Navigating the World of Document Edits
Contract redlining refers to the process of reviewing and revising a contract or critical document before it is submitted to a customer, investor, or regulator. The term "redlining" dates back to the pre-digital age, when a printed document under review was marked up using a red pen or marker. Today, redlining is performed using digital tools to highlight areas under review and revision.
The Redlining Process is Collaborative
The redlining process is typically a collaborative effort, involving a core project team plus input from multiple departments, subject matter experts, lawyers, and analysts. While the process often requires many documents used as references, the contract itself boils down to a single document: the contract term sheet or regulatory submission.
How Redlining Works
During the redlining process, the original document is examined thoroughly to identify any provisions or sections that need changes, amendments, or further negotiation. The goal is to highlight areas of potential disagreement, ambiguity, or legal risks that could stand in the way of a finalized agreement. These modifications can include clarifying ambiguous language, adjusting payment terms, changing deadlines, adding or removing clauses, or addressing legal or regulatory concerns.
To aid the collaborative process, each proposed change is identified and marked using specific formatting conventions. For example, additions may be underlined or highlighted in a specific color, while deletions may be crossed out or displayed in a different color.
In some cases, areas of ambiguity require commentary. These comments along with the identity of the commentator appear in a designated column (generally to the right of the primary document text). Collaborators agree with comments and amend the document accordingly or disagree and dismiss comments.
Goals of Redlining
For the contract document development team, the redlining process is designed to meet specific goals:
- Clarity: Clarify any unclear or ambiguous terms or clauses
- Protection: Ensure the terms protect the interests of the proposing party
- Risk Mitigation: Identify and address potential issues before they become problems, and/or provide indemnifications for types of potential damages
- Compliance: Ensure that the contract complies with legal or regulatory requirements
Customers Redline, too
The redlining process may be repeated after a document is submitted. As with the originating contract team, the receiving party will examine the proposed contract document to ensure that the terms are fair and equitable, that its best interests are served, and that the contract meets its legal and regulatory requirements.
Customers or other parties then share their redlining version of the contract document, and a process of negotiation ensues. Redlining often requires several iterations of review and revisions until a consensus is reached.
The finalized contract document should accurately reflect the agreed-upon terms and conditions and adequately protect the interests of all parties involved.
Digital Redlining Tools Improve the Process
Digital tools and software are commonly used in contract redlining. These tools provide collaborative editing features, making it easier for multiple parties to contribute, track changes, and comment on specific sections of the contract. “Track Changes” command in popular business word processing apps like Microsoft Word and Google Docs provide tools for denoting adjustments to copy and formatting. Version control features provide a quick and easy way to compare different iterations of the contract.
However, while MS Word and Google Docs are adequate for many business documents, they present two liabilities for contracts: security and version histories.
How to Maintain Security during Contract Development
For the contract development team, document security is key. It is not unusual for the competition to learn that a contract is in the works. Even more ominous, hackers also monitor business activities and watch for contract negotiations.
At risk is not just the contract itself. The contract document process typically requires accessing many reference documents that contain confidential information.
Both the contract initiating party and its customer(s) need protection. The best security strategy is to develop the contract using a Virtual Deal Room (VDR), an online platform that protects documents. The VDR protects documents in multiple ways:
- With a quality VDR provider like ShareVault, the contract development team can drag-and-drop upload a virtually unlimited number of reference documents
- ShareVault provides advanced document organization and sharing tools
- Every document uploaded to the VDR is automatically encrypted
- Only authorized parties can enter the protected online environment
- Authorized users can access the VDR from anywhere in the world, 24/7
- Additional security features, including permissioning protocols like two-factor passwords and device IP registration, ensure the contract and supporting documents are only accessible by the right people
- When the contract is ready for review, the initiating party can authorize password-protected access to the VDR for the receiving party, who can then review and redline their revisions in a secure and protected environment.
Collabloop is Secure Contract Redlining Software
In addition to providing a secure environment for storing reference documents, ShareVault has developed Collabloop, a task management software for redlining, Collabloop streamlines the redlining process and addresses vulnerabilities in Word and Google Docs:
- With Collabloop, both the contract development team and the customer team are always working on a single document
- When a party makes a comment or revision, their input is visible to everyone, much as it would in Word’s track changes annotations, but in real time, which improves the speed of collaboration. Collabloop can reduce the contract development project timeline by up to half.
- Collabloop maintains a history of every version of a contract document with details of the date, time, and identity of the contributor, a useful tool for the contract development team and a necessary report for a regulatory audit
- Since Collabloop is housed in a ShareVault VDR, every version of the contract and all reference documents remain protected throughout the contract development process
Collabloop integrates with DocuSign
Once the proposing and receiving parties have completed their redlining efforts and come to an agreement, Collabloop integrates with DocuSign and all its online features for the final signatures.
Collabloop 24-hour Support
ShareVault knows that with a contract on the line, time is everything. That’s why ShareVault provides round-the-clock support from our IT team, who can answer questions and resolve issues quickly and efficiently.
ShareVault and Collabloop Save You Money
Collabloop redlining software and ShareVault’s secure virtual deal room provide maximum document security and speedy contract development. Since each company has unique document security needs, ShareVault feature sets and pricing are customized to fit your company. To receive a customized ShareVault proposal, contact us today!