Contract Review

|---|---|---| | Liability Cap | Capped at fees paid in prior 6 months | Yellow | Low cap for potential damages | Negotiate to 12-month cap | | IP Assignment | Broad assignment of all work product | Red | Could capture pre-existing IP | Add carve-out for pre-existing IP |

Missing Protections Checklist

Bulleted list of protections that should be present but are not.

Prioritized Action Items

Numbered list of what to do, in order of importance.

Frameworks & Best Practices

The Red/Yellow/Green Flagging System

Red Flags — Immediate concern, do not sign without modification:

• Unlimited liability or liability cap below a reasonable threshold
• Broad IP assignment that could capture pre-existing IP or IP unrelated to the engagement
• Non-compete clauses that are overly broad in scope, geography, or duration
• Unilateral termination rights without cure period for one party only
• Automatic renewal with no opt-out window or unreasonable notice requirements
• Indemnification obligations that are uncapped or wildly asymmetric
• Most-favored-nation clauses that constrain your pricing with other customers
• Exclusivity provisions that limit your ability to work with competitors
• Audit rights with unreasonable scope or no notice requirement
• Governing law in an unfavorable or distant jurisdiction with no negotiation

Yellow Flags — Worth negotiating, but not necessarily deal-breakers:

• Liability caps that are low relative to the contract value
• Warranty periods or SLA credits that are below industry standard
• Payment terms exceeding net-60
• Change-of-control provisions that allow termination on acquisition
• Broad confidentiality definitions with long or indefinite survival periods
• Assignment restrictions that prevent assignment in an acquisition scenario
• Force majeure clauses that are overly broad or favor one party
• Data handling terms that are vague about deletion, portability, or sub-processors

Green Flags — Standard and reasonable:

• Mutual confidentiality obligations
• Balanced termination rights with cure periods
• Liability capped at 12 months of fees paid