Contract Redlining Etiquette – Rule # 8 on Finalizing

Contract Redlining Etiquette – Rule # 8 on Final Versions, by Nada Alnajafi, for Contract NerdsWhile the contract redlining process can be fun, alas, it must come to an end at some point.

How do you know when you’re done redlining a contract?

When everyone involved has reached mutual agreement on the terms.

This is either achieved through extensive back-and-forth redlines, or because one of the parties accepted the other party’s terms as-is. Bottom line is, when there are no more proposed changes to review, all action items and questions have been resolved, and required internal approvals have been received, it is time to prepare the final version for execution.

But wait! Before you send the contract off for signatures and scratch this one off your To-Do list, there are a few steps you should take to ensure that the final version of the contract is truly the final version.  This Rule #8 on Finalizing outlines three main stages of preparation that you are responsible for before you send a final contract out for signature: 1) Control, 2) Verify, and 3) Clean.

Rule # 8 – Control, verify, and clean, the final version of a contract before requesting signatures.

Control

Always maintain control over your version of redlines throughout the contract review process and when preparing the final version for execution. This will help streamline the verification process and reduce the chance of inconsistencies or errors.

As the contract reviewer, you are the gatekeeper between the contract and your business clients. The person most knowledgeable. The subject matter expert. The project manager. However you want to phrase, it is your responsibility to review, negotiate, obtain signatures on the final version of a contract. Your business clients trust you to notify them of red flags (see Verify section below) just as much as they trust you to make sure the section numbers are in sequential order (see Clean section below). With contracts, the little things count just as much as the big things.

To maintain control over the contract across the contract review lifecycle, organization is key. Here are some methods you can use to stay organized:

  • Keep track of redlines as you go along rather than waiting until the end. You can always do a document comparison exercise at the end to compare the initial draft to the final draft.
  • Use consistent file naming conventions to indicate the drafter, version number, and date of revision.
  • Use color coded comments within the document to manage open action items and topics for discussion or follow-up.

Verify

Whether the contract was on your paper or your counterparty’s paper, make sure to verify that the final version is a true and accurate representation of the terms agreed upon during negotiations. That means not only double checking that your counterparty applied all the changes they were responsible for applying, but also holding yourself accountable to reflect the changes you agreed to during negotiations.

To verify the final version of a contract, much like when tracking changes, integrity is key. To contract at the highest level of integrity, be transparent about every change made to the contract, no matter how minor you may think it is. Double check that you have discussed and mutually agreed upon every redline with your counterparty, and those redlines are reflected in the final draft. Your transparency from the beginning of the negotiation process to final signature will establish a solid foundation of trust with your counterparty.  That relationship will proceed the life of the contract and hopefully result in future contracts with your counterparty, and maybe even referrals.

Contract expert, Laura Frederick, recommends “giving your counterparty one final look before you sign the contract.” Even if the counterparty has already accepted all of your redlines. This can be a useful tactic when you’re working with a lengthy or complex agreement that contains multiple exhibits and addendums. It doesn’t hurt to verify (or sometimes re-verify) a final version of the contract prior to sending out for execution.

Clean

It may sound redundant, but cleaning is an important stage of preparing the final version of a contract. In fact, entire case findings can turn on a single drafting or formatting error, like the placement of a comma or redundancy. Don’t let a mere oversight or rush job haunt you later on down the line.

For example, in Karmely v. Wertheimer, 737 F.3d 197, 209–11 (2d Cir. 2013), the court found that the positioning of a subsection (i) label caused confusion as to whether the text in question was part of the larger Section 8 or its own sub-section to Section 8. See Ken Adams’ blog post about this here and learn more about how to properly enumerate sections in a contract here.

To prepare a clean version of the contract, here are some recommended guidelines to follow:

  • Proofread for drafting or formatting errors and inconsistencies
  • Remove any residual redlines or comments from the margins
  • Double check section numbers and cross-references
  • Fill in any blanks, like Effective Date
  • Ensure font type is consistent across the entire document
  • Fix awkward page endings, like hanging signature lines

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Contract Redlining Etiquette is a set of 10 modern contract negotiation rules that promote efficiency, speed, and professionalism.

Nada Alnajafi currently serves as Corporate Counsel for Franklin Templeton, a Fortune-500 global financial services organization. She has been practicing in-house for 11+ years and created Contract Nerds to connect with and serve the people who love contracts just as much as she does.
Comments
  • For routine and/or high-volume contracts, a better use of time than verification is to include a redlining representation such as the following, which I often use: “Each party’s signature to the Contract constitutes a representation of that party’s good-faith belief that it (or its counsel) has redlined, or otherwise called attention to, all of its changes in prior drafts of the Contract and related documents (exhibits, etc.) that it sent to any other party.”

  • In the old days, when redlining actually meant using a red pen on a physical contract, my prehistoric hack for ensuring that there were no changes slipped in was to take my last version of the contract, and superimpose each page over the corresponding page of the signature copy, then hold it up to the light. If something didn’t line up properly, that would alert me to some kind of change or discrepancy. Thank God for MS Word and the compare documents feature!!!! I’ve used it several times in the past two weeks. Much easier when you are dealing with a really long contract, or multiple contracts.

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