The Critical Eye: Developing Analytical Skills for Contract Review in Legal Training

Nov 30, 2023

Written By Lewis Ogg

In the fast-paced world of legal practice, the cornerstone of a successful career is your ability to conduct contract reviews. Contracts will permeate every aspect of your work as a trainee, whether it's an employment contract, property lease, or share purchase agreement. Given their prominence, developing a robust contract review approach is integral to producing consistent, high-quality work. With this in mind, this article will take you through the reliable strategies and techniques instrumental in nurturing your critical eye for contract review.

Foundations of analytical thinking in contract review

Analytical thinking is more than a singular skill; it is a mindset, an approach which you should bring to every task. Being analytical in contract review means engaging with the task so that you can decipher complex legal language and identify critical components. A practical example of an effective analytical approach is whether you can explain to your client their key responsibilities under a contract.

Contract review is often seen as laborious by those who dislike the task. However, trainees who excel in this area are those whose curiosity allows them to enjoy uncovering the nuances and potential issues of a contract. Even though it may sound childish, contract reviews are often like a puzzle where you need to uncover which piece is out of place; try to remain curious and enthusiastic about this challenge.

Developing attention to detail in contract analysis

Remaining detail-oriented is the bedrock of any effective contract review; every vague or incomplete clause is a potential source of litigation down the line.

There are several ways that prospective lawyers can develop the skills needed to be successful contract reviewers. One of the most effective of these is analysing real-world contracts. Using examples from legal textbooks or searching online, imagine you were given this contract to review. Spend time understanding the negotiation context, considering key terms and obligations of the contract, dissecting legal terminology, evaluating risk mitigation attempts, and finally considering the commercial implications of the contract.

Repeating these exercises with new contracts will help you to develop a sharper eye for perceiving nuances and pre-empting the types of wording or clauses to expect in certain contracts.

Analysing contract components effectively

When first attempting to analyse contracts, they can seem overwhelmingly complicated and as if they are speaking in code. Here are two definitions to help you:

Clauses: Specific subsections within the contract that refer to a specific aspect of the agreement that has been reached. Contracts are typically formatted as a series of these clauses.

Obligations: These are the responsibilities of each party involved in the contractual agreement. For example, one party may be obliged to paint an appointed wall with a specific shade of colour within an agreed-upon length of time. In contrast, the other will usually be obligated to pay an agreed-upon sum of money within a specified period of time after completion.

There is a plethora of other legal and financial terminology that will be incorporated into contracts that, if misunderstood, can dramatically impact the reading of a contract. Understanding of this terminology will grow with experience, and the best advice for new trainees would be to make a short definition, in your own words, for each new term you come across. In a matter of months, you will find that you have developed a handy database of essential terms that you can refer to at any time.

When approaching the contract as a whole, it is vital that you take a systematic approach, so you can group clauses with the obligations or limitations they are referring to. Highlighting can be very useful for when you look back.

Recognising patterns and anomalies

One of the great assets of experienced contract lawyers is that they have a bank of past experiences that they can draw upon to make their analysis of a contract quicker and more effective. To help develop these skills as a trainee, you should be trying to observe the patterns which underpin related contracts, whether that is the terminology used, the types of clauses proposed, or the overall structuring of the contract.

Any anomalies or inconsistencies are a potential source of litigation, meaning that the trainee’s job can be incredibly important as a final vetting of a contract before it is signed.

Applying critical thinking to risk assessments

Critical thinking is a powerful tool in risk assessments as it allows trainees to understand the intersection between client intention in making the clause and how the wording of the clause reflects that intention. Again, it is vital that these two points are aligned because, if they aren’t, there might be grounds for litigation disputing the wording of the clause.

When taking an analytical approach to risk assessment, remember to consider both the context of the contract and the wording reflected in that contract. You should also consider how it could be revised or improved to better reflect your client's priorities.

Risk assessment is a prominent part of most contractual agreements, especially for larger corporations. Imagine that company A rents a ship from company B for a month, and on day 10, it sinks. The contract made no reference as to what would happen in this situation, and both sides think they should be entitled to all the money. Who should be awarded the money? Or should it be divided between the two? And if it is to be divided, how will that be done? Risk assessment aims to prevent any obvious gaps in contracts that could lead to contractual incompleteness and potential litigation if certain events transpire.

While this is a theoretical example, the point is to demonstrate what can result in improper risk assessment during contract signing. The best solicitor can pre-empt these situations by understanding the commercial and operational possibilities that must be mitigated in a contract

Leveraging technology

In recent years, the use of technology in making the contract review process more efficient has become increasingly common. Software like DocuSign Insight and Lumina have begun to take much of the manual labour out of the review process. The important thing to note here is that this software does not work without supervision, so think of it as a tool to aid your analytical approach rather than an excuse to not develop one at all.

There has been much debate in the legal industry about the impact that AI can have on contract review. Generally, such technologies are highly equipped to perform pattern recognition, like the grouping of like clauses and identifying potential inconsistencies. Ultimately, the key drawback is not being able to understand the business or commercial context within the contracts, meaning that advice tends to be less tailored to the specific needs of the contract in question

Continuous improvement and training strategies

Developing the skills discussed in this article should be an ongoing process that takes place throughout your legal career; it isn’t enough to stop trying to develop after you have received your initial training. Try going the extra mile to progress by discussing potential improvements with your supervisors, consulting internal firm training modules or resources, and additionally enrolling in online courses on contract law and analytical thinking.

The most effective way to improve in this regard is almost certainly to seek mentorship from a more experienced lawyer. Having a mentor can be invaluable in raising original cases for you to examine or just to ask questions.

Conclusion

Contract review should not be considered an exercise you are naturally capable or incapable of. It should be seen as a subsection of intersecting skills (i.e analytical thinking) that can be individually cultivated to improve the overall quality of your work.

When trying to develop these skills, remember to approach tasks critically, try to observe patterns across different contracts, make sure you understand all the context that has gone into the formation of the contract, and don’t be afraid to take constructive criticism on your work.

Regardless of how frustrating this may be, in the long run, mastering a robust approach to contract review will be invaluable in allowing you to progress. Try to develop yourself with each and every task in some small way. Before you know it, the amount of progress you will have made will be astounding.

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