What Are Contract Redlines?

Contract redlines refer to an editing and negotiation process in which contributors mark text and track change together. There is more to redlining a contract than simply editing it. The contract is created through collaborative efforts between all parties involved. In order to finish the contract, Party A will present it to Party B, who will edit it. The new version will be passed to Party A, who will edit it themselves and decide if the edits of Party B are acceptable or not before returning the file to Party B. The process continues until all parties are satisfied. Prior to today's technological advancements, contract redlines were done by red pens and paper. Nowadays, it is typically done via computer files instead, where redlining is usually accomplished by side-by-side versions of the same contract. 

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Why Are Contract Redlines Important?

It is essential to have contract redlines whenever more than one person needs to agree on the final version. Redlining is most commonly used when multiple parties negotiate new contracts, but it is not limited to that. If you're creating a new agreement template or revising an existing agreement, you may also need to redline a contract. Essentially, contract redlines eliminate lengthy alignment meetings by reducing their duration. Keeping track of changes automatically helps collaborators identify opportunities that require conversation and work on resolution, saving crucial time during contracting.

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Benefits of Contract Redlines 

When you implement contract redlines, negotiation partners become more confident in the negotiation process. Before sending back the document version for confirmation, redlines can help alert your colleagues to key points that need to be approved, reviewed, or changed. Contract redlines may reflect the position of a bargaining partner’s position at a particular point in time. It is possible, however, to discover ways to move or erase those lines in advance of contract negotiations. When you understand the motivations of the other party, you will be able to find a compromise that will be mutually beneficial.

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The Challenges of Contract Redlines 

Despite the efficiency and effectiveness of contract redlines, they can cause more harm than help to the negotiation if done incorrectly. For instance, some of the  challenges include:

• Warped Formats: If too many people make changes to a document over time, the formatting may change. Consequently, you have to spend more time readjusting the format to restore it to your liking.
• Slow Return Time: You may not receive the redlined document back for days or weeks depending on how you send your drafts. As a result, the contract finalization process is significantly slowed down.
• Mobile Compatibility: It can be difficult to share documents for redlining between desktop computers and tablets since not all redlining software works cross-platform.
• Incompatible file types: Trying to edit documents with other people can quickly result in incompatible file types due to the many different versions of Microsoft Word. As a result, the formatting of your contract could be broken or the whole document could be corrupted. 
• Untracked Changes: It is necessary to track any changes made to the entire contract. The redlining document comparison process can break if the track changes feature isn't enabled prior to revision, making it challenging for external parties to identify changes.
• Residual Metadata: Using a redlining tool to keep track of document changes can often result in the creation of undesired metadata, which may contain sensitive or personal data. As a result, before sending the document to another recipient or collaborator, it is necessary to remove all metadata.

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Effective Management For Contract Redlines 

There can be dozens of revisions when redlining your contracts, depending on your industry. In order to reach a satisfying agreement with clients and vendors, your legal team needs to track each of these changes. By providing them with the right tools, you can streamline the contract workflow and reduce the amount of time they spend on redlining. Furthermore, having both parties work on the document together is the easiest way to redline it. It may not be possible to do this in person, but it is easily accomplished through digital contracting. Redlining can be done in real time with the help of a cloud-based editor that allows everyone to view the contract at any time for editing, approval, or denial. Documents are stored centrally, eliminating the problem of incompatible file formats and platforms. Tracking document changes is also easier with a cloud-based collaboration and negotiation tool. By using the right tool, you will be able to track the changes automatically until the document is approved, so you can see who made the changes and when they were made.

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When Do You Use Contract Redlines? 

Contract redlines should be used when two or more parties need a diplomatic way to collaborate on document reviews, negotiations, and/or contract drafts. As each party scrutinizes legal language and business language during the early stages of contract negotiations, redlining will most likely take place as each side examines the contract provisions. The process of redlining can also be used by higher-level decision-makers and stakeholders before the contract goes into effect to indicate desired changes. When using contract redlining software, you can avoid using red pens to make strikethroughs and other stray marks that need to be deciphered by opposing counsel before a counteroffer can be submitted.