Contract Review Checklist
A comprehensive guide on what to look for in a contract. Review each section carefully to identify potential risks before signing.
Pro Tip: Use this checklist alongside aicontract's AI-powered review to automatically identify these risks in your contracts within minutes.
1 Payment Terms
Thoroughly review all payment-related provisions to ensure favorable terms and clear obligations.
-
Payment Amounts: Verify all amounts are correct, including base fees, bonuses, and any variable components. Check for hidden fees or unexpected charges.
-
Due Dates and Payment Schedule: Confirm payment terms align with your cash flow. Look forNet-30, Net-45, or other terms and ensure they are acceptable.
-
Currency: Ensure the payment currency is specified and acceptable. For international contracts, check for currency conversion terms and exchange rate provisions.
-
Late Payment Penalties: Review interest rates on overdue payments. Ensure penalty rates are reasonable and capped. Watch for escalating penalty clauses.
-
Payment Method: Confirm acceptable payment methods. Check for electronic transfer requirements, wire instructions, or other specific procedures.
-
Invoice Requirements: Check for specific invoicing requirements including format, supporting documentation, and approval processes.
2 Liability Provisions
These clauses determine financial exposure if something goes wrong. They are among the most critical provisions to review.
-
Limitation of Liability: Check if liability is capped at contract value, insurance limits, or a specific dollar amount. Understand your maximum exposure.
-
Indemnification: Review who indemnifies whom and for what types of claims. Watch for broad indemnity provisions that could obligate you for third-party claims.
-
Consequential Damages: Check whether consequential, incidental, or special damages are excluded. These can be enormous in cases of business interruption.
-
Warranty Disclaimers: Review what warranties are disclaimed. Be cautious of contracts disclaiming all implied warranties, including merchantability and fitness for a particular purpose.
-
Liability Insurance Requirements: Check if you are required to maintain specific insurance coverage. Verify you have adequate coverage or can obtain it.
3 Termination Clauses
Understand how and when the contract can be ended to avoid being locked into unfavorable terms.
-
Termination for Cause: Review what constitutes a material breach that allows the other party to terminate. Ensure definitions are clear and not overly broad.
-
Termination for Convenience: Check if either party can terminate without cause, with or without penalty. This affects your ability to exit the relationship.
-
Notice Periods: Review required notice periods for termination. Longer notice requirements can create binding obligations during the notice period.
-
Termination Effects: Check provisions regarding payment obligations, return of materials, confidentiality survival, and ongoing liabilities after termination.
-
Auto-Renewal: Watch for automatic renewal provisions. Understand renewal terms, notice requirements to prevent renewal, and any rate changes upon renewal.
4 Intellectual Property
IP provisions determine who owns the work product, innovations, and creative materials generated under the contract.
-
Work Product Ownership: Determine who owns deliverables created under the contract. In services contracts, work product is often assigned to the client.
-
Pre-Existing IP: Check how pre-existing intellectual property is treated. Ensure you retain ownership of your background IP and can use it in other engagements.
-
License Grants: Review any licenses granted to the other party. Understand scope (exclusive vs. non-exclusive), duration, territory, and permitted uses.
-
IP Representations: Check warranties that you have the right to use any materials provided. Ensure no third-party IP rights are being infringed.
-
Moral Rights: In some jurisdictions, creators retain moral rights. Review if waivers of moral rights are required and understand implications.
5 Confidentiality
Protect your sensitive business information with clear confidentiality obligations.
-
NDA Provisions: Review the scope of confidentiality obligations. Ensure the definition of "Confidential Information" is neither too broad nor too narrow.
-
Confidentiality Duration: Check how long confidentiality obligations last. Some information may need perpetual protection, while other information may only need protection for 2-5 years.
-
Standard of Care: Review the standard of care required to protect confidential information. Obligations should be reasonable and achievable.
-
Permitted Disclosures: Check for exceptions allowing disclosure, such as legally required disclosures, disclosures to employees/contractors with need to know, or publicly available information.
-
Return or Destruction: Review obligations for returning or destroying confidential information upon termination. Ensure adequate time is provided.
6 Force Majeure
These clauses address unforeseeable circumstances that prevent contract performance.
-
Covered Events: Review what events qualify as force majeure. Common examples include natural disasters, war, pandemics, and government actions. Ensure the list is adequate.
-
Notice Requirements: Check how quickly you must notify the other party of a force majeure event. Ensure notice procedures are practical.
-
Duration Provisions: Review how long force majeure relief can last. After a certain period, either party may typically terminate the contract.
-
Payment Obligations: Clarify whether payments must continue during a force majeure event or are suspended. Understand your cash flow implications.
-
Pandemic Considerations: Given recent experience, ensure pandemic-related disruptions are addressed or explicitly included in covered events.
7 Dispute Resolution
These provisions determine how conflicts will be resolved and can significantly impact litigation costs.
-
Arbitration vs. Litigation: Check if disputes must be resolved through arbitration or can go to court. Arbitration can be faster but limits appeal rights.
-
Jurisdiction and Venue: Review where disputes will be heard. Consider convenience, costs, and familiarity with local courts. Watch for remote or inconvenient locations.
-
Governing Law: Determine which state's or country's laws govern the contract. Ensure you are comfortable with that jurisdiction's laws.
-
Class Action Waiver: Check if class action rights are waived. This can affect your ability to join with others in similar situations.
-
Fee Shifting: Review who pays attorney fees in disputes. American vs. British rule (loser pays) has significant cost implications.
8 Compliance Requirements
Ensure the contract and counterparty meet necessary regulatory and standards requirements.
-
Regulatory Compliance: Verify the counterparty complies with relevant laws and regulations including data protection, industry-specific rules, and export controls.
-
Data Protection: Review GDPR, CCPA, and other data protection obligations. Ensure appropriate data processing agreements are in place.
-
Anti-Corruption: Check for FCPA, UK Bribery Act, or other anti-corruption compliance requirements. Ensure adequate anti-corruption representations.
-
Accessibility Standards: For customer-facing contracts, verify compliance with WCAG and other accessibility requirements.
-
Industry Certifications: Check for required certifications such as SOC 2, ISO 27001, HIPAA compliance, or other industry-specific standards.
9 Insurance Requirements
Verify adequate insurance coverage protects both parties and meets contractual obligations.
-
Required Coverage Types: Review required insurance types such as general liability, professional liability, cyber liability, and workers compensation.
-
Minimum Coverage Limits: Check minimum coverage amounts required. Ensure they are adequate for the contract value and risk level.
-
Additional Insured: Review whether you must be named as an additional insured on the other party's policies. This provides direct protection.
-
Certificate Requirements: Check for requirements to provide certificates of insurance and notify of coverage changes or cancellations.
-
Waiver of Subrogation: Review whether insurers can seek recovery against the other party. Waivers limit recourse in case of claims.
10 Assignment Provisions
These clauses determine whether contractual rights and obligations can be transferred to third parties.
-
Assignment Rights: Review whether either party can assign the contract. Generally, consent is required from the non-assigning party.
-
Change of Control: Check if a change in company ownership triggers consent rights or termination rights. This protects against unexpected new counterparties.
-
Delegation of Duties: Review whether duties can be delegated to subcontractors or other parties. Ensure you have approval rights over key delegates.
-
Successors and Assigns: Check how the contract binds successors and assigns. Ensure adequate protections exist if the other party's business is sold.
-
Novation Requirements: Review whether formal novation is required for assignments. This affects how quickly obligations can be transferred.
Ready to Automate Your Contract Review?
aicontract uses artificial intelligence to automatically analyze your contracts against all these checklist items and more. Get risk reports in minutes, not hours.
Frequently Asked Questions
What is a contract review checklist?
A contract review checklist is a systematic guide that helps you evaluate contracts for potential risks and ensure all critical provisions are properly addressed. It covers areas like payment terms, liability limitations, termination clauses, intellectual property rights, confidentiality, and more.
What should I look for in a contract?
When reviewing a contract, you should examine: payment terms (amounts, due dates, currency, penalties), liability provisions (limitations, indemnification, consequential damages), termination clauses (for cause, for convenience, notice periods), intellectual property (ownership, licensing), confidentiality provisions, force majeure clauses, dispute resolution mechanisms, compliance requirements, insurance requirements, and assignment provisions.
Why is a contract review checklist important?
Using a contract review checklist helps ensure you don't miss critical provisions that could expose your business to risk. It provides a standardized approach to contract analysis, reduces the chance of overlooking important terms, and helps identify potential negotiating points before you sign.
How can I automate contract review?
aicontract uses artificial intelligence to automatically review contracts and identify risks in each of these checklist areas. Upload your contract and receive a comprehensive risk report within minutes, highlighting concerning provisions and suggesting areas for negotiation.