How to Review a Contract Before You Sign: A Practical Checklist

The Contract Review Habit That Saves Money

Contracts create obligations that can last months or years. A 20-minute review before signing can save thousands in disputes, missed deadlines, or unexpected liabilities. This checklist applies to any contract: service agreements, vendor contracts, employment offers, licensing deals, or NDAs.

The 10-Point Contract Review Checklist

1. Identify the Parties

Verify the full legal names of all parties. "John Smith DBA Acme Consulting" has different legal implications than "Acme Consulting LLC." If you are signing on behalf of a company, ensure the contract names the company — not you personally — to limit personal liability.

Watch for: Signing in your personal name when you intended to sign as a business entity. This is a common mistake that can make you personally liable for business obligations.

2. Scope of Work / Deliverables

Exactly what is each party agreeing to provide? The scope section should answer:

What specifically will be delivered (not vague descriptions)
By when
In what format or to what standard
What is explicitly excluded

Watch for: Vague language like "reasonable efforts" or "as needed." Vague scope means disputes. Prefer specific, measurable deliverables.

3. Payment Terms

Total contract value
Payment schedule (milestone-based vs. monthly vs. net-30/60/90)
Late payment penalties
Expense reimbursement (what qualifies, approval required?)
Currency

Watch for: Net-90 payment terms for a small vendor (you are effectively lending money to your client). Also watch for "payment on acceptance" with no defined acceptance criteria.

4. Term and Termination

Contract start and end date
Auto-renewal provisions (and required notice to cancel)
Termination for cause (what constitutes breach?)
Termination for convenience (can either party exit without cause? With what notice?)
Obligations that survive termination (confidentiality, non-compete, IP ownership)

Watch for: Auto-renewal without notice. Many software and service contracts renew annually and require 60-90 days notice to cancel — missing that window locks you in for another year.

5. Intellectual Property

Who owns what is created under the contract?

Work made for hire — IP created belongs to the client, not the creator
License grants — creator retains ownership but client gets usage rights
Background IP — pre-existing work each party brings; should remain theirs
Derivative works — who owns improvements built on existing work

Watch for: Overly broad IP assignments that claim rights to things you built before the contract or on your own time.

6. Confidentiality and NDA Terms

What information is considered confidential
Obligations of each party when receiving confidential information
Exclusions (publicly available info, info already known)
Duration of confidentiality obligations (common: 2-5 years, or indefinitely for trade secrets)

7. Representations and Warranties

Statements each party is certifying as true. Common examples:

You have authority to enter the contract
Your work won't infringe third-party IP
Services will be performed professionally

Watch for: Making representations you cannot guarantee (e.g., "software will be error-free"). Ask to limit warranties to "reasonable commercial efforts."

8. Limitation of Liability

Caps on what each party can owe in damages. Common structures:

Liability capped at fees paid in the last 12 months
No liability for consequential or indirect damages (lost profits, reputational harm)
Carve-outs for fraud, gross negligence, or willful misconduct

Watch for: Unlimited liability provisions. Always negotiate a cap equal to the contract value if no cap exists.

9. Dispute Resolution

Governing law (which state's laws apply)
Jurisdiction (where disputes must be litigated)
Arbitration clause (private vs. court proceedings)
Mandatory mediation before arbitration or litigation

Watch for: The other party's home state as governing law and jurisdiction. Having to litigate in a state where you have no presence is expensive. Negotiate for your home state or neutral ground.

10. Force Majeure and Amendment

What events excuse non-performance (pandemics, natural disasters, supply chain issues)
How the contract can be amended (must be in writing and signed?)
Entire agreement clause (the written contract supersedes all prior verbal agreements)

Extract Contract Data Automatically

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