Contracts are legal bindings between two parties who want to enter into an agreement and can involve the exchange of monetary values, promises, goods, or even services and should not be taken jokily. The main aim of a contract is to build a link up and create strategic relationships. Contract management is the process whereby contracts get requested and created, and negotiations take place, which leads to contract review and, finally, contract execution.
For a contract to be fully done, it does not only involve an agreement and the signing off; however, it calls for a sequence of actions and with the help of an implemented contract management software which makes the entire process digitalized and smooth to operate. A precise and thorough knowledge of what happens at every stage is an indispensable way to ensure the processes meet all requirements to deliver optimum results. A thorough understanding of contract management stages reduces time and effort spent on administrative tasks.
Here are seven essential stages that contract management as stipulated on https://www.contractsafe.com/ that a contract should pass through for effective results and relationship between parties.
Contract Request and Planning Stage
The first instance in the contracting process is whereby one-party requests or initiates the contracting process. A contract gets to be created upon the agreement between parties to close a deal.
At the planning stage, contract management should define and mitigate risks. It contains information on the features of contract and critical specifications of dates such as contract start date, end dates, and renewal dates. Identification of needs by the parties and setting of goals as this will ensure a healthy contract cycle also happens here. Also, stakeholders are assigned specific responsibilities for specific stages.
Drafting The Contract
Before having a final contract, it is important to draft the contract first. After receiving a contract request, drafting takes place. Here the parties are advised to seek consultations and help from lawyers, especially in areas where they feel there are difficulties and ambiguities. When drafting, it is also important to ensure that the wording is precise and easy to understand by all parties.
Implementation Stage
Here is where you get to implement the contract management software, which will help you in executing the contract-based tasks and aiding your business with all the advantages that come along with using the software, such as having all the tasks in a centralized place. With the help of the software, every member who needs to look at the contract can receive a notification and be able to view, edit and comment.
Contract Negotiation Stage
Negotiation is seen as the most critical stage of the contract process. Also, negotiations take place in that after the parties have planned the contract, the same parties need to negotiate till they have one voice and agree to all the terms set. Negotiations lay the foundation for trust and transparency. Also, in negotiation, we have the onboarding process whereby you ensure everyone involved in the team gets to understand the contracts' visions and is comfortable with the tools they will be using.
Handover and Review Stage
At this point, everyone is satisfied with the contract after the negotiations, and now the contract needs to be reviewed by all parties. The contract at this stage gets to be reviewed by the stakeholders, also referred to as the internal approvers, and other legal representatives referred to as the external approvers.
It is important for the parties not to assume that the contract has all the things needed; however, at this stage, there can be changes made to the contract. A thorough check of the contract details and confirming roles and responsibilities needed by each party is very important.
Contract Execution
At this stage, the parties have already agreed that everything is fine with the contract, from fulfilling each side's needs and interests to even the smallest things such as wording. The contract is now completed, signatures are needed, and the documents are sent to the other parties to obtain the e-signatures for the contract to become official.
With the signatures, finally, the contract becomes effective from that day onwards. With the rise of technology, digital electronic signatures are used as they are convenient, reduce costs, save time, and are hassle-free.
Contract Renewal
The contract now is effective. However, it needs to be updated and maintained occasionally. Mostly contract renewals happen if the relationship between the parties is friendly and beneficial and all the parties want to remain in contact and continue doing business together.
The contract owners here also have to ensure that the contract gets renewed once it reaches its expiration. If the contract fails to be renewed on time, it is a miss of opportunity, which can lead to lost revenue.
If the contracts are amended with new terms, they go through the cycle again so that all the stakeholders are aware of the changes.
