Redlining Contracts

By PracticeLeague, Mar 04, 2022   |   8 Min Read

What Is Redlining A Contract?

The editing of a contract where two or more parties are negotiating the terms together encompasses the concept of “Redlining”. The main aim of redlining a contract is to arrive at a single document that appeases all the parties involved.

‘Redlining’ finds its origin in the manual marking and editing of contracts, which involve hard copy drafts and red markers. Parties involved in the negotiations would take the hard document and mark the terms or words that call the other party’s attention- with red ink- thus 'Redlining Contracts' became a regular practice in contract management.

The pointers and remarks made in red ink would make it easier to spot the exact points where negotiations were required or changes were proposed. Once the process of redlining and negotiations goes through, the final outcome is one final version of a contract - a clean document agreed upon by all.

With the digital age setting upon the market, and being propelled by the on-set of the global pandemic, the process of contract management has become much simpler. The legal teams are adopting and migrating to cloud-based platforms for creating agile workflows and cutting out the physical copy traditions with digital contracts for minimizing version creation.

How Does Redlining Work?

When we try to analyze the concept of redlining, the very basic understanding is that it means marking and editing points in a contract that need to be re-negotiated. However, it is more than that - the process of redlining a contract is a step towards a collaborative effort by every party involved to arrive at such terms in a contractual relationship that satisfies everyone involved.

Previously all of these exchanges were carried out manually, but with the onset of technology, it has become easy to fast-track these processes. With the agility that cloud-based contract management software has brought, the collaborations have become more effective and are producing better and much more accurate output in contract negotiations.

Do You Need To Redline Contracts?

If you deal with contracts that involve more than one person working on the terms of the agreement to arrive at a final version, you surely need to redline the contracts. This process of contract negotiation and management is more profoundly required with multiple group collaborations when a lot of redlining happens over terms of contracts, in creation as well as renewals.

Redlining has been proven as an effective strategy to use with the increase in the contracting base of the firm. It is very easy to get overwhelmed by the number of features and integrations that a modern redlining tool can offer.

Pro Tip: We strongly suggest that you select a configurable CLM that offers you limitless possibilities to curate your redlining - the way you want.

What Are The Challenges To Redlining Contracts?

Any new technology is not easy to implement - it has its own set of challenges. With a misfitting tool, redlining can also become an equal mess of piled-up agreements. Here is a list of a few challenges that are quite eminent in redlining.

File formats: By sending copies for editing, you have no clarity on when you will get them back with changes accepted or more edits. This results in a slow-moving timeline of contract negotiations.

Laggard timeline: Creating documents in word or notepad can easily turn into the creation of incompatible file formats. For example, it is not possible to open files that are created in older word versions into the latest word versions and vice-versa. This creates hurdles when documents have to be sent for editing to other parties.

Inconsistent formatting: A legal document has to be standard across all verticals. These standards and formatting hold some value in the legal industry. With constant changes made, it is easy to lose track of the standard formatting of a contract.

Scattered changes: Using traditional tools to redline contracts make it tough to spot the actual changes. If either party forgets to track the changes, many errors can easily slip unnoticed.

All these issues can be handled well in time with an efficient redlining tool.

How Can You Effectively Manage Contract Redlining?

Contract redlining includes dozens of revisions done in a single contract. Your legal department needs to record, track and analyze all of these changes and then work with the parties to arrive at satisfactory terms.

Empowering your legal team with the right solution to ease out their work is something that every business should care about.

The fastest way to redline a contract is that all the parties involved in it work together on a single integrated platform. The Covid-19 pandemic has shown us that it may not always be possible to hold negotiations in person, however it is always possible to hold them online.

By integrating a cloud-based CLM with an in-built redlining editor, every person on board can review, edit and rework the terms of negotiations simultaneously and in real-time. This is the change that is soon going to hold a very important place in contract management and PracticeLeague is poised to be the torchbearer for this change bringing its world-class CLM at your disposal.