improving contractual relationships

Improving Contractual Relationships with CLM

Contractual business relationships are quite sensitive and fragile, especially if you’re entering into a contract with a new party for the first time.

You need to be aware of the clauses, risks, and consequences of not meeting the obligations. It can ultimately be the make-or-break point for your business’s success.

This is where a contract lifecycle management (CLM) can come in handy to manage, track, and optimize your contract workflows. But before we look over the benefits of CLM, let’s touch upon the intricate details of contractual relationships.

What are Contractual Relationships?

Contractual relationships are legal obligations between two or more parties. They are legally enforceable and build upon a promise by one party to do something for the other. 

These contractual relationships define the terms and conditions of a business relationship and outline the responsibilities of each party in a contract. In the business context, a usual contract would cover information relating to the delivery of goods, dispute resolutions, and payment procedures. Several critical elements of a contractual relationship include the following:

  • Exchange relationship
  • Written or oral agreement
  • Legal enforcement
  • Mutual consent

A simple example of a contractual relationship can be related to availing of a car service. If you go to a showroom for your periodic car service, there’s an exchange of services between the mechanic and the customer (you). 

Role of Business Contractual Relationships

Businesses nowadays want to ensure that their deals are intact and avoid running the risk of lawsuits. In such cases, a holistic written contract is one of the most important aspects of maintaining contractual business relationships. These contracts outline the expectations, intended terms, and consequences of revoking the contract for both parties.

Furthermore, such relationships also foster a sense of predictability, ultimately creating trust and reducing misunderstandings between the contracting parties.

Types of Contractual Relationships

The contractual relationships vary according to the parties involved and the agreement nature. Some of the common types of the contractual relationship are as follows:

Unilateral: It’s where the promise is made by just one party to the contract. It’s legally binding, and one party must fulfill their obligations.

Bilateral: A bilateral contract is legally binding between two parties, and both should fulfill their stated obligations.

bilateral contractural relationships

Express: It’s a written contract and includes all terms and conditions.

Implied: An implied contract isn’t written, but it’s formed by way of the actions of the parties involved. A popular example would involve visiting a dine-in restaurant and ordering food.

Void: It’s a non-binding form of a contract since one or more parties can’t enter into a contract.

Stages of Forming a Contractual Relationship

A contract essentially has three fundamental stages. Let’s discover the stages of how can a contractual relationship be created.


It’s the first step to the initiation of a contract. An offer depicts the eagerness of one party to enter into a contractual obligation with the other. In this first phase, a promise is made by one party to the other.


A contract is void if it doesn’t have the mutual consent of all the parties involved. Therefore, the next primary stage is acceptance. The other party should accept the offer without any additional terms and conditions to develop a valid contract.


Of course, the purpose of any contract is to exchange something of value between two parties. It could either be money, goods, or services. Consider the following scenario: a customer pays $20 to purchase a loaf of bread from a bakery. In this context, the consideration for the bakery is $20, while it’s the loaf of bread for the customer.

Additional Rules and Conditions of a Contractual Obligation

The contractual obligation will be revoked if it doesn’t have the fundamental components discussed earlier. But that’s not all! A contract consists of additional conditions, principles, and requirements that determine its validity. Some of the rules of a contractual relationship include the following:

Legal capacity

The parties involved should be competent. The primary criteria are that any party to the contract shouldn’t be:

  • a minor,
  • of unsound mind,
  • disqualified to participate in a contract.

Governing Law

The contract can specify the governing law which could apply in case of any disputes in the contract.


The parties involved should be able to perform the contract. If the act is impossible, the contract is considered void.


Indeed, a contract is only valid if it’s for a lawful object or consideration. Anything prohibited by law or considered immoral or fraudulent can’t form a valid contract.


The contract specifies the breaches and penalties in case one of the parties to the contract fails to fulfill the obligations.

Best Practices for Ensuring Contract Relationship Management

Better management of contractual relationships ensures seamless workflows, an increase in stakeholder satisfaction, and a reduction in risks. Here are the best management practices to maintain contractual relationships:

Centralize Contract Repository

A big organization often has thousands of active contracts. If each contract is stored across different IT systems, it might get extremely challenging to locate and track the progress. So, the best way out is to develop a singular central repository where every contract is stored at a single location and is accessible using a few clicks.

Ensuring Contract Relationship Management

What’s more? Instead of creating a new template for each contract, the legal team can standardize a ready-to-go template to save time and increase efficiency.

Automate Communications

Of course, stakeholders need to be aware of the contract’s progress. Therefore, it’s best to use a robust contract lifecycle management (CLM) to integrate emails and send real-time notifications to all parties involved. This way, everyone in the organization aligns on the same page and can view the progress anywhere, anytime.

Define Contract Management KPIs

To ensure successful contractual relationship management, you should measure it using KPIs. However, it’s imperative to set sensible performance metrics that align with your goals. Some of the common ones include:

  • Legal compliance with contracts
  • Time required to create a contract
  • Performance measurement
  • Tracking disputes and claims

How can CLM Solutions Help you to Improve Contractual Relationships? 

If you choose a holistic CLM solution, you can pretty much ensure better management of your contractual business relationships. Here’s how an innovative CLM can help:

Enables collaboration: The tracking tools allow concerned departments to overlook the contract’s progress.

Automates communication: The integration of emails allows for conveying reminders to the concerned parties in real time. 

Reduce risk through AI: Al-led legal review reduces risk exposures and improves negotiations.

Customize templates quickly: Choose from hundreds of templates and develop a standardized one for your business processes.

Final Thoughts

From reviewing contracts in real-time to satisfying stakeholder objectives, CLM software is crucial for a successful contractual business relationship. If you also want to cut costs, save time, and improve workflows in your organization, reach out to Parley Pro for custom CLM solutions.

How useful was this post?

Click on a star to rate it!

Average rating 0 / 5. Vote count: 0

No votes so far! Be the first to rate this post.

Share this: