Contract Policy: How to Implement an Approval Process That Doesn't Slow Down Your Business

The Dilemma with No Winners

You're the manager of a growing company. Two scenarios:

Scenario A: Every contract goes through you before signing. Result: Greater control, but delays in approvals and signatures, team frustrations, suppliers or clients who grow tired of waiting, opportunities lost. A bottleneck is created.

Scenario B: You delegate signing to your team without legal review. Result: contracts that don't reflect what was negotiated with a client/supplier, counterparty shifts costs and liabilities without you noticing, long-term commitments not previously agreed upon. Disorder and greater risk are created.

Most growing companies oscillate between these two extremes. Few have an intermediate process that works.

Legal Authority vs. Internal Policy

Here's the most common point of confusion.

A power of attorney (or mandate) is a legal instrument that authorizes a person to act on your behalf or on behalf of your company before third parties (sign contracts, open accounts, purchase property).

A contract policy is an instrument that regulates your company's processes, such as who reviews, who approves, and who signs based on the type, amount, and risk of the contract. It's a corporate governance mechanism, not a legal act.

You need both. The power of attorney grants legal authority. The policy ensures that authority is used with judgment.

What happens without a policy:

• Someone with authority signs anything.
• There's no record of decisions.
• Risk is distributed without being measured.
• When there's a conflict, nobody knows who decided what.

Framework: Approval Policy by Tiers

Below is an example model. The amounts should be adapted to your reality.

Tier 1: Low Risk (Under X UF)

What's included: Standard contracts, low legal risk, amount under X UF (adjust according to your revenue — e.g., 50 UF).

Examples: Internet services, office lease with standard clauses, contract with a recurring client for standard service, low-risk supplier.

Who approves: Legal review + Area manager (commercial manager, operations manager, as applicable).

Maximum time: 3 business days.

Documentation: Simple request, reviewed contract (no substantial changes from standard template).

Tier 2: Medium Risk (X-Y UF OR Atypical Clauses)

What's included: Contracts over X UF or with non-standard clauses (exclusivity, special penalties, IP transfer, employment restrictions). Examples: Lease with additional guarantee, contract with important client, special employment contract, consulting contract with specific confidentiality clauses.

Who approves: Legal review + approval from the responsible area manager + General Management.

Maximum time: 7 business days.

Documentation: Request with commercial justification, contract with legal risk analysis, proposed modifications if necessary.

Tier 3: High Risk (Over Y UF OR Complex Nature)

What's included: M&A contracts, financing contracts, long-term commitments, contracts with significant labor risks, changes in corporate structure, government contracts, significant IP transfers.

Who approves: Legal review + approval from the responsible area manager + General Management + Board.

Maximum time: 15 business days (may be extended depending on complexity).

Documentation: Executive request, detailed legal analysis, risk memorandum, mitigation proposal, board minutes authorizing.

How to Implement It Without Bureaucracy

The flow is simple. The complexity is in communicating it and making it consistent.

Step 1 — Request: Whoever needs to contract fills out a simple request (can be an email or a form). It includes: what, with whom, how much, for what purpose, deadline.

Step 2 — Classification: The process owner classifies which tier it falls into. Automatically routes to the appropriate person.

Step 3 — Review: Depending on the tier, legal review and risk assessment are conducted.

Step 4 — Approval: The corresponding approver gives the green light or requests changes.

Step 5 — Signing: It's signed and filed in a centralized folder with a record of who, when, and why.

Maximum timelines:

• Tier 1: 3 days (if it exceeds that, escalate).
• Tier 2: 7 days.
• Tier 3: 15 days (subject to complexity).

The Pre-Signing Checklist

Before anyone signs, verify:

1. Does the signatory have authority?
2. Has the contract been approved at the correct tier?
3. Have legal risks been identified and mitigated?
4. Are the parties correct? (name, representative, address)
5. Are the dates complete?
6. Has the approval been recorded?
7. Is there a copy for the archive?
8. Will accounting/compliance be notified if applicable?

Need Help Implementing Your Contract Policy?

Designing an approval policy is just the first step. For it to really work, you need to define clear processes for drafting, negotiating, and managing contracts tailored to your company.

At Cubillos Lama we help growing companies professionalize their contract management — from creating templates and approval workflows to periodic review of existing contracts.

Let's talk. Write to us and we'll help you build a process that protects your business without slowing it down.