When it comes to contract negotiation, the term “redlining” (sometimes called blacklining) commonly refers to the editing and negotiation process during document and business contract management.
During this stage, contributors collaborate to propose and negotiate changes to the contract.
They work together to annotate the terms that need updating before the contract is finalized and signed.
In this article, we’ll take a closer look at contract redlining and how to do it effectively using modern tools.
Key takeaways
- Redlining is an essential element of the contract negotiation process
- The contract redlining process helps contracting parties to stay fully aligned on proposed changes, alternative wording, and any minor adjustments
- Modern contract lifecycle management solutions offer a variety of valuable tools for collaborative editing, version control, and secure document storage
What is redlining a document?
Redlining a document refers to a method of editing or reviewing a document by marking, underlining or otherwise highlighting changes that should be considered by fellow reviewers or the other party or parties.
Redlining provides a convenient way for the original author and other reviewers to see exactly what changes have been proposed, who suggested them, and why.
The term got its name from the old practice of using a red marker or ink to make these annotations, which stands out against black or blue text, though the color is not as important in digital document management.
Modern document redlining
In many (if not all) word processing applications, the redlining process is automated, making it easier to apply, review, and accept/reject changes.
Some products even take it to the next level of collaboration confort by offering virtual data rooms for large group settings, allowing all team members to see what revisions have been suggested, promote transparency across the board, and facilitate active discussion.
Whether you’re negotiating contracts, working on medical research papers, or finalizing complex business agreements — these are documents that often require multiple revisions.
The use of redlining can be particularly beneficial for maintaining the key structure of the original document while integrating multiple changes throughout the contract review process.
Why redlining matters
Document redlining is incredibly important because it helps to ensure accuracy in every element of a contract and avoid miscommunication.
That is why redlining contracts is an unalienable phase of the contract drafting process in virtually every industry.
Professional-looking and promptly delivered documents that have fewer mistakes make prospects more likely to sign.
And when your clients get impeccable contracts, you get less back-and-forth editing to deal with.
Redlining allows you to keep track of any changes that have been made so that everyone has access to the most up-to-date version of the document and can easily spot any discrepancies or errors.
It also provides a record that can be used for reference if there are any disagreements about what was said or agreed upon during meetings or discussions.
Historically, the redlining period would be followed by one where contracts were updated and new versions were furnished.
However, with the use of modern redlining tools, it is now possible to eliminate the interval between negotiations by conducting redlining and updates in real time through the use of PandaDoc.
Why PandaDoc?
- In just one quarter, an office concierge service was able to decrease their time to close by 15% and save over $100,000 in annual software costs.
- A construction management company was able to boost productivity and 3x the number of closed deals.
- A marketing automation company was able to save $5k in legal fees and decrease its sales cycle by 75%.
- An event management company increased sales prices 10% across the board and increased sales close rates by 32%.
From SaaS and security consulting firms to creative teams and construction management companies, you can save countless staff hours and legal resources that were previously squandered on time-consuming and unjustifiably long contracting processes.
These organizations trust PandaDoc to expedite their redlining processes and help them close deals even faster.
When should you redline?
Document redlining is ideal when two or more people need a diplomatic approach to collaborate on the review, negotiation and/or drafting of a document or contract.
During the early stages of the contract management lifecycle, contract negotiations will typically involve some form of redlining as each party scrutinizes legal terms and business terms to agree on the contract provisions.
Similarly, decision-makers and project stakeholders higher up the chain of command may use redlining as a way of indicating the desired changes before the contract moves forward.
In legal settings, redlining software (or software that offers redlining features) can help you avoid using red pens to create strikethrough text and other stray marks that then have to be deciphered by the opposing counsel before a counteroffer can be made.
Interested in stepping up your contract management game?
Common redlining challenges
Redlining can be a fairly complicated back-and-forth process.
As such, the process comes with its own set of challenges and difficulties that can get collaborators totally lost and confused.
Failing to handle these issues effectively can create problems and potential misunderstandings later down the road.
While legal counsel can help you identify key elements that may have been left out of your contract negotiations, the entire process becomes far more difficult (and expensive) without an effective redlining process in place.
1. Untracked changes
One of the most important factors in any negotiation process is information on what changes are requested, who made those requests, and who actually updated the document.
This knowledge is critical to ensuring the integrity of the negotiation process while making sure that all major concerns are appropriately addressed.
Untracked changes can lead to confusion later on, especially during the post-negotiation review when project stakeholders who weren’t present during negotiations try to review the contract before the final signoff.
Questions regarding who suggested or agreed to a change only add confusion to the redlining process, further slowing down negotiation and contract execution.
Fortunately, this process is easily fixed by ensuring that your redlining software tools are set to assign comments and changes to corresponding parties.
2. Reading difficulties
Reading the fine print in legal documents can be a daunting task, especially when it’s full of complex legal jargon and contract terms.
In some ways, redlining makes this process more complicated by adding additional comments and suggested changes to the document.
Navigating these changes can make it difficult to stay focused on the task at hand.
Effective redlining software will offer some form of versioning so that you can look back at a previous version of the contract stored in your document repository to see changes and suggestions over time.
Many tools also offer a “suggestion mode” or a “comment mode” so that changes can be reviewed one at a time without ever making their way into the updated version of the document.
At the end of the day, you’ll also want to clean up the copy to ensure that spelling mistakes and minor formatting errors aren’t overlooked.
3. Broken formatting
Speaking of formatting, sharing documents for redlining between different software solutions can result in lost or broken formatting, as the formatting options in one piece of software might not align with the options in another.
On top of that, accepting the changes a previous collaborator has proposed to the contract may strip the intended formatting from portions of your document.
Unfortunately, the software doesn’t have to be all that different (this can even happen when using different versions of Microsoft Word!)
While most word processing software has some tools to help you overcome this obstacle, it might be necessary to reformat the entire document to your desired layout once contract negotiations are complete.
You can also solve this problem by using online document and contract management tools that offer redlining and document modification in real time.
4. Residual metadata
As frustrating as it is, tracking document changes with something like a word processing tool can result in the accumulation of undesired metadata that needs to be cleared before contract negotiations can continue.
A good example of this might be an internal discussion between a set of negotiators about acceptable rates before those rates are offered to the other side.
It’s obvious that these conversations are meant for in-house use only.
However, that comment history may accidentally stay inside a draft.
Savvy negotiators may dig up that residual information to better understand the thought process and integrity of their business partners.
To keep those details away from prying eyes, it is recommended to remove all metadata before sending a document to anyone.
Some redlining software tools will offer the ability to keep internal conversations entirely hidden or private from other parties.
If your software tools don’t offer that, it’s often best to keep those discussions out of the document entirely.
5. Mobile compatibility
Nobody enjoys reviewing detailed contracts on their smartphone, and it’s even worse when your redlining software isn’t optimized for mobile devices.
Not all redlining software functions across multiple platforms, making sharing documents for redlining between desktop computers and devices like tablets fairly hit-or-miss.
Failure to provide tools for mobile usage can result in slowdowns during negotiation and signoff as partners in an on-the-go lifestyle are forced to wait until they are at a desk to properly review your documents.
How to redline a document
Traditionally, document negotiations were carried out in person using pen, paper, and other analog tools.
Modern technology has made this kind of negotiation (largely) a thing of the past.
However, you’ll still have some options when it comes to how you want to handle redlining and contract negotiations.
As you edit a document, there are practical aspects to bear in mind.
Comments
1. Use comments to clarify concepts or ask questions.
For example, if the author mentions areas that are not going to be covered by the services in question, you’ll want to add a comment asking for more specific examples or explain the reasoning behind this decision.
2. Ask the author to define redlining rules at the very start of the document for readers and reviewers who might not be familiar with this term.
This will ensure higher process efficiency through consistent markup.
Text formatting
1. Use bold or italic formatting to emphasize key points.
For instance, highlighting the detrimental effects of waiving post-release software support and updates.
2. Use bullet points or numbered lists when outlining multiple ideas or arguments.
3. Format quotes or excerpts from other sources properly to differentiate them from the main text.
Suggest changes
1. Switch to the redlining mode in your text editing tool and add suggestions and negotiate the contract.
2. When suggesting alternatives, make sure that the wording you are proposing is concise and to-the-point to avoid further confusion and drowning in minute details.
3. Double check your suggestions before sending the final version to the counterparty.
Ultimately, it’s essential to remember that these tools and approaches are there to improve clarity, coherence, and the overall quality of your document while preserving the author’s original intention and voice.
Close more deals and sign contracts with unprecedented ease
How do you redline a contract?
At its core, redlining is a process designed to eliminate the need for lengthy alignment meetings.
In the past, redline/blackline processes compared two separate documents against one another.
This can still be done if you’re sending files back and forth via email.
Today’s best contract management software — especially those products that offer real-time editing — relies on internal versioning mechanisms to help you stay on top of every document change.
Automatically tracking changes ensures that collaborators can quickly identify opportunities that require conversations and work to resolve them, thus saving time in the contracting process.
To ensure that you’re redlining efficiently, consider the following tips for how to redline your document in the most efficient manner:
1. Get everyone on the same page
Before you even begin redlining, make sure that both parties know who will contribute to the document.
Get on the same page and align around a shared vision.
Documents about transactions, such as contracts and agreements, have a different focus than things like employment documentation.
For best results, take the time to understand what you’re redlining and with whom you’re sharing document ownership.
2. Don’t rush the process
Ensure that all of the details are in order and unimpeachable before the signing process begins.
If you’re using a word processing software like MS Word, make sure to check your review tab one last time.
Be sure to accept all changes before moving forward.
If someone needs to make a change halfway through the e-signing process, you’ll have to start the entire process over again.
Keep in mind that a signed document later discovered to have an overlooked mistake due to human error or miscommunication is still legally binding.
3. Stay compliant
When creating a legally binding document, contact compliance must be your priority.
Be certain that the language you use is right for the type of agreement you are working on and the rules and practices viewed as standard in the corresponding jurisdiction.
Most document and contract clauses can be set up with standardized or boilerplate language, which makes tracking any deviation from the norm much simpler.
4. Track every change
You need to be certain that all changes made to the document are tracked and preserved throughout the whole process.
Don’t leave anything to chance when creating documents that could have a binding impact on your business operations.
Make sure that every change is recorded and that both parties agree to any deviations or deletions from your standard contract and business document templates.
Are there redlining tools that can be used for free?
Popular products like Microsoft Word (as part of the Microsoft 365 suite) and Google Docs are the staples for contract signing and negotiation — and you don’t have to pay a single dollar for their core functionality.
Both offer decent redlining and commenting features that allow for in-depth negotiations to happen within a document.
These products make it relatively easy to review documents, suggest changes, and make final edits.
However, free word processors may not have what it takes to really thrive in a dynamic, multi-user environment, so it’s probably a good idea to consider an affordable commercial alternative like PandaDoc.
The platform packs a slew of advanced collaboration and document editing features that were initially designed and implemented as elements of the contract workflow management pipeline.
This means that a finalized document can be easily forwarded for approval, signed electronically, pushed to integrated CRM systems, and ultimately stored in a secure cloud archive.
With PandaDoc, you get incomparably more than just redlining and commenting tools — all for one low monthly fee.
Interested in upping your contract redlining game?
Request a 15-minute demo to get a better idea about the platform’s functionality.
Disclaimer
PandDoc is not a law firm, or a substitute for an attorney or law firm. This page is not intended to and does not provide legal advice. Should you have legal questions on the validity of e-signatures or digital signatures and the enforceability thereof, please consult with an attorney or law firm. Use of PandaDocs services are governed by our Terms of Use and Privacy Policy.
Originally published August 19, 2019, updated March 31, 2024
