4Approving and Accepting Procurement Contracts

This chapter contains the following:

A contract needs approval before it's executed. You can use a single application to approve all types of contracts.

Complete the following tasks before you submit a contract for approval:

  • Review contract deviations, if any.

  • Validate the contract.

  • Review approvers, and add viewers and approvers as required with a note to additional approvers.

  • Use the user statuses and transitions to pass the contract between teams for review, such as legal, finance, and accounts.

  • Preview a printable version of the contract.

Note: Based on the contract deviation, an application administrator can configure additional approval rules.

The following sequence explains the complete flow of contract approval, from approval policy setup to contract approval to contract acceptance:

  • The contract administrator sets up approval policies and approver groups.

  • You submit a contract for approval.

  • The next approvers can view the approval task in their My Worklist area.

  • The contract is reviewed for approval. A contract review may include the following:

    • The approver requests more information for their approval.

    • The application sends the approval request to the next approver in the hierarchy.

    • The approver delegates contract approval.

    • The approver transfers the contract to another approver.

  • The approver approves or rejects the contract.

  • The customer or supplier accepts the contract or requests changes.

  • The contract is available to view approval status and history.

Set Up Approval Policies and Approver Groups

The business analyst or contract administrator sets up approval policies, and defines the following categories of approvers:

  • A single or chain of approvers based on a set of rules

  • Parallel approvers

  • Additional approvers based on any contract deviations

Send Automatic Notifications to Approvers

The application automatically sends a notification to the approver when a contract is submitted for approval. If you included a note while adding an approver, then the application displays the note along with the approval notification. Contracts pending approval appear on My Worklist.

Submit a Contract for Approval

Attach the following documents to the contract and submit for approval:

  • The primary contract document with the terms and conditions.

  • Any contract documents such as state of work, drawings, and so on.

  • The contract deviation, if any, and deviation justification.

Use one of the following work areas to submit a contract for approval:

  • Contract authoring page

  • Contracts search results

  • Pending Approvals bin in the Contracts work area

  • Dashboard

Validate the contract before submission or the application automatically validates the contract when you submit it, listing any errors and warnings. You must fix the errors but you can ignore the warnings and continue with the submission. If you submit the contract for approval without errors, then the application takes it to the next step and enables you to review approvers before you submit the contract for approval. You can add viewers and approvers to the approval hierarchy and add notes to approvers that they receive along with the approval notification. When you click Submit, the status of the contract changes to Pending Approval.

Note: Withdraw a contract from approval to make any changes before it's approved. If you withdraw a contract from approval, the contract status changes to Draft or Under Amendment so that you can make changes and resubmit.

Review a Contract for Approval

You must review a contract in detail to approve or reject it. Alternatively, use the History tab to view approval or rejection details in the approval region and comments in the snapshot view for the version and approval submission date and time. You can also ask the contract author for more information if required, or ask an approver to re-examine and reapprove the contract. Optionally, delegate or transfer the approval task to another approver. If you delegate the approval task to another approver, the assignee approves or rejects the contract on your behalf. If you transfer the approval task, you are no longer associated with the approval or rejection.

Note: Get a complete view of the contract from the approval task details page.

Approve or Reject a Contract

Approve or reject a contract after a complete review of the contract. Optionally, add comments to explain why you approved or rejected a contract. If this contract version is submitted again for approval, the approver can see your comments in the snapshot view. When you approve a contract, its status changes as follows:

  • If the contract requires signature, its status changes to Pending Signature.

  • If the contract does not require signature for acceptance, its status changes to Active.

When you reject a contract, its status changes as follows:

  • If the contract was Pending Approval, its status changes to Draft.

  • If a version of the contract was already Active, and its next version was Pending Approval, its status changes to Under Amendment.

Note: If after submitting a contract for approval, you want to make changes, then use the Create New Version action to create a new version of the contract in Draft status. Once a new version of the contract is available, you can access older versions of the contract only from the History page.

Accept a Contract or Request Changes

Accept a contract if you agree with the terms and conditions and all of its contents. If you want any changes, reject the contract and request changes. If you accept a contract and the contract doesn't require any signature, its status changes to Active. If you reject a contract, its status changes to Draft or Under Amendment.

If the contract requires a manual signature, the signers can click the Sign Contract action and enter their signature details in the Sign Contract window. You can optionally capture any signature details in the Sign Contract page on behalf of the contract signers, then click OK to activate the contract. If the signers are external party contacts, then the internal user signs on their behalf. The History tab of an active contract enables you to edit signature details after you accept the contract.

If the contract is enabled for electronic signature and is Pending Signature, then it must be sent to the designated signers on the contract to move the contract to the Sent for Signature status. The sender uses the integrated electronic signature pages to manage the signature process. For contracts requiring signature, the contract becomes active only when all signers have signed the contract. To make changes to an active contract, use the Amend action. Using the Amend action creates a new version of the contract in Under Amendment status to which you can make changes and then submit for approval.

View Approval Status and Approval History

From the History tab, view the approval status while a contract is in approval, and the approval history after it's approved or rejected. You can view the approval history of the last approval cycle for a version, by leaving the default Approval Submitted On date and time in the Approval region.

The deviation reports highlights any differences between the contract terms in the contract and those in the associated contract terms template and warns you of any deviations from company policies. You can enter a justification for any deviations in the report and make the report available for review by the contract's approvers. This action is available while the contract is in a status that's open to editing, such as the draft status. A copy of the report is automatically attached to the contract approval notification sent to contract approvers along with comments for them that you entered on the report.

You can also correct the deviation before submitting it for approval. If you choose not to correct the deviation, based on the deviation, then the appropriate deviation-based approval rule reroutes approval for the contract provided that the deviation-based approval rules have been set up in the Contract Approval Human Task.

While the contract is closed for editing, for example, when the contract was submitted for approval or was rejected, you can only view the report by selecting the View Contract Deviations action.

The following sequence explains how the contract deviations report is generated and used:

  1. When you select the Review Contract Deviations action, the application checks for and lists any changes to the clauses applied from the contract terms template.

  2. The application also checks and records any deviations from company policies by evaluating Contract Expert rules that apply to the contract terms template you're using.

  3. If you want to submit the report for review by contract approvers, then you must select the Generate for Approval option. You can enter an explanation for the approvers and other comments in the Approval Abstract field.

  4. If you selected the Generate for Approval option and submit the contract for approval, then the application automatically regenerates the report to ensure that it contains the latest information and attaches it as a PDF to the notification sent to the approvers.

This figure shows the process for generating the
contract deviations report and including deviation-based approval.

Clause Deviations

The application checks for invalid, nonstandard, and missing clauses by comparing the contract terms in the contract with those in the latest version of the contract terms template applied to the contract.

Policy Deviations

Policy deviation checks are based on the values of variables in the contract and the answers that you give to any questions presented during authoring. For example, if you specified payment terms of 30 days for a big contract, but company policy permits only 20 days on such contracts, this deviation is recorded in the report. Policy deviations depend on Contract Expert rules set up by the Contract Terms Library administrator for a particular contract terms template.

Based on your setup, a contract can become active when approved. Alternatively, the contract may require to be signed before it can become active. In this case, internally approving a contract that is Pending Approval changes the contract status to Pending Signature.

For manual signature, you can optionally capture any signature details in the Sign Contract page and then click OK to activate the contract.

For electronic signature, the sender must use the Sign Contract page and click Send. This sends the contract to designated signers using the integrated electronic signature solution. All signers must sign the contract to make the contract active and available for use.

If you want that the contract be electronically signed for acceptance, perform the following tasks.

  • Set up the required Electronic Signature Solution provider with the required user accounts.

  • Enable the contract type of the contract for electronic signature.

  • For the contract type, select the terms layout template with standard signature tags as the default template.

  • Select the electronic signature solution provider.

  • You can also create the standard email message for the electronic signature process.

  • You can also designate party contacts as signers on the contract.

Creating User Accounts for Electronic Signature

Use the Manage Contract Electronic Signature set up task to create user accounts with the selected electronic signature solution provider. Once set up, click Validate to initiate the authentication web service of the electronic signature application. If user accounts have been successfully set up, the validation status returned is Complete.

Enabling a Contract Type for Electronic Signature

You can enable a contract type for electronic signature, by performing the following steps on the Contract Type page:

  • Select the terms layout template that is appended with standard signature tags as the default terms layout template. This ensures that the primary contract document that is sent for signature is auto-tagged for signature, signer name, signer title and date of signing.

    Note: If you do not select the terms layout template with the appended signature tags as the default template for electronic signature, then you must manually configure the signatures tags in the Sign Contract page before sending the contract for signing.
  • Select the Requires Signature check box.

  • In the e-Signature tab of the contract type options section, select the Enable Electronic Signature check box.

  • Select DocuSign as the solution provider.

  • You can also create the subject and the body of the email message to be sent to signers and recipients during the integrated electronic signature process.

Sending a Contract for Electronic Signature

When you create a contract from a contract type enabled for electronic signature, you can designate one or more party contacts as signers on the Parties page and provide valid email for them. When the contract is in Pending Signature status, a user with edit privileges on the contract can send the contract for signature to the designated signers by email. Such a user can be an administrative user or a user with full access on the contract.

To send the contract for signature and move the contract into the Sent for Signature status, the sender must use the Sign Contract action and click Send in the Sign Contract page. ClickingSend initiates the creation of the DocuSign signature envelope. This envelope that moves back and forth between signers consists of the list of signers, the email subject and message, the primary contract document and other attached contract documents.

When the contract is sent for signature, the signer receives an email notification from DocuSign. Once email confirmation of the envelope being sent to signers is received, the contract status changes to Sent for Signature.

Managing the Electronic Signature Process

The signer who receives an email from DocuSign can either sign or decline to sign. If the signer declines, the contract status changes back from its Sent for Signature to its previous Pending Signature status. The sender of the contract can then make the required corrections to the envelope before resending it for signature.

If the signer signs, the contract stays in the Sent for Signature status while the envelope moves between signers. While the contract is in Sent for Signature status, the sender can correct, void, withdraw the envelope or view signature history using the Manage Signatures action that launches the Manage Signatures page. If the sender of the contract must make minor changes to the envelope after sending it for signature such as correcting the email of the signer or adding an attachment, he can make corrections and resend it for signature. To make major edits, such as changes in the legal content of the contract after the contract has been signed by one or more signers, the sender can cancel or void the envelope and create a new one to send for signature. The envelope can also get voided if it expires according to the timeline set up in DocuSign. Withdrawing the envelope from signature or voiding the envelope moves the contract from the Sent for Signature status back to the Pending Signature status.

Only after every signer has signed, the contract moves to Active status.

You can also use the Track Electronic Signature Status process to track the electronic signature process and make the consequent contract status updates. When all signers have signed, this process retrieves the signed contract document from the electronic signature solution provider. The signed contract is stored in the Documents page as a supporting document and the necessary updates made to signature history.

The following figure shows the flow for a contract enabled for electronic signature.

The different processes of contract acceptance
without signature, with manual signature, and with electronic signature.

Viewing Electronic Signature History

The sender can view the electronic signature history of the current version of the contract in the Signatures region of the History page. The history of the signature envelope is sorted by the date on which it was submitted for signature. The details are listed as follows.

  • The name of the user who sent the contract for signature

  • The current status of the signature process

  • The date on which the signature process was completed (the envelope was either voided or signed by all signers)

  • The path to navigate to the DocuSign integrated signature history page

For the signature history of a previous contract version, you must navigate back to the History page and select the specific contract version from the Versions region.

How Capturing Contract Acceptance with Electronic Signatures Works

Once approved, a contract that requires an electronic signature is submitted for a signature from the other party and the process monitored.

Contract Settings for Electronic Signature

There are several initial steps, usually completed by your application administrator, that are required before creating a contract that requires an electronic signature:

  • An electronic signature contract type is set up with:

    • The Requires signature check box set to Yes.

    • The Electronic signature check box set to Yes.

    • The Solution Provider is DocuSign.

    • Entry of a meaningful value for the E-mail subject and E-mail message.

  • An electronic signature contract terms layout template must be set up with the signature table and with the standard tags in the signature table.

  • This layout template is selected as the default contract terms layout template for the contract type to be used for electronic signatures.

  • The contract author who plans to send the contract for signature must have a valid E-mail address and must be set up as a DocuSign user in the account that is specified in the electronic signature setup.

Note: Your contracts application must be configured to use electronic signatures. Check with your application administrator if you are not sure.

Create a Contract for Electronic Signing

Once the initial set ups have been completed, the contract creation process proceeds as follows:

  1. A contract is created based on the contract type created for electronic signing.

  2. Contract terms are applied to the contract as required.

  3. One or more party contacts are selected as Signers of the contract.

  4. The contract is approved and is in "Pending signature" status.

Initiate Contract Signature

Submit the contract to the signing party:

  1. In the Contracts work area, find your contract in "Pending signature" status.

  2. Verify that electronic signature is enabled for the contract.

  3. Click Sign Contract in the Edit Contract actions menu.

  4. Verify that the auto tags are rendered in the appropriate locations in the envelope.

  5. Click Send on the Sign Contract page.

Manage Signatures

  1. In the Contracts work area, find your contract in "Sent for signature" status.

  2. Click Manage Signatures in the Edit Contract actions menu and choose from the following actions:

    • View history

    • Correct and resend

    • Void envelope

  3. You can easily monitor your signatures by checking the contract status:

    • The contract status changes to "Pending signature" if any of the signers have not signed or have declined signature.

    • The contract status remains as "Sent for signature" if the signature process is still in progress.

    • The contract status changes to "Active" if all the signers sign the contract.

Approval FAQs

To check if a contract was rejected, search for the contract and view the contract history. You cannot search for a rejected contract by its status because a rejected contract does not have status of Rejected. If a contract is rejected, its status is changed back to Draft. To view rejection reasons see the comments section of the snapshot view.

The Contract Deviations report, generated by selecting the Review Contract Deviations or the View Contract Deviations actions, lists all the changes you made to the contract terms applied from the contract terms template and any departures in the contract from company policies. A copy of the report with your comments can be submitted along with the approval notification to approvers.

Contract terms validation, which is performed by selecting the Validate Contract Terms action or automatically whenever you attempt to submit the contract for approval, lists errors that you must fix before you can submit the contract for approval. Fixing warnings on the report is optional.

Contract deviations and validations do overlap. The Contract Deviations report lists invalid clauses that will generate errors when you validate the contract, for example. Examples of invalid clauses include clauses that were placed on hold or have expired. But the validation checks are more comprehensive and include checks for errors in variable definitions, for instance. The following table compares the features of contract deviation and contract terms validation:

Feature Contract Deviation Report Contract Terms Validation

Lists changes made to the contract terms applied from a template.

Yes, lists all changes including the addition of clauses or substitution of alternate clauses.

Restricted to warnings for some changes such as the deletion of mandatory clauses.

Lists changes to clauses recommended by the Contract Expert feature.



Includes a list of deviations from company policies.



Lists invalid clauses that will prevent the contract from being submitted for approval.



Lists variable and other errors that will prevent the contract from being submitted for approval.



Can be attached as a PDF report to the approval notification.



Makes it possible to add comments for approvers.



Makes it possible to add approval rules for additional approval routing.



If you are a contract approver and received an approval notification, then you can use the link in the notification to navigate to the page for Approval of Contract. On this page, you can view contract details, attachments, and comments, and the approval hierarchy. You can use the Add Assignee icon to add new approvers and viewers in a specified location in the hierarchy. A viewer is an FYI assignee or approver, who is copied on the approval notifications but who has no edit privileges.

If you create or edit a contract with or without the Wizard, you can also add approvers and viewers when submitting a contract for approval. The first step of the approval process is to validate contracts and then review approvers and the approval hierarchy. While reviewing approvers, you can add approvers and viewers as required. In addition, you can add notes to approvers that are displayed in their approval notification.

Note: You cannot add approvers or viewers when submitting a contract for approval using the Submit for Approval action from the Pending Approvals bin or from the Contracts Search region of the contracts work area.

Approvers or approver groups are also automatically added to the approval hierarchy for the approval of specific clause or policy contract deviations if your contract administrator has configured these deviation-based approval rules for the Contract Approval Human Task. Thus, based on the deviation in the Review Contract Deviations page the appropriate approval rule reroutes approval.