Master the Contract Preparation Process: The Ultimate Pre-Flight Checklist

Subscribe to our Newsletter

Ever had that sinking feeling after a handshake deal? That nagging thought, “Maybe we should have written that down?” It’s a common experience. A simple project spirals out of control, a payment gets “forgotten,” or a friendly agreement turns into a stressful dispute. It’s not because people are dishonest; it’s because memory is fallible and expectations can differ wildly.

A well-prepared contract isn’t about mistrust; it’s about creating clarity. It’s a shared roadmap that ensures everyone involved knows the destination, the route, and what to do if you hit a detour. Think of it as a pre-flight checklist for your business relationship. Pilots don’t run checklists because they expect the plane to crash—they do it to ensure a smooth, safe flight for everyone.

This guide is your pre-flight checklist. We’ll walk you through the entire contract preparation process, step-by-step, transforming industry jargon into simple concepts so you can create agreements that protect your work, your money, and your relationships.

What Is the Contract Preparation Process?

Contract preparation is the process of planning, gathering information, identifying risks, and aligning stakeholders before a contract is drafted. It involves both strategic thinking and operational execution to ensure that the agreement reflects business goals, legal requirements, and compliance standards.

A strong contract preparation process typically includes:

Understanding deal objectives and deliverables
Collecting legal and commercial data
Engaging internal reviewers early
Choosing the right templates or frameworks
Assessing and mitigating potential risks

This process lays the groundwork for efficient drafting, reduces negotiation cycles, and helps prevent value leakage down the line. In short, contract preparation isn’t paperwork—it’s business enablement.

The 7 Core Elements of Any Legal Contract

Before you start writing, it helps to understand what makes a contract legally binding. It’s not about using fancy “heretofores” and “whereas” clauses. At its heart, a contract needs seven core ingredients to be valid.

Offer: One party proposes a deal. (e.g., “I will design a new logo for you.”)
Acceptance: The other party agrees to the offer’s terms. (e.g., “I accept your proposal to design the logo.”)
Consideration: Something of value is exchanged. This is the “what’s in it for me?” part. It can be money, services, or goods. (e.g., The logo design is exchanged for $1,000.)
Mutual Assent: Both parties agree to the same terms. This is also called a “meeting of the minds.”
Capacity: The individuals signing the contract must be legally capable (e.g., of sound mind, not a minor).
Legality: The purpose of the contract must be legal. (You can’t have a valid contract for an illegal activity).
In Writing (Sometimes): While verbal agreements can be binding, certain contracts (like those for real estate or that can’t be completed in a year) must be in writing. In business, it’s always the best practice.

Pro Tip: See our Contract Management Best Practices guide to streamline workflows and boost contract value.

Contract Preparation vs. Contract Drafting – What’s the Difference?

Before diving into the step-by-step preparation process, it’s important to distinguish between two often-confused terms: contract preparation and contract drafting.

Contract preparation is the strategic groundwork—it involves gathering information, aligning stakeholders, identifying risks, and deciding what should go into the contract.
Contract drafting is the execution phase—turning those decisions into clear, structured legal language.

Think of preparation as building the blueprint, and drafting as constructing the structure. Great contracts start with intentional preparation—not just templated text.

Contract Preparation Process: A Step-by-Step Walkthrough

Alright, let’s move from theory to action. Here is the step-by-step process for preparing a contract that works, framed as your pre-flight checklist.

Step 1: Define the “Deal” (Gathering Your Information)

Before a single word is written, you need to be crystal clear on the details. This is the most critical step, and rushing it is the #1 cause of future disputes. Grab a notebook or open a doc and answer these questions:

Who are the parties? Get the full legal names and addresses.
What is the purpose? What is the big-picture goal of this agreement?
What are the specific deliverables? Be precise. Not “a new website,” but “a five-page WordPress website with a contact form, blog, and homepage slider.”
What is the timeline? Include start dates, end dates, and key milestones or deadlines.
What is the cost and payment schedule? Total price, deposit amount, payment milestones (e.g., 50% upfront, 50% on completion), and payment methods.
What defines “done”? How will you know when the project is successfully completed? What are the acceptance criteria?

Before you define the deal, it helps to assemble the right data and documents that will serve as your contract’s foundation.

Explore our Contract Document to learn essential formats, clauses, and structuring tips for airtight agreements.

Key Documents & Data Needed Before You Draft a Contract

In Step 1, we talked about defining the deal. But even before that, it’s smart to build a pre-contract data pack—a simple collection of materials and inputs that ensure you’re not starting from scratch.

Here’s what to gather:

Legal entity details of both parties
Business case or RFP (if the contract responds to one)
Approved budget and commercial terms
Internal compliance requirements
Prior agreements, including MSAs, NDAs, or SOWs
Stakeholder inputs and expectations
Risk considerations already identified

Having this information upfront makes drafting faster, reduces back-and-forth, and ensures your contract reflects both business priorities and legal safeguards.

Step 2: Assess the Risks (What Could Go Wrong?)

Every business engagement has potential risks. Thinking about them now isn’t pessimistic; it’s professional. A good contract is a risk management tool. Ask yourself:

What happens if a deadline is missed?
What if the client keeps asking for “one more little change” (scope creep)?
What if the quality of the work isn’t what was expected?
What if one party needs to cancel the agreement early?
What if confidential information is shared?

Your answers will help you identify which clauses you need to pay special attention to. The practice of contract risk management is about anticipating these issues before they become expensive problems.

Once you’ve mapped out the risks, it’s time to align with your internal stakeholders—because a well-prepared contract reflects the interests of everyone it impacts.

Internal Stakeholder Alignment and Approvals

After identifying risks in Step 2, the next essential task is internal alignment. Contracts don’t operate in a silo—they reflect the interests of legal, finance, procurement, compliance, and business units.

Here’s what this phase should cover:

Stakeholder review of key terms—pricing, deliverables, IP rights
Approval workflows for non-standard clauses
Delegation of authority for who can approve what
Compliance checks on regulatory or data handling requirements

This isn’t about red tape—it’s about ensuring the contract is executable and doesn’t fall apart during the final review or audit

Step 3: Write the First Draft (From Template to Tailored)

Now you can start assembling the document. For many small businesses and freelancers, starting with a reputable template is fine. But never, ever just fill in the blanks and sign. Use your notes from Step 1 and 2 to customize it.

The process of contract drafting and review involves turning your deal points into clear, unambiguous language. Focus on the core components first: scope of work, payment terms, and timeline.

Step 4: Decode the “Scary” Parts (Boilerplate Clauses Explained)

At the end of most contracts, you’ll find a section of dense, legal-looking text. This is often called “boilerplate.” People tend to skip it, but it’s incredibly important. These are the clauses that control how disputes are handled and define the legal mechanics of your agreement.

Here are a few of the most important contract clauses in plain English:

Indemnification (“Hold Harmless”): A promise that if your work causes a lawsuit against your client, you’ll cover the costs. It’s a way of transferring risk.
Limitation of Liability: This caps the maximum amount of damages a party can be responsible for, often limited to the total value of the contract.
Force Majeure (“Act of God”): This clause excuses a party from a contract if an unforeseeable event beyond their control (like a hurricane or pandemic) makes it impossible to perform.
Governing Law/Jurisdiction: Decides which state’s laws will be used to interpret the contract and where a lawsuit would have to be filed. This is huge if you and your client are in different states.
Termination: Explains how and why either party can end the contract legally.

Step 5: The Review Process (Get a Second Pair of Eyes)

Never review your own work in a vacuum. The goal of a contract review is to catch ambiguities, errors, and risks you might have missed.

Internal Review: Have a partner or trusted colleague read it. Ask them: “Based on this, can you tell me exactly what I’m supposed to do and what I’m getting paid?” If they can’t, it’s not clear enough.
Legal Review: For complex, high-value, or long-term agreements, having a lawyer review the contract is a wise investment. The contract review process they follow can spot issues you’d never think of.

Step 6: Prepare for Negotiation (It’s a Conversation, Not a Confrontation)

The first draft is rarely the final draft. The other party will likely have changes. This is normal. The key to a successful contract negotiation is to be prepared.

Before you send the draft, go through it and decide on your “must-haves” and “nice-to-haves.” Know what you’re willing to concede on and what your deal-breakers are. This pre negotiation planning prevents you from making emotional decisions in the moment.

Step 7: Finalization and Signing

Once all parties have agreed to the terms, create a final, “clean” version of the document. Double-check that all changes have been incorporated correctly. Then, it’s time to sign. Modern e-signature platforms are a secure and legally valid way to execute the agreement, creating a clear audit trail of who signed and when.

Manually preparing contracts is feasible—until it isn’t. As businesses scale, digital tools like Contract Lifecycle Management (CLM) platforms become indispensable.

Why CLM Software is Crucial for Contract Preparation

Manual contract preparation is manageable when you’re dealing with a handful of low-risk agreements. But as volume, value, or complexity increases, the risks of version errors, missed clauses, or approval delays compound quickly.

That’s where Contract Lifecycle Management (CLM) software becomes a game-changer.

Here’s how CLM transforms preparation:

Structured intake forms eliminate ambiguity at the start
Clause libraries ensure consistency and legal compliance
Templates tailored by contract type reduce rework
Automated workflows align internal stakeholders early
Centralized data ensures teams aren’t operating in silos
Audit trails and controls support compliance from Day 1

Without CLM, preparation is slow, manual, and error-prone. With CLM, it becomes scalable, efficient, and audit-ready.

Sirion, an AI-native CLM platform, goes beyond just helping you store and sign contracts—it transforms how you prepare them.

How Sirion Helps You Prepare Better Contracts

Sirion isn’t just a place to store your contracts—it’s where smart contract preparation begins.

Here’s how Sirion simplifies and strengthens every step of the preparation process:

Intelligent intake: Capture structured deal details, roles, pricing, timelines, and risk flags at the start—no more chasing fragmented emails.
Dynamic templates: Generate first drafts based on contract type, geography, and risk profile using AI-powered templates pre-approved by legal.
Clause library + fallback options: Ensure standardization while providing flexibility for negotiation.
Built-in collaboration: Route contracts automatically for review and approval across legal, finance, and business teams.
AI Agents for accuracy and risk detection: Sirion’s Redline and IssueDetection Agents surface inconsistencies, highlight missing clauses, and suggest remediations in real time.
Centralized repository: Every contract, clause, and edit is recorded, searchable, and auditable—making every future contract even easier to prepare.

With Sirion, contract preparation moves from being a manual task to a streamlined, intelligent process—helping your business move faster without compromising on control or compliance.

Next Step: See our Contract Compliance Process guide to ensure your agreements stay enforceable and audit-ready long after signing.

Common Pitfalls in Contract Preparation Process and Pro Tips to Prevent Them

Knowing the steps is one thing; avoiding the common traps is another. Here are the most frequent mistakes people make and how to sidestep them.

Mistake #1: Vague Scope of Work.

The Pitfall: Using phrases like “general consulting” or “website support.” This is an invitation for scope creep, where the client’s requests grow far beyond the original agreement.
Pro-Tip: Be hyper-specific. Use a detailed statement of work (SOW) that lists exact deliverables, revisions included (e.g., “two rounds of revisions”), and what is explicitly out of scope. For ongoing services, a master service agreement can set the general terms, with individual SOWs for each project.

Mistake #2: Unclear Payment Terms.

The Pitfall: Simply stating the total price. This leads to cash flow problems and arguments about when payment is due.
Pro-Tip: Create a clear payment schedule. Specify due dates (e.g., “Net 15”), late fees, and the trigger for each payment (e.g., “upon completion of Milestone A,” “50% deposit due upon signing”).

Mistake #3: Ignoring the Termination Clause.

The Pitfall: Not having a clear exit plan. If the relationship sours, you’re stuck in a bad agreement with no way out.
Pro-Tip: Ensure your termination clause covers both “for cause” (if someone breaches the contract) and “for convenience” (if someone just wants to end the agreement early). It should also state what happens upon termination, like who pays for work completed and how property is returned.

Your Toolkit & Next Steps

You’ve learned the process and how to avoid common pitfalls. Now, let’s put it all together.

When to Use a Template vs. When to Call a Lawyer

This is a critical question for any small business owner or freelancer. Here’s a simple decision framework:

Use a Template When:

The deal is low-risk and low-value (e.g., a simple one-off freelance project).
It’s a standard, repeatable transaction you do often.
You understand every clause in the template and have customized it to your specific deal.

Call a Lawyer When:

The deal is high-value, complex, or long-term.
It involves intellectual property, international parties, or sharing highly sensitive data.
The other party has presented you with their contract, and it’s full of legal jargon you don’t understand.
You feel any sense of unease or confusion about the terms.

A lawyer’s fee might seem like a high cost, but it’s a fraction of what a legal dispute could cost you down the road.

The Full Picture: Understanding the Contract Lifecycle

Contract preparation is just the beginning. It’s the first and most important phase of a much larger journey. Understanding the entire contract lifecycle management process—from drafting and negotiation through to performance, renewal, or termination—helps you see how the effort you put in today pays dividends tomorrow. A well-prepared contract makes every subsequent stage smoother, more efficient, and less risky.

FAQs on the Contract Preparation Process

How long does a typical contract preparation process take?

The timeline can vary depending on the contract’s complexity, internal review cycles, and the number of stakeholders involved. A simple contract may be prepared in a day, while enterprise-level agreements may require weeks of planning, alignment, and negotiation readiness.

Who should be involved in the contract preparation phase?

In addition to the person initiating the contract, it’s ideal to involve legal, finance, procurement (if applicable), and any key stakeholders responsible for approvals or execution. This cross-functional involvement ensures that the contract is both compliant and actionable.

Additional Resources

Contract Drafting and Review Header Banner Image

Contracts