Understanding Contract Review

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In a mid-sized tech company, an overlooked clause in a vendor contract auto-renewed a legacy software subscription—locking the business into another three years of outdated technology at an inflated rate. No one had flagged it during the rush to onboard the vendor. The legal team was stretched, and the contract was deemed “standard.” Months later, the finance team discovered the costly renewal buried in a payment reconciliation report—too late to act.

This story is not unusual. In fact, it’s common. In the pace of modern business, contracts often move fast, through inboxes and approvals, signed under pressure and shelved without a second glance. Yet these documents govern nearly every aspect of a company’s operations, including vendor relationships, revenue terms, intellectual property, compliance obligations, risk exposure, and more.

We see contract review as not just as a legal formality but as a strategic safeguard. This plays a central role in protecting business value, mitigating risk, and driving operational efficiency. This article attempts to offer some value in terms of exploring why contract review should be a priority for every business, while outlining some best practices, and identifying common pitfalls that lead to preventable financial and legal consequences.

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Contracts Are More Than Paperwork—They Are Risk and Revenue in Writing

Contracts are the lifeblood of any organization. They define who delivers what, to whom, by when, and at what cost. A well-reviewed contract can be a source of clarity and control; a poorly reviewed one can be a source of confusion, friction, and liability.

The World Commerce & Contracting Association estimates that poor contract management leads to value leakage amounting to up to 9% of annual revenue for many organizations (WCC, 2020). These losses are often traced back not to rare disputes or legal failures, but to everyday oversights: renewal clauses buried in fine print, performance milestones not tracked, indemnity language left unchecked.

These aren’t legal issues alone - they're operational realities with material impacts.

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Where Businesses Get It Wrong

While contract review best practices are clear, many organizations still fall short, often due to resource constraints, cultural blind spots, or lack of formal processes. Here are three of the most common mistakes.

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1: Treating Routine Contracts as Low-Risk

The Challenge: Contracts perceived as “routine”—like NDAs, SaaS licenses, or vendor renewals—are often fast-tracked or skipped entirely during review.

Why It’s a Pain Point: These contracts frequently include automatic renewals, unfavorable governing law clauses, or broad indemnities that can expose the company unexpectedly. Over time, these add up.

Business Impact: Hidden financial obligations, loss of negotiation leverage, and exposure to disputes. In one client case, a routine software contract auto-renewed with a 10% annual increase clause - unnoticed for four years.

Remedy: Implement mandatory checklist reviews for all contracts, even templated ones, and automate renewal tracking through CLM.

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Pitfall 2: Relying on Manual, Email-Based Review Workflows

The Challenge: Contracts are passed around via email, with redlines managed manually and no centralized tracking.

Why It’s a Pain Point: Version confusion, delays, and missed approvals are almost inevitable.

Business Impact: A SpringCM study found that 71% of organizations experience delays in contract approvals due to inefficient, manual processes (SpringCM, 2018).

Remedy: Move to structured, role-based workflows using CLM tools or even low-code platforms like Airtable or Monday.com for smaller teams.

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Pitfall 3: Neglecting Post-Signature Contract Obligations

The Challenge: Once a contract is signed, it’s often forgotten - especially when there’s no centralized system for tracking deliverables or renewal deadlines.

Why It’s a Pain Point: Key milestones, such as performance reviews or cancellation windows, are missed.

Business Impact: The Aberdeen Group reports that 60% of companies face financial exposure from poor post-signature management, including penalties and lost renegotiation opportunities (Aberdeen, 2019).

Remedy: Assign ownership of post-signature tracking and integrate obligation management into regular operational workflows.

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Best Practices: Building a Strong Contract Review Framework

Organizations that treat contract review as a core business function, not just a legal task, are best positioned to avoid risk and unlock long-term value. A sound contract review strategy includes the following foundational practices:

1. Standardize the Process with Playbooks and Templates

Contracts shouldn’t be reviewed in isolation. Using clause libraries, negotiation playbooks, and standardized templates ensures consistency, reduces human error, and empowers non-legal reviewers to handle low-risk contracts with confidence.

2. Use Tiered Review Models Based on Risk

Not all contracts carry the same weight. Define clear thresholds for what requires full legal review versus what can be handled by procurement, finance, or legal operations. This triage model allows teams to scale review capacity without compromising on quality.

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3. Align Legal, Operational, and Commercial Review

Legal risk is just one part of the puzzle. Contracts should also be evaluated for operational feasibility and commercial fit. Are delivery timelines realistic? Do service-level agreements match internal capabilities? Are renewal and pricing terms aligned with budget planning?

4. Embrace Contract Lifecycle Management (CLM) Technology

Technology is no longer optional. CLM systems streamline review workflows, track versions, flag risky language, and ensure contracts are stored and searchable. Gartner reports that organizations implementing CLM solutions reduce contract cycle times by 30% or more, improving both responsiveness and compliance (Gartner, 2021).

5. Monitor Post-Signature Performance and Obligations

Review doesn’t end at signature. Businesses must track delivery milestones, notice periods, renewals, and financial obligations. A centralized system for contract performance management ensures obligations are met - and opportunities for renegotiation aren’t missed.

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Conclusion: Reviewing Contracts is Reviewing Risk

Contract review is not a “nice-to-have” for growing businesses - it's a critical function that directly impacts financial outcomes, legal exposure, and operational success. Treating it as a legal checkbox fails to recognize its true importance. Organizations that embed review processes into their business rhythm, supported by technology and informed by playbooks, will not only avoid costly mistakes - they’ll gain clarity, confidence, and control over their external relationships.

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