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Before you get started in reviewing a contract, be sure to do some preparation beforehand.  That is, obtain as much information about what the contract is trying to achieve as possible.  This also includes asking some probing questions to get a better understanding of where issues may arise from your client or team.

 

Next create questions you would naturally have after gaining a solid understanding of the purpose of the contract and the issues you or your client have identified.  Do some research on the potential issues.  This may entail some case law searching, particularly with respect to the material aspects of the terms.

 

I always write out the key business terms regardless of who is drafting or has drafted the contract to test my understanding of the mechanics of the transaction.  This is always a useful exercise for me, as being able to express such terms clearly and cleanly demonstrates my understanding.

 

My first read is generally a quick read to understand the layout of the contract, where the key business terms are, and how the contract has been set out.  This will also give me an indication right away on the competency of the drafter.  I have yet to see a poorly organized contract that is well written.  Organization and clarity often go hand in hand and where one is poor, the other is likely to be, as well.

 

Before I start reading in more depth, I separate out the definitions and place them to the side.  This is so I do not have to leave the page I am reading to find the definition.  Often long contracts with multiple definitions will require the reader to refer back to the this section frequently. 

 

I then focus on the key business terms.  I look for rights of the parties, when they can be exercised and under which conditions.  I also look for the "outs" that each party has in given situations.  This highlights how committed the parties are and where the risk of a deal falling apart lies.  Look for red flags.  For example, a clear red flag might be an amendment or inclusion of an inflationary increase in the engineering specifications section. 

 

It's also important that one read the words as objectively as possible.  Sometimes being too close to a matter, one may miss how a clause may or should be interpreted and it ends up not being so clear later.  It's worth asking a colleague to have a look at clauses you are not so sure about.

 

Finally, always print out the contract.  I am proficient at amending documents on the computer, but I always miss something I tend to pick up only after I have printed the contract.  Thus, I always print my contracts and then hand write comments, after which I return to the computer to edit.  I often make additional edits while back in the computer, but I miss less if I print the document.

 

Paul Bellin is an advocate of the High Court of South Africa and an admitted attorney in the United States.  He frequently lectures on contract drafting and writing.