Contract Analysis: A Complete Overview

Effective contract management goes beyond the signing stage. Routine evaluations of contracts and agreements are essential to identify legal risks such as unclear clauses, compliance issues, or unfair financial obligations. 

This is why adopting a contract analysis process is crucial for spotting opportunities to renegotiate terms — or simply to terminate a contract and avoid renewal fees. In this article, we’ll cover the basics of this process and further explain why it’s crucial. 

What is contract analysis?

Not to be confused with contract review, contract analysis is the process of evaluating agreements by tracking and examining pertinent information after signing these contracts. This includes terms and conditions, key deadlines and obligations, and potential risks or benefits. 

The goal is to understand what a contract means for your business in terms of its performance and benefits — whether legally, financially,  or in relation to partnerships with stakeholders. 

Contract analysis vs. contract review

While both involve similar tasks, contract analysis is distinct from contract review. Let’s break down the key differences: 

Purpose and scope

Contract reviews usually happen before you sign or enter a new contract. You and your stakeholders will review the terms, such as renewal or confidentiality clauses, to negotiate anything unfavorable and make other informed decisions. Therefore, this review process ensures that a contract is well-drafted with clear terms, so all parties are protecting their best legal and business interests. 

On the other hand, contract analysis is geared towards the consistent tracking of contract terms and performance for the entire contract lifecycle. After a contract has been executed, you should always monitor risk, compliance, performance, and impact to inform future negotiations and renewals. 

Focus

Review is primarily concerned with the language and legal accuracy of an agreement, whereas analysis is focused on understanding its practical and strategic impact. 

Tasks

Even though there’s some crossover, review involves the detailed reading and editing of a contract, while analysis involves extracting and analyzing key information — typically using this data to generate reports and recommendations.   

Outcome

The outcome of a contract review is a legally sound document before signing, while the outcome of a contract analysis is a set of insights and data that inform business decisions.

Practical examples

Contract analysis: After signing a contract, you perform regular checks to identify key deliverables, payment terms, and renewal dates. You also assess the potential financial impact and risks associated with contract performance (i.e., Are you losing money?)

Contract review: Before signing a contract, you review the terms and conditions, such as payment obligations, and check for any ambiguous terms that could lead to legal disputes.

Elements of contract analysis

Review of key terms

The first step is to identify and summarize important terms and conditions like deadlines and limitation of liability. You can even use Concord’s contract analysis software to simplify this data collection. 

For example, Concord’s AI engine automatically recognizes dates, names, and other key terms when you create or import a contract. It will then pull this information into a secure database to generate summary details that you can review, so you don’t have to read through pages of legal documents. 

Risk assessment

Another critical aspect of the contract management process is assessing potential risks and the likelihood and impact of these risks on your business. Steer clear of unclear terms, potential violations of the agreement, and other factors that could yield negative consequences.

Compliance

Make sure your contract meets all legal and regulatory requirements, inducing industry standards. Adherence to these regulations is necessary to prevent legal disputes or penalties. 

Financial impact

As a business, it’s always beneficial to analyze a contract’s financial terms, including costs, payments, and potential revenue. This assessment will help you calculate the financial benefit or burden of a contract — and ultimately help you decide whether to end or renew a contract. 

Renewal and termination terms

Understand the conditions and procedures for extending or ending the contract. Additionally,  to prepare for potential disputes, review mechanisms for handling conflicts, and evaluate their efficiency and fairness for all parties. 

Performance metrics

Determine the success of key performance indicators (KPIs) and benchmarks specified in the  contract and how they align with your business objectives. KPIs could include contract lifecycle time, number of contracts signed, compliance rate, and frequency of contract renewal. 

Contract management analytics can be difficult to compile and track, but automated contract analysis will do most of the work for you. Concord’s Global dashboard can create an intuitive visual of each contract’s performance and help you assess the numbers with comprehensive reporting. 

Top 4 benefits of contract analysis

Here are the top, long-term benefits of contract analysis. 

Reporting 

Producing and managing reports based on your contract analysis is essential for gathering insights to improve your contract lifecycle and overall business performance. With Concord’s customizable reporting tools, you can analyze a wide range of data, including monetary terms, duration details, and deadlines.

Historical Comparison

You can compare a contract with previous agreements to identify trends or changes — and learn from past failures and successes. This way, you’re also assessing all of your contracts holistically and flagging the best contracts for renegotiation. 

Actionable insights  

You and your team can formulate actionable insights and recommendations based on the analysis, such as pursuing contracts that provide the most financial value or addressing inefficiencies in your contact management processes. 

Cost and resource savings   

During contract analysis, you can identify areas of inefficiencies or improvements,   including the elimination of redundant steps in your contract lifecycle or contracts where you’re overpaying. Once these issues are addressed, you can reduce costs and time spent on inefficient tasks. 

Leverage contract analysis to gain insight and make informed business decisions that foster growth. Concord’s AI engine, which gathers data at every stage of your contract management process, can greatly streamline this process.

Analyze your contracts and make smarter decisions, with Concord.

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