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How to Read a Contract

Woman reading a contract with a magnifying glass


Spend some quality time reading your contract without any distractions. 


Lindsey Ehlman is on the content team at ApproveMe. She’s an MVP legal junkie, professional paralegal with over 6+ years experience and currently pursuing her doctorate of law. In this guide, Lindsey will outline how companies and individuals can craft, negotiate and execute a win-win (and enforceable) contract.

Date Published:

Wake up! ApproveMe is here to provide helpful tips for reading a contract without dozing off. Contracts are different from other documents you typically read. They are structured and worded differently. However, contracts are essential for small businesses. 

A contract defines the scope of work and obligations of the parties. This means that costly legal headaches can be avoided from the frontend. While this may seem obvious, it is important to read your contract before signing it. Not skim, but read and understand what you are agreeing to. Spend some quality time reading your contract without any distractions. 

Woman reading a contract with a magnifying glass

Why is it Important to Read Your Contract?

Because you’re about to be legally bound by its terms. So if you want to avoid a potentially unpleasant surprise down the road, or want to negotiate in terms that you feel give you some protection, potential outs, etc – now is the time to do it!

Contracts are Legally Binding Documents

When the parties execute a contract, they agree to fulfill every term in the agreement. It is worth your while to sit down and thoroughly review the contract. This avoids trouble down the road and offers protection to your growing business. Generally, commercial contracts contain the same introductory provisions. Each contract will contain boilerplate language, but again, it is important to review the clauses to make sure they are applicable to your contract. 

What Should Every Contract Include?

All contracts contain a few basic elements. The contract must:

  • List the Parties and Effective Date (Preamble)
  • Explain the purpose of the Contract and Context of the Agreement (Recitals)
  • Clearly express the required elements of a contract (offer, acceptance, and consideration) 
  • Define the Meaning of Industry Terms
  • Scope of Work and Each Party’s Responsibility 
  • Terms of Payment
  • Duration of the Contract and Termination
  • Warranties and Representations 
  • General Provisions aka Boilerplate language 
  • Exhibits (details of the project, payment schedule(s), and other specifics) 
  • Signatures

These are simply the bare bones of a contract. A contract must include these elements to be enforceable in a court of law (to read more on this, we’ve broken down what makes a contract enforeceable). Further, the terms of the agreement should be clear and easy to understand. If a contract sets unreasonable expectations or is grossly one-sided, a court of law may find that the contract is void. So, how do you read a contract?

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Top 7 Contract Reading Tips

Reading a contract can seem overwhelming. It takes practice, but the more you develop an understanding of contract terms and what should be included, you will be a pro in no time! Note that laws vary from state to state on what they require to be included in an enforceable contract. It is beneficial to consult with an attorney before finalizing your agreement. Before reviewing your contract, list expectations and write down the “who,” “what,” “when,” “where,” and “how” of the project. Here are seven steps to check off your contract reading checklist:

  1. Read the contract! This tip cannot be overstated. We are human, and we make mistakes. Some mistakes in a contract could be detrimental. To avoid any trouble down the road, read the contract! Break it down section by section. Print the document and read every word. Do whatever you need to do, ensure you read through it, paying special attention to the key areas around money, terms, dates, and governance.
  2. Slow down! Reading and reviewing a contract is worth your time. This is not a task that should be brushed to the side. Contracts can make or break a business deal, so it is important to read over every term to make sure you cross your t’s and dot your i’s. Try not to review or read your contract in one sitting. After your initial review, set it aside and re-read it later and highlight any areas that are confusing or need improvement. 
  3. Take Notes! If you run across a section in the contract that is unclear or hard to understand, make a note, and plan to discuss it with the other party. This should be settled and fixed before the contract is signed. It is best to use plain-language instead of puffing the agreement and making the language too complicated.
  4. Review! The party’s obligations and question things like deadlines, reasonable expectations, the duration of the agreement, costs, expenses, and other important considerations. 
  5. Get it in Writing! Make sure all agreements and terms are in writing. Avoid relying on a “gentleman’s agreement” or any sort of outside verbal agreement. 
  6. Boilerplate Language! Contracts usually incorporate standard “boilerplate” language. Boilerplate language is essential and should not be excluded. These provisions spell out the process for dispute resolution, amendments, indemnification, assignments, governing law, choice of law provisions, confidentiality, exclusivity, force majeure, notice, and other specific, but essential provisions. While this is standard language, these clauses should not be glossed over.
  7. Bonus Tip! Consult with an attorney and colleague. It is always best to have another set of eyes to review an important legal agreement, especially if you have any doubts. Lawyers are well-versed in contract law and can offer guidance on how to proceed with your agreement.

“A legally binding, enforceable, and a well-drafted contract is necessary and beneficial to your business”

Ready for Signatures! 

Reading a contract is a tedious process. A legally binding, enforceable, and a well-drafted contract is necessary and beneficial to your business. It tackles any potential issues before the agreement is signed. It is not easy navigating through the legal jargon, but it gets easier over time. 

Once you have read through the agreement and cleared up any issues, it is time to get it signed! ApproveMe offers comprehensive contract templates to get the ball rolling. ApproveMe also expedites the signing process, getting you to work quicker! 

ApproveMe’s E-Signature WP plugin is what you have been missing! E-signatures are legally binding. Our state of the art plugin is convenient for you and your clients. Once the agreement is signed, both parties are emailed a copy for their records!  

Looking for a contract management software designed to wow your signers?

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The contents of ApproveMe are intended to convey general information and provide starter templates. The material on this site is for informational purposes only and does not provide legal advice or opinions. The contents of ApproveMe and the posting and viewing of information on this website should not be construed as legal advice or legal representation.

ApproveMe is not a law firm or a substitute for an attorney or law firm. The content provided by ApproveMe has not been reviewed or approved by an attorney and may not reflect the most current legal developments. You should seek advice and legal counsel of your choice concerning any particular issue or legal problem before acting upon any information derived from this site.

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