A good contract review checks five things before you sign: who is bound, what each side must deliver, how and when money moves, how the deal ends, and who bears the risk when something goes wrong. Work through the document clause by clause with a checklist, mark anything unclear or one-sided, and negotiate the terms that carry real exposure for your business.
Most contract problems are not hidden in obscure legal language. They sit in plain sight: an auto-renewal nobody calendared, an uncapped indemnity, a statement of work that never defined “done.” The checklist below is the one we use as a starting point when reviewing commercial agreements such as services, vendor, licensing, and SaaS contracts.
1. Parties, Authority, and Signatures
- Confirm the exact legal names of the contracting entities, not trade names or individuals. If your company is the party, make sure you are not signing personally.
- Check that the signer has authority to bind the other side, and that signature blocks show name, title, and entity.
- Look for affiliates or parent companies that should be included, or that are being pulled in without your intent.
2. Scope, Deliverables, and Acceptance
Vague scope is the most common source of disputes. The contract or statement of work should state what is being delivered, by when, to what standard, and how acceptance works. If the work is ongoing, define service levels and what happens when they are missed. Our guide on writing a statement of work covers this in more detail.
3. Payment Terms
- Price, currency, invoicing schedule, and payment deadline.
- Late fees, interest, and the right to suspend work for nonpayment.
- Expenses, taxes, and who bears them.
- Price increases on renewal and any minimum commitments.
4. Term, Renewal, and Termination
Note the start date, the length of the initial term, and whether the contract renews automatically. Calendar any notice window for non-renewal; missing it can lock you in for another year. If you sell subscriptions to consumers, California’s Automatic Renewal Law imposes specific disclosure, consent, and cancellation requirements, and those rules have been amended in recent years.
For termination, check whether either side can terminate for convenience, what counts as a material breach, whether there is a cure period, and what survives termination (payment obligations, confidentiality, indemnities). Also check what happens to your data and work product at the end.
5. Representations and Warranties
Representations are statements of fact; warranties are promises about quality or performance. Read them for what they promise and what they disclaim. Many vendor forms disclaim all implied warranties and offer only a narrow fix-or-refund remedy. Make sure any warranty you give is one you can actually keep.
6. Indemnification
An indemnity shifts the cost of specified third-party claims from one party to the other. Ask:
- Is it mutual or one-way?
- What triggers it: any breach, negligence, IP infringement, data incidents?
- Does it cover defense costs, and who controls the defense?
- Is it subject to the liability cap, or carved out from it?
7. Limitation of Liability
This clause often matters more than any other. Look for a cap on damages (commonly tied to fees paid over a set period), an exclusion of consequential and indirect damages such as lost profits, and carve-outs from both. Typical carve-outs include confidentiality breaches, indemnified IP claims, gross negligence or willful misconduct, and sometimes data breaches. Make sure the cap is not so low that it leaves you with no meaningful remedy, and that carve-outs apply in both directions.
8. Intellectual Property, Confidentiality, and Data
- Ownership: Who owns the deliverables, and who keeps pre-existing materials and tools? If you are paying for custom work, confirm that it is assigned to you, not just licensed.
- Licenses: Check scope, exclusivity, territory, duration, and whether you can sublicense or use the work after termination.
- Confidentiality: Look at the definition, the exceptions, the duration, and return or destruction obligations.
- Data and privacy: If personal information changes hands, the contract may need terms required by privacy laws, security commitments, breach notice timelines, and limits on how the vendor may use your data, including for training AI models.
9. Assignment, Change of Control, and Insurance
Anti-assignment clauses can require consent if you sell your company or merge, and some treat a change of control as an assignment. If you may raise money or be acquired, this clause deserves attention. Also review any insurance requirements: types of coverage, minimum limits, and additional-insured obligations. Confirm with your broker that you actually carry what you are promising.
10. Disputes and Boilerplate
The “standard” provisions at the end are not throwaways:
- Governing law and venue: Which state’s law applies and where you must sue or be sued.
- Arbitration: Whether disputes go to arbitration, which rules apply, and who pays.
- Attorneys’ fees: Whether the prevailing party recovers fees. In California, a one-way fee clause in a contract is generally made reciprocal by statute.
- Notice: The addresses and methods for formal notice. Keep these current.
- Entire agreement and amendments: Side emails and verbal promises usually do not count, and changes typically must be in a signed writing. As we explain in why what your written document says matters, courts generally enforce the words on the page.
Red Flags in the Other Side’s Paper
- Terms incorporated by reference to a website the other side can change at any time.
- One-way indemnities, caps, or termination rights that favor only the drafter.
- Broad IP assignments that sweep in your pre-existing technology.
- Auto-renewals with short or hidden notice windows.
- Exclusivity, non-solicitation, or most-favored-customer terms buried in the middle.
Setting Negotiation Priorities
You will rarely win every point, so rank them. For most businesses, the order is: liability cap and indemnity, IP ownership, payment and termination rights, then everything else. Re-read the full document after every round of redlines, because a fix in one section can create a conflict in another. For tactics, see our post on contract negotiation.
After Signing: Manage the Contract
Store the signed version where people can find it. Record renewal and notice deadlines, payment milestones, insurance certificates, and reporting obligations. Assign an owner for each contract. Many disputes start because nobody on the team knew what the contract required.
The Takeaway
A structured review turns contract risk into a short list of decisions. Know who is bound, what is promised, how the deal ends, and who pays when it goes wrong, and focus your negotiating energy on the clauses that carry real exposure.
Frequently Asked Questions
How long should a contract review take?
It depends on the deal size and how far the document departs from your standard terms. A short vendor agreement on familiar terms may take an hour; a multi-year services or licensing deal with custom liability and IP terms can take several rounds. Budget time for at least one round of redlines before any deadline.
What are the most important clauses to review?
For most business contracts, start with payment, term and termination, indemnification, limitation of liability, and IP ownership. Those clauses decide who pays when something goes wrong and who owns the work. Governing law and dispute resolution matter next, because they decide where and how you fight about the rest.
Can I rely on a verbal promise that is not in the written contract?
Usually not. Most commercial contracts contain an entire-agreement clause stating that the written document replaces prior discussions. If a promise matters to you, get it into the contract or a signed amendment.
Should I sign the other side’s standard form or insist on mine?
Starting from your own paper gives you an advantage, but it is not always realistic with larger counterparties. If you sign their form, focus your edits on the handful of terms that carry real risk for your business rather than redlining every sentence.
How Sutter Law Can Help
Sutter Law reviews, drafts, and negotiates commercial contracts for startups and growing companies, often as part of an outside general counsel relationship. If you have a contract on your desk, contact us to schedule a free consultation.
This article is general information, not legal advice. Reading it does not create an attorney-client relationship.
