Negotiating a contract can be incredibly complex. Many contracts are sent back and forth between different parties multiple times before they’re finalized. This back-and-forth is called redlining, and it’s crucial to developing agreements that make everyone happy. It needs to be done right, or your organization can lose contracts or even face legal consequences. Here’s what you need to know about contract redlining, how to do it properly, and how to manage the process.
What is redlining a contract?
Redlining is the process of editing a contract when two or more parties are negotiating or working together. The goal is to produce a single document that satisfies all parties.
The term redlining comes from the original, physical method of editing contracts, which involved printed papers and red pens. One party would take the document and cross out words and add edits in red ink. This document would then go to the next editor, who would do the same thing. The red ink made it easy for everyone to see the exact changes that were made. Eventually, everyone would agree on one version of the contract. A clean document was then produced to become the final agreement.
Today, the process is much simpler. With a cloud-based contract management solution like Ironclad, you can redline contracts in real time. Your legal team doesn’t need to worry about sending physical copies back and forth to manage version control. That can help you speed up your contract negotiation process by days or even weeks.
How do you redline a contract?
Redlining is more than just editing. It’s a collaborative process where every party involved in the contract works together to produce a document that satisfies everyone. This used to be handled with paper documents and red pens, but now it’s most often done through computer files.
Party A will present a contract to Party B, who will make edits. This new version will be passed to Party A, who will make their own edits and approve or reject Party B’s edits before returning the file. This continues until all parties are satisfied with the contract.
When should you redline a contract?
You need to redline a contract whenever more than one person needs to agree on the final version. It’s most often used when multiple groups negotiate the terms of a new contract, but that’s not the only time it’s used. You may also need to redline a contract when you’re drawing up a new agreement template or revising old agreements.
Remember, redlining is collaborative editing. There’s no reason to limit your use of a helpful tool just because it’s most common in one scenario. Any time you want to refine a contract with other people, redlining can be a valuable strategy.
The challenges of contract redlining
Redlining is helpful, but it can still have its challenges. With the wrong tool, redlining can quickly lead to a mess instead of a cohesive agreement. A few problems you can run into during redlining include:
Confusing changes: If you redline your agreements through a traditional word processor, it can quickly become difficult to spot differences and read the resulting text. If either party forgets to track their changes, errors can slip through the cracks.
Broken formats: When too many people make changes to a document over time, you may find that the formatting is broken. That forces you to spend extra time returning it to your preferred appearance.
Incompatible file types: There are so many different versions of Microsoft Word that you can quickly run into incompatible file types when you try to edit documents with other people. That can break your contract’s formatting or even corrupt it entirely.
Slow return time: Depending on how you’re sending your drafts, you may not get the redlined document back for days or weeks. That dramatically slows down the contract finalization process.
These issues are problematic, but they can be resolved by using the right tool for the job.
Effectively managing contract redlining
Depending on your business, contract redlining can involve dozens of revisions. Your legal team needs to track each of these changes and work with clients and vendors to come to a satisfying agreement. Giving them the right tools can help streamline the contract workflow and significantly reduce the time spent on redlining.
The easiest way to redline a document is for both parties to work on it together. While that’s not always possible in person, it can be easily accomplished through digital contracting. By using a cloud-based redlining editor, everyone involved can look at the contract at any time to edit it or approve or deny changes. The document is stored in a central location, which neatly avoids the problems of incompatible file formats and platforms.
With a cloud-based collaboration and negotiation tool, you can also neatly track document changes. The right tool will track the changes automatically until the document is approved, giving you a clear view of what changes were made, by whom, and when.
Ironclad product features that help
If you want to improve your redlining workflows, Ironclad Editor can help. The cloud-based solution is DOCX-native and supports both Microsoft Word and in-browser editing. You can use the word processor with which you’re comfortable without worrying about incompatible systems.
For agreements you send out frequently, you can create workflow templates with Ironclad Workflow Designer. These templates allow you to customize your contracts on the front end instead of facing significant redline revisions down the road. You can use Workflow Designer to offer clauses pre-approved by your legal team, so your sales team doesn’t need to reach out to legal for every client request.
You can also implement Ironclad’s clickwrap feature if you’re using non-negotiated agreements. This immensely reduces the number of contracts you need to redline, and can speed up the contract process, especially if you’re sending several of the same contract.
Contract redlining made easy with Ironclad
Contract redlining is a vital part of finalizing any contract negotiation. That’s why you need to establish an effective system for managing your business’s redlining process. You can simplify the redlining process, avoid costly mistakes, and reduce wasted time.
Ironclad’s digital contract management solution helps make redlining easy. With Ironclad Editor and Workflow Designer, your legal team can streamline the revision process. You can provide your clients and vendors with a better experience while giving your team time to focus on more important things. Contact Ironclad today to schedule your demo and learn how it can help your contracting workflow.
- What is redlining a contract?
- How do you redline a contract?
- When should you redline a contract?
- The challenges of contract redlining
- Effectively managing contract redlining
- Contract redlining made easy with Ironclad
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Ironclad is not a law firm, and this post does not constitute or contain legal advice. To evaluate the accuracy, sufficiency, or reliability of the ideas and guidance reflected here, or the applicability of these materials to your business, you should consult with a licensed attorney. Use of and access to any of the resources contained within Ironclad’s site do not create an attorney-client relationship between the user and Ironclad.