The contract lifecycle refers to the process by which a contract is written, reviewed, sent for signature, executed, and possibly renewed.
The contract lifecycle refers to the process by which a contract is written, reviewed, sent for signature, executed, and possibly renewed. The "lifecycle" archetype is used to compartmentalize and comprehend the evolution of a contract. The lifecycle starts with contract requests and ends when those requests are fulfilled - with the option of the contract renewal. Let's take a closer look at the stages of the contract lifecycle.
While each company may have its own routines and processes in place, in general, we can talk about the following stages:
The contract lifecycle begins with this kick-off contract stage. Contract parties and stakeholders can express their expectations for the contract at this stage. This first stage of the contract lifecycle allows parties and stakeholders to gather critical information about a new contract, an amendment, a renewal, etc.
Contract parties have laid the groundwork for contract authoring to begin once they have established and addressed contract requests. This stage, also known as the contract writing stage, involves contract parties writing down the terms and conditions of a contract by combining standard contract clauses, key dates, counterparty information, and other critical data. It is critical to remember who is entering into a contract, what services are being offered, and what terms have been agreed upon.
Contract parties negotiate the framework of specifications drafted during contract authoring during the contract negotiation stage, which is arguably one of the most critical phases of the contract lifecycle. Following back-and-forth redlining and collaboration, agreed-upon terms and conditions provide clear insight into the contract parties' expectations.
When everyone involved is satisfied with the outcome of the negotiations, the contract goes through a second draft and is reviewed by the parties. Contract approvals should adhere to a general approval timeline as they are passed back and forth between the parties. The length of the approval process can be influenced by how far up the chain of command the approval must travel.
Once the parties are satisfied with the negotiations, all involved stakeholders conduct a final contract review. Parameters are set up to meet compliance standards, obligations, key dates, milestones, and contract special terms.
Following approvals, a contract can be signed by a chief employee or someone with signing authority. In an increasingly mobile and digital landscape, a lot of signing goes on over electronic signing platforms making it easier to sign in the office or on the go, one-off or in bulk. Manual "wet signatures," on the other hand, are time-consuming and inefficient.
Following the execution of the contract, all parties acknowledge their pre-defined responsibilities, milestones, contract key dates, deliverables, payment windows, and any other specific contract obligations.
Depending on the type of contract, the final stage of the contract lifecycle may differ. Contract renewal is appropriate when the parties’ relationship is beneficial and they want to stay in touch in order to continue doing business with one another. Instead of going through all of the previously mentioned stages of a new agreement, stakeholders can revisit discounts, renegotiate terms, and engage in further opportunity realization more seamlessly if they have access to cutting-edge contract management software.