Most people have a basic understanding of how contracts work: draft, sign, execute. While these three steps are important, the lifecycle of a contract actually has nine stages. Understanding these stages, and seeking the proper counsel as needed throughout the cycle, is critical for Michigan businesses looking to avoid legal issues.
Stages of the lifecycle before the contract is signed
There are four stages of the lifecycle that take place before a contract is signed: the contract request, authoring, negotiation and approval. Depending on the nature of the contract, legal counsel may be engaged even before the contract request; however, the bulk of legal work in this first area of the lifecycle will happen during the authoring and negotiation stage. These are critical stages where the terms of the contract are laid out in writing and negotiated between parties.
Stages of the lifecycle after the contract is signed
The next stage of the life cycle is execution, meaning of signing of the contract. After execution comes obligations management and, in some cases, contract amendment. This is where both sides fulfill the contract, adjusting it through mutual agreement if needed.
Stages of the lifecycle that may follow
Finally, there are two stages that typically take place after the obligations have been fulfilled. The first of these is audit and reporting, which involves ensuring that the contract was indeed fulfilled in accordance with the agreement. The second is renewal, which only applies if both parties wish to re-enter into an agreement.
Suffice it to say, entering into a contract can be more complicated than one may initially think. It is very important to get the wording exactly right, and to ensure obligations are fulfilled throughout the lifecycle of the contract. Additionally, making sure that both parties fully understand any amendments or renewals is key. Businesses can get legal support for their contracting processes by speaking with an experienced Michigan attorney.