How a contract deal runs, from first email to signature

This guide splits a contract deal into six stages: drafting, review, redlines, negotiation, rounds, and the final version and signing. One side drafts, the other sends changes back, and you trade versions until both sides accept the same one. Each stage stalls in a different place, so know which stage you're in and what you're waiting for.

What happens at each stage of a deal?

Once the first draft goes out, the other side reviews it. If you drafted, they review it and you pick up at stage 3, when your draft comes back changed. If they drafted, you start at stage 2 and send your changes back as redlines. Either way, both sides review every new version.

Who should write the first draft?

If you can, offer to write the first draft. It sets the order and the starting wording that later changes are measured against. Some clients will still insist on their own template. Australia's government business guide says a simple contract should cover the work, the pay, what counts as finished, and disputes. A deal agreed by email can sometimes be a contract already, if the usual rules for forming a contract are met. In England and Wales, for example, most agreements need no particular form. But the rules differ between countries and US states, so don't rely on the thread. Put the deal into one document both sides sign, so nobody has to rebuild it later.

Before you send your draft, check that:

• Every agreed point is there, in its latest version, not the first one mentioned
• Both sides' full legal names and business addresses are right
• It says when and how you get paid, and what counts as finished
• It says how changes to the work get agreed: in writing, by both sides
• Anything still unknown is in [brackets], and one email asks for all of it

What if they send their contract instead?

When the other side sends its own template, you do the review. A company's standard contract is often written with its own interests in mind, so read it from your side. Read every page, including the statement of work, any schedules and any terms it links to. Then compare it with what you agreed: price, dates, scope and when you get paid. Australia's government business guide also warns against a variation clause that lets only one party change the work.

Before you reply, check that:

• You have every document the contract refers to, including linked terms
• Price, dates and scope match what you agreed
• You know when you're paid, when they own your work, and what you owe if something goes wrong
• Neither side can change the work alone
• You have an editable Word file, so your changes can be tracked

They sent your draft back with changes. Now what?

Redlines are the other side's edits to your draft, usually shown as tracked changes. The same steps apply when they answer the redlines you made to their template. Sort each change by what it does to you: money, risk, scope or wording. Push back on the few that cost you, accept the rest, and reply with one email and one tracked file. If they send a clean copy with no tracked changes, compare it with the version you sent. In desktop Word for Windows, the legal blackline compare (Review tab, Compare, then "Compare two versions of a document (legal blackline)") shows the changes in a third, new document. By default, both originals stay as they were. For which changes to push back on, and an email to send, see Your client redlined your contract.

Before you send your reply, check that:

• You compared their file with the version you sent, not an older one
• Each change is accepted, countered or pushed back
• Every counter includes your wording, not just "no"
• Track Changes is on before you edit, so they can see your changes

What if you're stuck on one clause?

Negotiation can narrow to one or two clauses, such as payment terms, ownership of the work or liability. Repeating "no" tends to stall things. Offer a trade instead: give where it costs you little, and hold where it costs you a lot. Send each offer with the exact clause wording, so a yes can go straight into the contract. For a worked example on one clause, see How to push back on Net-60 payment terms.

Before you make your next offer, check that:

• You know what the clause costs you, in money or in risk
• You have a second offer ready if they turn down the first
• Each offer is written as contract wording
• Every other clause is settled, so only this one is open
• You know the point at which you'd walk away

How do you keep versions and agreed points straight?

Rounds are the back-and-forth after the first redlines. Each new version is a chance for an agreed point to slip, so start tracking with the first draft. Keep one current file where both sides can find it. Name each version so anyone can tell which is latest. A file called "Final_v7" helps no one. Keep a short list of what's agreed and what's still open, with the wording you settled on. Before you reply, compare each new version with the one you sent. Agreed clauses sometimes change without anyone saying so.

Each round, check that:

• There's one current file, and both sides know where it is
• The newest version is obvious from its name
• Your list of agreed and open points is up to date
• You compared the new version with the one you sent
• You both know the date for the next reply

What should you check before you sign?

The last check before signing is a word-for-word comparison of the signing copy with the last version you agreed. Use Word's legal blackline compare, then check the legal names, the signer, every amount and date, and the attachments. If the signing copy is a PDF, check all of it, attachments included: compare the Word file it was made from, or read the PDF side by side with the agreed version. In the US, for deals in or affecting interstate or foreign commerce, the ESIGN Act says a contract or signature can't be denied legal effect solely because it's electronic. That rule removes one objection only. It has exceptions, such as wills and family-law matters, it doesn't make anyone accept an e-signature, and the usual rules on forming a contract still apply. After signing, put any later change in writing and have both sides sign it.

Before you sign, check that:

• The signing copy matches the last agreed version, word for word
• Legal names, signer, amounts and dates are right
• Every attachment the contract mentions is attached
• The e-signature platform has the same file you checked
• Both sides will keep a fully signed copy

When should you get a lawyer?

Get a lawyer when a possible loss is bigger than what a lawyer would charge to review the contract, or you can't tell what a clause does. Australia's government business guide suggests legal advice on any clause that gives the client IP rights, and professional advice on indemnity clauses. Other common reasons:

• The contract has no cap on your liability, on work where a claim could exceed what you could pay
• The other side is in another country, or the contract uses a law you don't know
• The deal is large for your business, such as several months of revenue
• The document needs a special signing step, such as a witness or a notary

When does running deals by hand stop working?

One deal at a time fits in an inbox and a folder. It gets harder when several deals run at once, each at a different stage, and you have to remember whose turn it is, which version is current and what's still open in each. That's when it's worth keeping every deal, and every version of it, in one place.

DealMate is an AI contract assistant that takes a deal from first draft to final: describe the deal in a sentence and get a draft built from your templates and clauses; when they send their template, review it from your side and see what's risky; when their redlines come back, compare the versions and see every change and the risk it carries.