Business Contract Review

Framework

IRON LAW: Read the Entire Contract, Not Just the Commercial Terms

Price and scope are negotiated carefully. Liability, indemnification,
termination, and IP ownership are often accepted on autopilot.
These "back-of-contract" clauses are where the real risk lives.

A great price with unlimited liability is a terrible deal.

Contract Review Checklist (Business Focus)

1. Parties & Authority

• Correct legal entity names (not a subsidiary you didn't intend to contract with)
• Signer has authority to bind the organization

2. Scope & Deliverables

• Clearly defined: what is included AND what is excluded
• Acceptance criteria: how do you determine delivery is satisfactory?
• Change order process: how are scope changes handled and priced?

3. Payment Terms

• Payment schedule: milestones, monthly, upon delivery
• Payment terms: net 30, net 60, upon receipt
• Late payment consequences
• Currency and exchange rate risk (for international contracts)

4. Term & Termination

• Contract duration: fixed term vs auto-renewal
• Termination for convenience: can either party exit? With what notice?
• Termination for cause: what constitutes a breach?
• Wind-down obligations: what happens after termination? Data return? Transition assistance?

5. Liability & Indemnification

• Liability cap: is there one? What's the amount? (ideally = contract value)
• Indemnification: who indemnifies whom? For what? Is it mutual or one-sided?
• Exclusions: consequential damages, lost profits — are they excluded?
• Insurance requirements: does either party need to carry insurance?

6. Intellectual Property

• Who owns work product created during the contract?
• Pre-existing IP: remains with original owner (ensure this is stated)
• License grants: what rights does each party get to use the other's IP?

7. Confidentiality

• Definition of confidential information (not too broad, not too narrow)
• Duration: how long after termination?
• Exceptions: publicly available info, independently developed, legally compelled

8. Dispute Resolution

• Governing law: which jurisdiction?
• Arbitration vs litigation: arbitration is faster and private, litigation is cheaper for small claims
• Venue: where are disputes heard?

Risk Rating

| Risk Level | Characteristics | Action | |-----------|----------------|--------| | 🟢 Low | Market-standard terms, balanced obligations | Sign | | 🟡 Medium | Some one-sided clauses, manageable risk | Negotiate specific clauses | | 🔴 High | Unlimited liability, no exit, one-sided IP | Don't sign without major revisions |

Output Format

markdown
# Contract Review: {Agreement Type} with {Counterparty}

## Overview
- Type: {service/vendor/partnership/license}
- Value: {$X}
- Term: {duration}

## Risk Assessment
| Area | Risk | Issue | Recommendation |
|------|------|-------|---------------|
| Scope | 🟢/🟡/🔴 | {finding} | {action} |
| Payment | 🟢/🟡/🔴 | {finding} | {action} |
| Termination | 🟢/🟡/🔴 | {finding} | {action} |
| Liability | 🟢/🟡/🔴 | {finding} | {action} |
| IP | 🟢/🟡/🔴 | {finding} | {action} |
| Confidentiality | 🟢/🟡/🔴 | {finding} | {action} |

## Red Flags
1. {specific clause + why it's risky}

## Negotiation Priorities
1. {most important change to request}
2. {second priority}
3. {third priority}

## Overall Risk: 🟢/🟡/🔴
{Summary recommendation: sign / negotiate / reject}

Gotchas

• Auto-renewal without notice deadline: Many contracts auto-renew unless you give 30-90 days' notice. Calendar the notice deadline immediately upon signing.
• "Standard" contracts are NOT neutral: The drafter's "standard" template protects the drafter. Everything is negotiable.
• Verbal agreements are risky: "They said they'd cover that" means nothing if it's not in the contract. If it's important, it must be written.
• Force majeure scope: Post-COVID, check what's included. Pandemic? Supply chain disruption? Government orders? Too narrow = no protection when you need it.
• This is a business review, not legal advice: For contracts with significant financial or legal exposure, have a licensed attorney review the final version.

References

• For contract law fundamentals, see the law-contract skill
• For negotiation tactics, see the ops-negotiation skill