Everything You Should Know About Contract Lifecycle
Contracts play a key role in the business world. Partnerships and negotiations are built around legally binding contracts. But few contracts are designed to bind two people or entities forever. Most have contract expiry dates or other clauses that end them. Understanding the contract lifecycle process allows you to build an audit trail that your legal teams can follow, review and renew contracts regularly, and ensure your business benefits from a well-organized contracting process.
What Is a Contract Lifecycle?
A contract lifecycle is a term used to describe the entirety of the contract process, starting with contract drafting and continuing through to contract renewal or termination.
Contract tracking allows you to monitor all of the key stages in your contract lifecycle. This ensures that the contract is followed according to plan and that you don’t forget about key contract dates. Contract lifecycle management software can help you track contract lifecycles. But before you can use contract lifecycle management tools effectively, you first need to understand what the contract lifecycle entails.
Overview of the Contract Lifecycle
The contract lifecycle management process has seven key stages, starting with contract initiation and finishing with contract renewal or termination. Contract management systems keep that information in a central repository.
If you don’t plan to use a contract lifecycle management system, you have to keep excellent records on your own. If you’ll need an audit trail in the future, having a system already established for tracking contract statuses will be critical.
Let’s take a look at the key stages of the contract lifecycle.
Stage 1: Contract Request or Initiation
The contract lifecycle begins when either you initiate a new contract or a client requests one. This stage involves beginning to talk about why you might need a contract and what the terms of the contract might entail. Think of this as the semi-informal brainstorming stage of contract creation. Two parties agree on the need for a contract and begin to discuss what might be included in it, but official terms have not yet been reached.
Stage 2: Contract Authoring
The next step is writing the initial draft of the contract.
Contract templates can help you include the right information in your contract without getting too bogged down in reinventing what it should look like. Once you’ve found a template you like and have personalized it to represent your brand, you can use the template for all of your future clients. This helps automate the contract authoring process.
Regardless of whether you use a template, the contract authoring phase is a more formal process in which you outline the terms and conditions of the contract. This should include information about any money that needs to be exchanged, key dates or deadlines, and the process for future contract reviews, adjustments, or addendums. It’s a good idea to get your legal team involved during the contract authoring process to make sure that the contract you create is legally binding and properly represents the needs of both parties.
Stage 3: Contract Negotiation
Once you’ve developed the first draft of the contract, you and your client need to agree to the terms you outlined. Before signing the contract, both parties should read it and ensure that they feel comfortable agreeing to all of the terms and conditions it outlines.
Sometimes, there’s a lot of back and forth during the contract negotiation phase. The best contracts are born of collaboration and communication. Once again, make sure that your legal team is involved in this process so that the final contract you agree on is fair and binding.
Stage 4: Contract Approval
Once the main parties have negotiated the terms of the contract, they may need to reach out to other stakeholders in their respective organizations to get approval. Sometimes, this can lead to more contract negotiations if key stakeholders aren’t happy with the initial terms of the contract. Other times, contract approval is a relatively seamless process.
Stage 5: Contract Execution
Once everyone is comfortable with the contract, the next step is to get the document approved. This means that all of the key stakeholders impacted by the contract need to sign the document. One of the fastest, most convenient, and most effective ways to do this is to use a legally binding electronic signature. This allows everyone to sign asynchronously and without having to be in the same physical space.
Stage 6: Contract Performance and Management
Once a contract has been signed by all relevant parties, organizations become responsible for upholding the terms of the contract. Having a clause library within your contract management system can help with this process. It can also be a good idea to put reminders about key dates in your calendar.
Stage 7: Contract Renewal or Termination
When the timeframe of the contract is over, organizations need to decide whether they want to renew the contract or terminate it. Termination is not always a bad thing; sometimes, it’s just a sign that you need to renegotiate. Other times, contracts are terminated because they no longer benefit both parties.
If you decide to renew your contract, the contract lifecycle starts over again but is simplified because you don’t need to start back at the authoring stage. Instead, you can renegotiate terms based on the original contract. If you have an evergreen contract, you may only need to adjust the dates before renewing it.
Easily Sign, Send, Track, and Collect eSignatures With jSign
Keeping track of every stage of the contract lifecycle can be an arduous process. But with the right contract lifecycle software in hand, you can become an expert at contract tracking and management.
jSign allows you to sign, send, track, and collect eSignatures with the touch of a button. jSign has been specially designed to integrate with most major contract formats, including Google Docs, PDFs, and Word documents. Blockchain technology keeps your eSignatures secure and legally binding.
Learn more about how jSign can help you manage contracts, or contact us for more information.
