terms aligned with business interests

◼️ Reduces Disputes: helps in drafting clear, precise terms that minimise disputes and legal conflicts.

◼️ Ensures Enforceability: ensures that contracts are legally enforceable and protect the business

◼️ Promotes Uniformity: establishes standardized procedures for reviewing contracts

◼️ Uniform Risk Profile: standard review process and procedure creates a uniform contract risk profile 

◼️ Reduces Errors: minimises errors and omissions by following a standardised review process

◼️ Clarifies Responsibilities: clearly defines who is responsible for each aspect of the contract review 

◼️ Provides Audit Trails: creates a documented trail of the review process for audits= and compliance

◼️ Provides Insight: offers valuable insights and data on contract terms and their potential impact

◼️ Enables Informed Decisions: data-based insights permit informed contracting decision-making

◼️ Better Agreements: helps deliver terms and conditions that are more beneficial to the business

◼️ Builds Trust: demonstrates diligence and professionalism when dealing with third parties

◼️ Ensures Fairness: ensures that contracts are fair and balanced, promoting long-term relationships

◼️ Supports Expansion: provides a scalable framework for reviewing contracts as the business grows 

◼️ Adapts to Changes: allows for adjustments and updates in response to required changes 

◼️ Operational Clarity: helps deliver legal and compliance operational clarity

◼️ Board Duties: helps the board discharge their duty to act in the best interests of the company

◼️ Corporate Conduct: drives the highest levels of corporate governance and conduct

◼️ Legal Empowerment: the contract review policy ensures the role of legal is empowered

The contract review policy delivers the following value for the Legal Department:

Improved Efficiency and Workflow

◼️ Structured Process: establishes a clear, standardised process for reviewing contracts

◼️ Reduced Time: standardised contract review process streamline workflow and reduce time spent

◼️ Role Clarity: defines roles and responsibilities, allowing the legal team to focus on critical tasks

Enhanced Risk Management

◼️ isk Identification: helps in systematically identifying and mitigating contractual and legal risks 

◼️ Consistent Review: ensures that all contracts are reviewed with a consistent approach

Increased Compliance and Control

◼️ Regulatory Adherence: ensures that contracts comply with internal policy and applicable laws

◼️ Policy Enforcement: enables enforcement of internal contract management policy and procedures

◼️ Audit Trails: provides detailed records of the review process, including revisions and approvals

Enhanced Negotiation and Drafting

◼️ Guidance: offers guidelines and tools that aid in drafting and negotiating contracts improving position

◼️ Standardisation: promotes the use of standardised clauses and templates to reduce contract risk

Improved Collaboration and Communication

◼️ Clear Communication: establishes clear communication channels between legal stakeholders 

◼️ Stakeholder Involvement: defines how and when to involve other departments in the review process

Enhanced Accountability and Oversight

◼️ Defined Responsibilities: clarifies who is responsible for each stage of the contract review process

◼️ Monitoring and Reporting: provides mechanisms for monitoring the review process and reporting 

Training and Development

◼️ Consistent Training: supports ongoing training and development for the legal team

◼️ Knowledge Sharing: facilitates knowledge sharing within the legal department 

Strategic Alignment

◼️ Alignment with Business: ensures that the contract review process aligns with business objectives

◼️ Support for Growth: provides a scalable framework that adapts to the organisation’s growth

Risk Mitigation and Dispute Resolution

◼️ Early Issue Detection: helps identify legal risk early in the contract review process

◼️ Proactive Solutions: enables the legal department to address issues proactively and efficiently

General

◼️ Mandate: the contract review policy clarifies the contours of the legal teams operational mandate

◼️ Role Recognition: clarifies the role of the legal department within the Business

◼️ Empowerment: empowers the legal team in respect of contract reviews 

◼️ Resourcing: a clear contract review policy helps inform legal department resourcing requirements 

◼️ Prioritisation: contract review policy enables resourcing priorities to be defined

◼️ BU Co-operation: helps to clearly set legal department boundaries as pertains contract reviews

The contract review policy is essential for:

◼️ All Businesses: ensures contracts are risk managed and aligned with business objectives

◼️ Legal Ops Teams: streamlining review process, maintains consistency, ensures compliance 

◼️ In-House Counsels: providing benchmarks and reference points to reduce subjectivity of review

◼️ Compliance Officers: sets the standard for reviews, and creates auditable measures and records

◼️ Senior Management: enables management to define the legal risk profile of the business. 

A legal team operating without a contract review policy will face a wide range of inefficiencies including:

◼️ Inconsistency: inconsistent / subjective reviews leads to variable review standards

◼️ Errors: no common standards means inconsistent reviews leading to increased risk and errors

◼️ Inefficiencies: delays as legal teams may handle contract reviews in an ad hoc manner

◼️ Workload: increased workload due to the need to manage contract reviews without defined approach

◼️ Delegation: a distinct inability to delegate work to junior team members as no clear guidance exists

◼️ Time Cost: the time cost of legal support for teams without a review policy grows increasingly

◼️ Risk Costs: high cost of risks manifesting due to no/poor review policy and inconsistent approach

◼️ Tech Adoption: an impaired ability to embrace legal tech that relies on defined positions

◼️ Process Adoption: an inability to delegate workflows to established and approved processes

◼️ Resourcing: an impaired ability to resource plan due unclear positions & associated work effort

◼️ Training & Development: an impaired ability to train in relation to required positions 

◼️ Prioritization: impaired resource prioritisation capabilities due to unclear contract review priorities 

◼️ Morale: deteriorating team morale due to lack of positional clarity and ad-hoc approach to reviews

◼️ Bottlenecking: increased risks of workflow bottlenecking with senior team members 

◼️ Internal Conflicts: conflict with business functions / stakeholders over roles and responsibilities

◼️ Communication: misunderstandings or poor communication between legal and the business 

◼️ Diminished Reputation: slow / inconsistent contract processing is brand diminishing 

◼️ Difficulty in Scaling: no standard review policy impedes department scalability and growth

◼️ Housing: the contract review policy should be housed electronically and subject to user access restrictions (no hard copies)

◼️ Legal Tech Configuration: the contract review policy should be reflected in how legal tech applications will be configured (e.g. CLMS, MLM, A.I. Contract Review, Document Automation, etc)

◼️ Tech Policies: the contract review policy will contain direction around information management, cyber security and Data protection, amongst other tech-enabled/related domains

◼️ Tech Strategy: the above-mentioned policies will impact, to varying degrees, the Business operational approach to ensure associated risks are maintained 

The GLS Knowledge Centre has a wealth of resources available for learning more about the importance of the Contract Review Policy and how you can effectively implement one - check out a few on the right.

The GLS Legal Operations Centre contains everything you need to effectively implement your own tailored Contract Review Policy in a cost-effective and timely manner. Check out the resources linked on the right. 

Also, feel free to contact GLS to book a consult to discuss your Contract Review Policy needs right here.