Contract Redline Item

A Contract Redline Item is a legal document modification in a contract language that outlines and incorporates agreed-upon changes to an existing contract.

• AKA: Contract Amendment.
• Context:
  • It can (typically) be in a Redlined Contract Document.
  • It can (typically) be visually highlighted to indicate an addition, deletion, or amendment.
  • It can (typically) facilitate clear communication between the contract reviewer and other Contract Stakeholders about proposed changes to the contract terms.
  • It can (often) appear as Marked Text (often in red with strikethroughs for deletions and underline for additions) using tools like Document Processing Apps
  • It can (often) be managed through document editing software or legal document management systems that support track changes functionality.
  • It can (often) include annotations or comments to provide rationale for the changes or to seek clarification on certain points.
  • It can (often) support risk management by identifying areas of potential dispute or misunderstanding before a contract is finalized.
  • It can range from minor edits, like correcting typos, which have little material impact, to major amendments, like altering the scope of agreement, which have significant material implications.
  • It can range from being a Simple Redlined Change Item to being a Complex Redlined Change Item.
  • It can range from being a Pre-Signature Redlined Change to being a Post-Signature Redlined Change, depending on the contract review phase.
  • It can be subject to further discussion and revision as part of the Contract Negotiation process.
  • It can be referenced by a Contract Redlines-Focused Report, such by a redlined contract summary (with redlined contract summary items).
  • ...
• Example(s):
  • Modification Items:
    • Sentence-Level Modification Items:
      • A Contract Language Change Item in the payment terms of a redlined vendor agreement, such as:
        • "Payment terms are net 30 days net 60 days." that shifts from net 30 to net 60 days.
      • A Contract Clause Modification Item in the termination clause of a redlined service contract, such as:
        • "Termination notice period is 30 days 60 days."
      • An Update Item to the warranty clause in a redlined product supply contract, such as:
        • "Warranty period is one year two years."
      • A Contract Term Clarification Item in the delivery terms of a redlined procurement contract, such as:
        • "Delivery will be made within 30 days within 45 days of order placement."
      • A Contract Clause Adjustment Item in the liability clause of a redlined software license agreement, such as:
        • "Maximum liability is $100,000 $150,000."
      • A Revision Item to the dispute resolution clause in a redlined international trade agreement, such as:
        • "Disputes will be resolved through local arbitration international arbitration."
    • Multi-Sentence Modification Items:
      • A Contract Language Change Item in the confidentiality clause of a redlined employment contract, such as:
        • "Employee agrees to keep company information confidential. Employee agrees to keep company information confidential, including client lists, financial records, and proprietary software."
  • Deletion Items:
    • Sentence-Level Deletion Items:
      • A Contract Clause Deletion Item in the indemnification clause of a redlined commercial contract, such as:
        • "The vendor shall indemnify and hold harmless the client for any claims arising from the vendor's services."
  • Addition Items:
    • Sentence-Level Addition Items:
      • A Contract Clause Addition Item in the force majeure clause of a redlined construction contract, such as:
        • "Including pandemics as a force majeure event."
    • Multi-Sentence Addition Items:
      • An Amendment Addition Item to the non-compete clause in a redlined sales agreement, such as:
        • "The employee agrees not to engage in any sales activities within a 50-mile radius of the company's headquarters for one year following termination."
  • By Contract Type:
    • Vendor Agreement:
      • A Contract Language Change Item in the payment terms of a redlined vendor agreement, such as:
        • "Payment terms are net 30 days net 60 days." that shifts from net 30 to net 60 days.
    • Employment Contract:
      • A Contract Language Change Item in the confidentiality clause of a redlined employment contract, such as:
        • "Employee agrees to keep company information confidential. Employee agrees to keep company information confidential, including client lists, financial records, and proprietary software."
    • Commercial Contract:
      • A Contract Clause Deletion Item in the indemnification clause of a redlined commercial contract, such as:
        • "The vendor shall indemnify and hold harmless the client for any claims arising from the vendor's services."
    • Sales Agreement:
      • An Amendment Addition Item to the non-compete clause in a redlined sales agreement, such as:
        • "The employee agrees not to engage in any sales activities within a 50-mile radius of the company's headquarters for one year following termination."
    • Service Contract:
      • A Contract Clause Modification Item in the termination clause of a redlined service contract, such as:
        • "Termination notice period is 30 days 60 days."
    • Product Supply Contract:
      • An Update Item to the warranty clause in a redlined product supply contract, such as:
        • "Warranty period is one year two years."
    • Construction Contract:
      • A Contract Clause Addition Item in the force majeure clause of a redlined construction contract, such as:
        • "Including pandemics as a force majeure event."
    • Procurement Contract:
      • A Contract Term Clarification Item in the delivery terms of a redlined procurement contract, such as:
        • "Delivery will be made within 30 days within 45 days of order placement."
    • Software License Agreement:
      • A Contract Clause Adjustment Item in the liability clause of a redlined software license agreement, such as:
        • "Maximum liability is $100,000 $150,000."
    • International Trade Agreement:
      • A Revision Item to the dispute resolution clause in a redlined international trade agreement, such as:
        • "Disputes will be resolved through local arbitration international arbitration."
  • By Contract Clause:
    • Payment Terms:
      • A Contract Language Change Item in the payment terms of a redlined vendor agreement, such as:
        • "Payment terms are net 30 days net 60 days." that shifts from net 30 to net 60 days.
    • Confidentiality Clause:
      • A Contract Language Change Item in the confidentiality clause of a redlined employment contract, such as:
        • "Employee agrees to keep company information confidential. Employee agrees to keep company information confidential, including client lists, financial records, and proprietary software."
    • Indemnification Clause:
      • A Contract Clause Deletion Item in the indemnification clause of a redlined commercial contract, such as:
        • "The vendor shall indemnify and hold harmless the client for any claims arising from the vendor's services."
    • Non-Compete Clause:
      • An Amendment Addition Item to the non-compete clause in a redlined sales agreement, such as:
        • "The employee agrees not to engage in any sales activities within a 50-mile radius of the company's headquarters for one year following termination."
    • Termination Clause:
      • A Contract Clause Modification Item in the termination clause of a redlined service contract, such as:
        • "Termination notice period is 30 days 60 days."
    • Warranty Clause:
      • An Update Item to the warranty clause in a redlined product supply contract, such as:
        • "Warranty period is one year two years."
    • Force Majeure Clause:
      • A Contract Clause Addition Item in the force majeure clause of a redlined construction contract, such as:
        • "Including pandemics as a force majeure event."
    • Delivery Terms:
      • A Contract Term Clarification Item in the delivery terms of a redlined procurement contract, such as:
        • "Delivery will be made within 30 days within 45 days of order placement."
    • Liability Clause:
      • A Contract Clause Adjustment Item in the liability clause of a redlined software license agreement, such as:
        • "Maximum liability is $100,000 $150,000."
    • Dispute Resolution Clause:
      • A Revision Item to the dispute resolution clause in a redlined international trade agreement, such as:
        • "Disputes will be resolved through local arbitration international arbitration."
  • ...
• Example(s):
  • by Revision Type:
    • A Contract Language Change Item in the payment terms of a redlined vendor agreement, such as:
      • "Payment terms are net 30 days net 60 days." that shifts from net 30 to net 60 days.
    • A Contract Language Change Item in the confidentiality clause of a redlined employment contract, such as:
      • "Employee agrees to keep company information confidential. Employee agrees to keep company information confidential, including client lists, financial records, and proprietary software."
    • A Contract Clause Deletion Item in the indemnification clause of a redlined commercial contract, such as:
      • "The vendor shall indemnify and hold harmless the client for any claims arising from the vendor's services."
    • An Amendment Addition Item to the non-compete clause in a redlined sales agreement, such as:
      • "The employee agrees not to engage in any sales activities within a 50-mile radius of the company's headquarters for one year following termination."
    • A Contract Clause Modification Item in the termination clause of a redlined service contract, such as:
      • "Termination notice period is 30 days 60 days."
    • An Update Item to the warranty clause in a redlined product supply contract, such as:
      • "Warranty period is one year two years."
    • A Contract Clause Addition Item in the force majeure clause of a redlined construction contract, such as:
      • "Including pandemics as a force majeure event."
    • A Contract Term Clarification Item in the delivery terms of a redlined procurement contract, such as:
      • "Delivery will be made within 30 days within 45 days of order placement."
    • A Contract Clause Adjustment Item in the liability clause of a redlined software license agreement, such as:
      • "Maximum liability is $100,000 $150,000."
    • A Revision Item to the dispute resolution clause in a redlined international trade agreement, such as:
      • "Disputes will be resolved through local arbitration international arbitration."
  • Redline Items by Complexity:
    • Simple Redlined Change Item: Correcting a typographical error in a contract clause.
    • Complex Redlined Change Item: Restructuring a complex pricing formula in a services agreement.
  • Redline Items by Review Phase:
    • Pre-Signature Redlined Change: Modifying a liability clause during contract negotiations before signing.
    • Post-Signature Redlined Change: Updating a vendor's address in a supply agreement after it has been executed.
  • Redline Items by Impact:
    • Minor impact: Fixing a misspelled word that doesn't change the meaning of the clause.
    • Moderate impact: Adjusting payment terms from net 30 to net 60 days.
    • Major impact: Adding or removing an entire section of the contract, such as a non-compete clause.
  • Redline Items by Type:
    • Major Revision:
      • **10.2 (Term of Subscription Services):** The automatic renewal clause and the provision for a price increase of up to 5% per year for Renewal Terms have been removed. This change requires explicit agreement from both parties to extend the subscription beyond the Initial Term, potentially affecting the contract's longevity and financial terms. The revision directly impacts the duration and pricing of the agreement, making it a significant alteration to the original terms. "Automatic renewal clause requires explicit agreement from both parties to extend the subscription beyond the Initial Term."
      • **11 (Mutual Indemnification):** The current version introduces a new indemnification clause that makes the indemnification obligations largely mutual, whereas previously, they were solely the Customer's responsibility. However, LegalOn's indemnification obligations exclude damages arising from Customer Content, and there are minor grammatical errors in the new clause. This change significantly alters the allocation of risk between the parties, although the exclusion for Customer Content and the grammatical issues slightly diminish the overall balance. "Indemnification solely the Customer's responsibility indemnification obligations largely mutual excluding Customer Content."
      • **22 (Publicity):** The "Publicity" article from the previous version has been removed, and the "Choice of Law" article has been renumbered from 23 to 22. This change eliminates provisions that allowed LegalOn to use the Customer's name, trademarks, and logos for advertising purposes. The deletion of the entire article substantially impacts the marketing rights and obligations of the parties. "Publicity article renumbered Choice of Law article."
    • Minor Revision:
      • **6.3 (Warranties):** The phrase "FITNESS FOR A PARTICULAR PURPOSE" has been removed from a list of examples of warranties disclaimed by LegalOn. The contract language states that LegalOn and its licensors and suppliers disclaim all promises, representations, and warranties, except as expressly provided otherwise in the Agreement. While this change slightly narrows the scope of the disclaimers, it does not materially alter the overall allocation of risk or warranties. "FITNESS FOR A PARTICULAR PURPOSE narrowed scope of disclaimers."
      • **10.4 (Effect of Termination):** The current version adds an obligation for LegalOn to delete Customer Content within 30 days following the termination of the Agreement. This change enhances data protection for the Customer by ensuring the deletion of its content from LegalOn's systems post-termination, even if the Customer fails to request its destruction. Although this revision improves the Customer's position, it is a relatively minor addition to the termination provisions. "LegalOn to delete Customer Content within 30 days post-termination."
  • ...
• Counter-Example(s):
  • Clean Contract Document, e.g., one that incorporates all agreed-upon changes and is ready for signing.
  • Draft Contract before any review or negotiation process has begun.
  • Unmodified Contract Clauses, which remain unchanged during the negotiation process.
  • Contract Appendix or Contract Exhibit, which are separate from the main body of the contract and not typically subject to redlining.
  • Oral Contract Amendments, which are not documented in writing and therefore not redlined.
  • ...
• See: Annotation Tool, Contract Lifecycle Management, Document Markup, Markup Language, Negotiation Tactic, Stakeholder Communication, Version Control System, Contractual Term, Addendum.

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References

2024

• (ChatGPT-OpenAI, 2024) ⇒ Prompt: Summarize the concept Contract Redline Item (aka Contract Amendment) in 1- 2 paragraphs. ChatGPT (model:gpt-4o). Retrieved: 2024-09-21.
  • QUOTE: A Contract Redline Item, also known as a Contract Amendment, refers to a specific, marked-up change or addition to an existing contract that is proposed during the negotiation process or after the contract has been executed. These redlines are typically highlighted using a different color or font and denote alterations, deletions, or insertions to the original contractual terms. Redlining is a crucial step in contract management as it allows involved parties to clearly see proposed changes, agree on adjustments, and ensure mutual understanding and consent before finalizing the updated agreement.

    The process of redlining typically involves detailed review and negotiation by legal teams and business teams to address evolving needs, rectify issues, or incorporate new regulations or conditions. Amendments can cover a broad range of contract elements such as pricing adjustments, changes in scope of work, timeline extensions, or modifications to terms and conditions. Once all parties agree on the redlined terms, the contract amendment is formalized and incorporated into the original agreement, ensuring that the contract remains up-to-date and legally binding.

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