What Is Contract Redlining Software and How Does It Help?

Contract management software is used to help organizations streamline and automate the traditional contract lifecycle in order to significantly reduce the amount of time and human errors typically associated with these processes.

And, when it comes to law firms and legal departments, contract management software is especially essential.

In this article, we will take a look at what it means to redline a contract, the challenges in the redlining of contracts, and why document redline software is so beneficial.

What are redline contracts?

Do you remember when growing up in elementary school, your teacher would mark your papers or essays with red ink so that it stood out among your black ink?

This is where the word ‘redline’ comes in and when it involves legal teams and law firms, it is a very important term to understand.

‘Redline’ contracts are not a type of contract; ‘redlining’ simply refers to the editing process that takes place in contracts when two (or more) parties are involved in the contract negotiation phase.

The redlining of contracts occurs either during these negotiation phases or when a party is editing a contract in order to show the other party exactly where and how they made changes (similar to how your teacher would edit your papers with red ink – so you can see where they made changes!)

What does redlining a contract mean?

It means to edit text or changes in a contract, usually done collaboratively. 

As mentioned, it often takes place during the negotiation phase of contracts when each party is attempting to draft a finalized contract that includes all the terms and clauses of which both sides are satisfied.

When an involved party is making their set of changes or edits that they would like to see in the final contract, the annotations and edits will be a certain color (often red); this makes it easier for the other party to see the changes that were made apart from what was already printed in the contract.

Redlining is a practice that has been around for ages (at least, much before we started using digital contracts).

How to redline a document

There are many different ways of redlining a contract.

Previously, these changes would need to be made manually – by hand. Now, this is no longer true.

Although many legal departments use contract management and redlining software, other teams use programs like Microsoft Word.

Whatever the case, the basics of document redlining is this: each party goes ‘back and forth’ during negotiation making edits or additions in the text that is unique from the rest of the document (this can be red, blue, bold, etc.) Then, with computer files, the two documents files are inputted and compared; then, the software or program outputs a third file that contains all the new edits.

Usually, the new text additions will be marked by bold or underlined and the deleted text might have brackets or strike-throughs.

Now, using contract redlining software, this entire process is much easier and more effective.

When should you redline a contract/document?

Redlining of contracts is required when:

• two or more parties are negotiating or reviewing a legal document
• when one party is editing a contract where the other party needs to see the changes made
• Editing documents for internal use, such as one department making changes so another department can see what needs to change or errors

Challenges

There are many challenges that come with the traditional ‘redline contract process’.

Such challenges include:

• hard to read (arguably the most annoying aspect of in contract redlining, edits and additions make it tricky to find text mistakes, such as spelling or grammar).
• untracked changes (it’s crucial for all prior versions of contracts to be tracked and saved for recall – if the track-changes features aren’t enabled, this can create many problems for legal teams).
• poor formatting (after various changes, a certain part of the document may lose its previous intended formatting – this means users must fix these errors by reformatting).
• platform compatibility (not all redlining will show up as intended on different devices – for example, when edits are made on an Apple Computer, they might not show up on a Google Tablet).
• leftover metadata (the redlining of contracts leaves unwanted metadata that may contain classified information – deleting this data is a necessary yet meticulous task in and of itself).

How to redline contracts effectively

Despite the many challenges of redlining contracts, there are ways to ensure the process is executed much more effectively.

The main secret to this is proper collaboration; each party must be unified in what they are working towards for any specific legal document. Contracts vary greatly in terms of goals so it is very important everyone is ‘on the same page’.

Also, the entire redlining of process contracts cannot be rushed; this is an important stage of the entire contract lifecycle and should not be taken lightly.

Unfortunately, many of the ‘redline contract challenges’ we’ve just discussed are a natural byproduct of the traditional process.

However, all of these issues are simply fixed by the use of contract management and contract redlining software.

Why Is contract redlining software beneficial?

Contract redlining (or document redline) software is the simple fix for all the challenges and issues associated with the redlining of contracts.

Such challenges as:

• metadata
• compatibility
• reading clarity
• formatting
• tracking changes

Issues like these are all automatically solved when using a contract redlining software/document redline tool or contract management software with a redlining function.

These software programs are designed to help law firms and legal teams blaze through the document redlining process by eliminating all of these challenges and making it as simple as possible for teams to effectively negotiate or edit their important legal documents.