It’s no surprise that contracts are huge in the world of business, as they’re used to outline obligations, protect multiple parties, and set expectations for how work, payments, and/or services will unfold.

The thing is, contracts are not just about getting a signature. It’s all in the details: reviewing a contract can mean analyzing its terms, conditions, and fine print with a careful eye so that everything is clear, fair, and legally sound.

This article will cover everything you need to know about reviewing contracts effectively, avoiding expensive mistakes, ensuring compliance, and securing fair terms.

Ready? Let’s go!

What is contract review?

A contract review involves verifying:

  • Each party’s responsibilities
  • Payment terms and deadlines
  • Termination clauses
  • Liability and indemnity provisions
  • Compliance with applicable laws

Essentially, a contract review acts as a safeguard so that you can avoid costly disputes, missed obligations, or unfavorable terms that can be caught early in the drafting process. You definitely don’t want to skip or rush through this checklist.

Bonus: Dig deeper into contract management challenges and how to handle them head-on.

Why is it important to review contracts?

With contracts sometimes being complex in nature, reviewing them thoroughly is important. Here’s why:

Avoiding mistakes

Even a small error, like a typo in payment amounts or a misaligned date, can cause huge issues later on. When you carefully review, you’ll prevent these kinds of oversights from slipping through the cracks.

Risk mitigation

Vague terms, unlimited liability, or one-sided obligations are risks often hidden in contracts. A contract review checklist is the best way to identify and minimize these kinds of risks before they become problems.

Want to learn more about common contract management risks? Check out our guide here.

Compliance assurance

Certain industries like healthcare, finance, and tech have strict regulations they must comply with. Reviewing your contracts makes sure your agreements meet the necessary legal and regulatory standards. This will also help protect you from fines or penalties.

Securing fair terms

You want to be asking the right questions with your review: Does each party benefit equally? Are the termination or renewal clauses reasonable? You want to carefully scrutinize the contract to make sure the terms are fair and align with your business goals.

Preventing disputes

If you have a clear, well-reviewed contract, you’re less likely to have misunderstandings. If a dispute comes up, you’ll feel better knowing you have solid documentation that states responsibilities clearly, which will make resolution smoother.

How long does it take to review a contract?

There isn’t a single answer for this, as the time needed to review a contract depends on:

  • Complexity of the contract: While a simple vendor agreement might take an hour, a more complex, multi-party partnership deal could take days.
  • Number of stakeholders involved: More parties mean more negotiation cycles.
  • Industry-specific requirements: Highly regulated sectors demand extra care and legal oversight.

A standard business contract could take anywhere between a few hours to a few days, on average. You want to allocate more time upfront when dealing with critical agreements, since it can save you trouble later.

Contract review process + checklist

So, how do you actually review a contract? You can break it into clear steps to make the process easier to manage.

Here’s a contract review checklist we created that you can use to guide your review:

Step What to check Why it matters
1. Verify party information Make sure all names, addresses, and contact details are correct Prevents enforceability issues
2. Review scope of work/services Confirm deliverables, timelines, and performance standards Avoids vague expectations
3. Check payment terms Look at amounts, due dates, penalties, and methods Ensures cash flow clarity
4. Examine liability & indemnity clauses Assess how risk is allocated between parties Prevents one-sided obligations
5. Review termination clauses Identify conditions for ending the contract Protects you if things go wrong
6. Evaluate confidentiality & IP rights Confirm who owns data, ideas, or work created Protects sensitive assets
7. Ensure compliance with laws Cross-check for industry or local regulations Avoids legal penalties
8. Look at dispute resolution methods Note arbitration, mediation, or litigation terms Helps resolve conflicts efficiently
9. Flag ambiguous language Highlight vague or open-ended terms Reduces risk of misinterpretation
10. Seek legal review (if needed) Get professional input for high-stakes contracts Provides expert assurance

Pro tip

PandaDoc’s contract management software is a tool you can count on to streamline this process. You can set up templates, track changes, and centralize your review workflow, which will save you valuable time and reduce human error.

Want to dig deeper into strategies for efficient contract handling? Check out our guide on contract management best practices.

The bottom line

Contracts are your business lifelines, which means they are more than legal formalities. When you employ a thoughtful review process with a thorough contract review checklist, you’ll:

  • Avoid costly mistakes
  • Spot hidden risks
  • Confirm compliance with regulations
  • Build stronger, dispute-free business relationships

So remember, don’t just skim the pages of the next contract that lands on your desk. Plus, PandaDoc’s contract management software can simplify the entire process so you can make contract reviews faster and more reliable.

Need more convincing? Just ask our client, KarmaCheck, who saved 20+ hours per week by switching to PandaDoc. We helped them consolidate tools, automate approvals, and made compliance easy so their contracts could get signed faster.

“As an Ops professional, trusting the tech you bring into a business is everything. It needs to work, scale, and actually deliver results — and PandaDoc has done that on all fronts. If you’re looking for a solution that’s not just software, but a true partnership, you won’t find anything better than PandaDoc.”

– Allie Blech, Director of Operations at KarmaCheck

Ready to see how PandaDoc can work for you? Request a free demo today.

FAQ

First, you want to verify the parties involved, then move through key sections like scope of work, payment terms, liability, termination, and compliance. Look out for fairness, clarity, and enforceability. Using a structured checklist like the one in this article will help you avoid missing any critical details.

The seven elements that make a contract legally binding include:

  1. Identification
  2. Offer
  3. Acceptance
  4. Consideration (something of value exchanged)
  5. Mutual consent (meeting of the minds)
  6. Competency and capacity (all parties must be legally capable)
  7. Legality (subject matter must be lawful)

For a deeper dive on these essential elements, check out our guide here.