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negotiates and administers these contracts. For example, the process of entering into an important customer contract contains a number of possible stages and these are discussed below. Not every contract will contain all of these stages.

Initial tender document

Some major organizations will invite businesses to tender for an important contract to provide services. A tender document is produced by a business in order to sell itself by explaining the procedures and practices it can implement in order to provide the best possible levels of service. The organization will consider several tenders and award the contract to the most impressive of those.

Heads of terms

Sometimes, before a final contract is entered into, 2 parties will sign or at least agree on a heads of terms document. The purpose of this document is to set out the broad terms on which the 2 parties are prepared to contract. In many jurisdictions it is not legally binding but serves a helpful purpose of preventing later difficulties in the actual contractual negotiations.

Contract negotiations

This is the period of negotiation during which the minutiae of the contractual terms are usually finalized. This process is usually carried out by sending a version of the contract backwards and forwards between the parties. Each party will amend the contract, deleting terms which are unacceptable to them and / or inserting other provisions which they require. After several turns of the contract, the parties will have each decided on the things which are most important to them and a compromise will have been reached. The number of concessions that each party will have had to make in order to reach this stage will be dependent upon their relative bargaining positions. At this stage each party will sign a copy of the final form of the contract and the relationship is confirmed.

In negotiating draft contracts, it is important to have a system which allows businesses to keep and update draft versions. From an administrative point of view, it is the most efficient way to make a complicated task as simple as possible. Also, it creates a paper trail which records the parties’ expectations and intentions in reaching final agreement and this can often be a helpful tool to refer to in the event of a contractual dispute.

After the final agreement is reached it will be important that each party actually complies with the terms and conditions to which it has agreed. If a business does not have an efficient method of doing this, then the contract might not be worth the paper on which it is written.

In most jurisdictions contracts can be amended after they have been entered into. This is usually done by each party signing a deed of variation indicating that they acquiesce to the amendment.

Contracts can also be ended and, in the case of particularly important arrangements, this is often formalized by a deed of termination.
For businesses which enter into a large number of contracts, the process of managing these can become an everyday battle. If, for example, arrangements with a particular customer or supplier are not working out as planned, it is essential that a business should be able to access all the contractual details in order to ascertain whether there is any suitable passage of recourse.

This is where contract management software comes in. These are computer programs which have been specifically designed to manage every part of the process of entering into a contract. Through this system, the details of every single contract can be stored in a virtual warehouse, accessible by any authorized employee. Template documents can be uploaded to the system in order to provide the starting point and employees with appropriately high-levels of access will be able to amend these in order to comply with updated legislation and court decisions. Major companies will almost invariably take advice from lawyers in order to agree the template documents. Contract management software has been particularly successfully used by major corporations such as credit card companies, which enter into many virtually identical consumer credit agreements on a daily basis.

Almost all businesses rely on contracts in order to create revenue streams and manage relationships. Good contractual management is an essential part of a well-run business and this can be facilitated using contract management software.