What is Contract Redlining and How Does it Help?

Is it possible to make everyone happy? Yes, if the contract has been read and terms verified thoroughly by both the parties while respecting each other’s duties and expectations, it is quite possible.

A vital step in ensuring everyone is happy is contract redlining. The process of clarifying terms and editing the contract based on the modified clauses between two or more parties is called contract redlining. The term redlining dates back to the time when a paper draft of the contract used to be evaluated by teams of both the contracting parties, and words and clauses were crossed out using a red pen. 

The good news is the arbitrary manual process is behind us, while contract redlining, in its essence, has remained in the contract process, albeit more conveniently. 

What is Contract Redlining?

With the help of cloud-based intelligent contract lifecycle management software, the process of redlining has become more efficient. All the previous drafts, edits, and changes can be tracked in a single click, so both parties are in the know about the changes made. This builds transparency and confidence between contracting parties. 

Redlining a contract is a collaborative process where parts of texts are edited and marked for rejecting or accepting clauses or adding more variables. This is done through a CLM platform that allows revisions and tracking of changes. 

What is the Need for Contract Redlining?

There are primarily two purposes of redlining a contract:

1. Review

If there are clauses or terms that one or more parties are interested in modifying or reviewing, then the said party invests time in redlining a contract. The changes have to be notified to the other contracting party.

2. Internal use

Contracts also need to be modified (or their language needs to be changed) for internal departments to honor them at a future date. This is done for better clarification and execution. Documents are edited between departments, but everyone involved has to be notified.

Etiquette Checklist While Redlining a Contract

1. During drafting

Ideally, one should verify basic details such as names, addresses, pricing, and deadlines at the time of drafting a contract. This comes much before contract redlining. 

2. Reasonable alterations

Alterations and modifications must be vital enough to merit editing. Small changes that may not directly affect the honoring or delivery of the contract terms must be avoided. 

3. Honor the other party’s concerns

Before redlining a contract, it is best to discuss it in advance with the other party in person. Redlines in a contract should not come as a complete surprise to the other party. 

4. Reviews at both ends

Redlining will involve some back and forth. As a result, it is important to review all the edits thoroughly before finalizing.

How Does Contract Redlining Software Help?

1. Transparency 

There are many terms that are usually discussed orally between the parties. These terms are then included in the contract document while drafting. However, there may be finer nuances of clauses or conditions that may arise after the contract has been drafted. When both the parties redline a contract mutually, it brings about transparency in the agreement and execution. 

2. Peace of mind 

Once both the parties have redlined problem areas and agreed upon the changes, it brings peace of mind. It excites people to work on the contractual terms since all their doubts have been cleared at the redlining stage. 

3. Collaboration 

Contract redlining forges collaboration between contracting parties since both the parties begin to team up and collaborate for editing and modifying the document. 

4. Building trust 

 Redlining brings about transparency about terms, clauses, pricing, conditions, and delivery dates. There are no hidden factors left at this point and this builds trust among the parties. 

The Need for Contract Redlining Software 

An electronic CLM software often does not solve the challenge of contract edit tracking. Drawing up a contract in a word document or a PDF will create multiple drafts and re-writes simply due to the limitation of editing tools and versions. The best and most logical way to go through the contact redlining process is through cloud-based software. 

Here’s why you need contract redlining software

1. Scattered information 

Unless you have redlining software that’s accessible to all, contracts will have multiple versions at different locations. As a result, all your information would be scattered. 

2. Coordination between departments 

Contract redlining involves reiterations and edits. Some edits come from one department, others may be made by another, and then a final version is exchanged between parties. With a software, this coordination is smooth and easily managed. 

3. Version control 

Only a cloud-based contract management software would allow version control between various versions to ensure transparency and clarity. 

Benefits of Contract Redlining Software 

1. Easy tracking

The biggest advantage of a cloud-based software is how easy it makes the accessibility of various versions between departments and contracting parties. An intelligent CLM software becomes a single source of truth that can be accessed by all parties. 

2. Approval workflows 

Contract redlining also involves approvals from different departments.  A cloud software creates approval workflows to easily track the clauses and terms that are waiting for approval and facilitates the acceleration of the approvals. 

3. Collaboration in real-time 

Collaboration between parties during the redlining process makes it more efficient and faster. 

4. E-Signatures

With tools such as e-signature, parties can easily sign the document and put it in motion after the redlining is done.

5. Tool integration

Another important feature of cloud-based redlining contract software is that other tools related to sales and operations can be integrated easily. This further facilitates coordination between departments involved in the contract.

6. Minimizing errors 

When the contract process is digitized on a unified platform, the chances of human errors are reduced significantly during the contract redlining stage. 

Contract Redlining Software is a Game-changer 

There are a lot of capabilities that come with an AI-based CLM software. This is particularly useful for redline a contract. AI capabilities make it possible to anticipate problem areas in a contract much before the redlining begins. That way, businesses can accelerate the processing of contracts and sign more contracts in the time that they have saved. More contracts mean faster turn-around and better bottom lines. If you wish to understand this more, feel free to call or email us. 

Written By

Kristina Isagunde

Kristina Isagunde

Director of Operations


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