Redlining a contract means marking up the other side's draft with the changes you want, so they can see exactly what you are asking for. The name comes from the red pen and has survived into tracked changes, where insertions and deletions are shown in colour rather than hidden. A redlined contract is simply a version carrying those marks. The practice is straightforward; what people actually want to know is how a round works, what to mark up when you are handed standard paper, and when to stop.
What a round of redlines looks like
You receive a draft. You mark your changes in the document with tracked changes on and add short comments where a change needs explaining. You send it back showing the marks. The other side accepts, rejects or counters, and sends it back showing theirs. Two or three rounds is normal for a routine business agreement. Each round should be marked against the version the other side last saw, not against the original, or every round gets bigger and the actual movement disappears into noise they already agreed.
The three clauses worth marking up on standard supplier paper
Standard supplier agreements are drafted for the supplier, and three clauses are both most one-sided and most often conceded when asked. The notice period and auto-renewal, because a ninety-day window on an evergreen term is a trap and a shorter one is usually available. The liability cap, because the default is frequently the fees you have paid, which may be small. And the price uplift mechanism, because an unlimited annual increase is common and a capped one is a reasonable ask.
When to stop redlining
When the remaining differences are about risk you are willing to carry, or when a third round has produced only cosmetic movement. Contracts do not get better indefinitely and each round costs both sides time. If a structural disagreement is being solved clause by clause, stop and have the conversation directly; that is faster than six more rounds.
What to keep once it is signed
The executed copy, its dates and its obligations, on a record. The redlines themselves are worth keeping if it is free to do so, because they can show what the parties intended if a dispute arises, but they stop being operationally useful the moment the agreement is signed.
Questions people ask about redline contract
What are redlines in a contract?
The marked-up changes one side proposes to the other's draft, shown against the previous version so both parties can see exactly what is being asked for.
How do you redline a contract?
Turn on tracked changes, edit the draft, add short comments where a change needs explaining, and send it back showing the marks. Mark up against the version they last saw, not the original.
How many rounds of redlining are normal?
Two or three for a routine business agreement. Consistently more usually means a structural disagreement being addressed clause by clause.
What should a small business always redline?
The notice period and auto-renewal, the liability cap, and any uncapped price uplift. All three are frequently conceded on standard supplier paper when asked.