Analysis is the process of breaking a complex topic or substance into smaller parts to gain a better understanding of it. When we talk about ‘contract analysis’ plenty of questions come to mind – does it refer to the financial analysis of a contract or it is about cost effectiveness, business analysis or maybe price analysis, all of which can be derived from the contract clauses.
A comparative and stand-alone analysis of your contracts can give an insight into your contracts. Contracts contain complete information about a deal and a thorough analysis can open more opportunities to improve and expand your businesses with your current and prospective buyers. Also, summaries and reports generated can help management take better-informed decisions.
Let’s talk about this analysis from a legal perspective. When a legal scholar analyzes a contract, s/he basically looks for key similarities across the agreement and various types of agreements without ignoring the differences. Clauses are reviewed and analyzed keeping various regulatory, industry and business practices in mind. All the relevant and important information is then extracted for any future reference and management perusal.
The other important factor that affects the interpretation of a contract is the language and style used while drafting a contract. Language within different contracts may be similar or there can be similarities in the structure of frequently occurring consistent clauses. Examples of such clauses, having similar language include so-called “boilerplate” provisions. Different types of agreements can have different types of language in similar clauses; hence, an analyst has to be very careful. Language variation can be due to different intent, custom, or preferences of the contracting parties.
Analyzing contracts also reveals that some clauses are common characteristics of some particular contracts, for example, license term is essential for software licensing agreement but may not be necessary for an employment agreement. Meanwhile, FTE Status is necessary for Employment Agreement.