Contracts are an essential part of doing business. They help to define the terms and conditions of an agreement between two or more parties, and they can be used to protect the interests of all involved. However, managing contract obligations can be a complex and time-consuming task.

What are contract obligations?

Contract obligations are the promises that are made by each party to a contract. They can be complex and vary depending on the specific terms of the contract. It is important to carefully review any contract before signing it to make sure that you understand all of the obligations involved.

These obligations can include things like:

  • Performance Obligations: These involve doing something specific, such as delivering goods, providing a service, or completing a specific task. For example, a contractor might be obligated to build a house according to specific plans and specifications.
  • Payment Obligations: These involve the payment of money. For instance, a buyer may be obligated to pay for delivered goods within 30 days of receipt.
  • Promissory Obligations: These involve making a promise about a future action or behaviour. An example might be a non-compete clause, where one party promises not to compete with the other party for a certain period and within a certain region.
  • Restrictive Obligations: These restrict or prohibit certain actions. An example is a confidentiality clause, where one party agrees not to disclose certain information.
  • Obligation to Inform: This can be a requirement to notify the other party of specific events. For instance, if a shipment is delayed, a vendor might be obligated to inform the buyer immediately.
  • Obligation to Act in Good Faith: Many contracts, especially in the U.S., have an implied obligation for the parties to act in good faith toward each other. This means parties must deal honestly and fairly with one another and not intentionally prevent the other party from fulfilling its obligations.
  • Indemnification Obligations: One party might be obligated to protect or compensate the other party for certain losses or damages. For instance, a manufacturer might be obligated to indemnify a retailer if the products are defective and cause harm to end customers.

When negotiating contracts, businesses should try to get the best possible terms for themselves. This includes things like payment terms, delivery dates, and dispute resolution procedures.

Why do contract obligations need to be managed?

Contract obligations need to be managed in order to ensure that all parties to the contract meet their commitments. This is important for a number of reasons, including:

  • To avoid financial losses: If one party fails to meet their obligations, the other party may suffer financial losses. For example, if a vendor fails to deliver goods on time, the buyer may have to pay penalties or find a new supplier at a higher cost.
  • To protect legal rights: If one party fails to meet their obligations, the other party may have legal recourse. For example, the buyer may be able to sue the vendor for breach of contract.
  • To maintain good business relationships: When contract obligations are not managed effectively, it can damage business relationships. This can lead to lost opportunities and decreased profits.

What does an effective contract obligation management process look like?

An effective contract obligations management process should include the following steps:

  1. Identify all contractual obligations. This includes all of the terms and conditions of the contract, as well as any additional obligations that may be implied by law or industry standards.
  2. Assign ownership of each obligation. This will help to ensure that someone is responsible for ensuring that the obligation is met.
  3. Set deadlines for each obligation. This will help to track progress and identify any potential risks.
  4. Track the status of each obligation. This can be done manually or using contract management software.
  5. Take action if an obligation is not met. This may involve issuing a reminder, escalating the issue to a manager, or taking legal action.
  6. Use technology. Contract management software can be a valuable tool as it helps to automate many of the tasks involved in contract obligations management, such as tracking deadlines, assigning ownership, and generating reports.

How to manage contract obligations with ContractNow

ContractNow is a cloud-based contract lifecycle management (CLM) solution that helps businesses to automate and streamline their contract obligations management process.

ContractNow provides a number of features that can help businesses manage their contract obligations, including:

  • A centralised repository: ContractNow provides a central location for all contracts, making it easy to find and access the information you need. Know that you’re working with the most up-to-date and complete information. Eliminate fragmented storage methods including Excel, shared drives, emails and paper so you can build a holistic picture of your contracts.
  • Automated alerts: Receive automated alerts for key dates such as contract renewals, upcoming deliverables, and payment due dates. This helps you to avoid missing important deadlines and ensures that you are always aware of your contractual obligations. No more manually digging through spreadsheets to track key dates and the ability to be proactive rather than reactive.
  • Global Search capabilities: Easily search for clauses and specific language relating to contract obligations. Whether you’re looking for Force Majeure or termination clauses, ContractNow allows you to easily identify the information you need.
  • Driven accountability: Each contract obligation should be assigned to a specific person or team. This will help to ensure that someone is responsible for ensuring that the obligation is met. ContractNow also builds a defensible history of every action - with a date, name and time stamp - to drive accountability for contract outcomes.


With the growing complexity of contracts and the heightened need for compliance, traditional methods of managing these obligations can often falter. Enter ContractNow — a solution that streamlines, automates, and enhances the management of contractual duties.

By leveraging the capabilities of CLM software, businesses can navigate the intricate maze of contract obligations with precision, ensuring that no detail is overlooked. Not only does this mitigate the risk of breaches and associated repercussions, but it also fosters a culture of accountability and transparency.

In essence, integrating CLM software into your contract obligations management processes is not just an upgrade; it's a transformative step towards operational excellence and robust professional relationships.

If you’re ready to get started, book a demo today.

Shannon Smith
Shannon Smith

Shannon Smith bridges the gap between expert knowledge and practical VCLM application. Through her extensive writing, and years within the industry, she has become a trusted resource for Procurement and Legal professionals seeking to navigate the ever-changing landscape of vendor management, contract management and third-party risk management.

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