The Ultimate Contract Analysis Checklist: What to Look For
A comprehensive guide to reviewing any contract. Use this checklist to ensure you never miss critical clauses, risks, or obligations again.
Downloadable Checklist
Save this comprehensive checklist for your contract review process. Print it out or keep it digital for easy reference.
Reviewing a contract can feel overwhelming, especially when you're faced with dozens of pages of legal language. But having a systematic approach—and a comprehensive checklist—can transform contract review from a daunting task into a manageable process.
This ultimate contract analysis checklist covers everything you need to examine in any business agreement, from basic party information to complex liability provisions. Whether you're reviewing a vendor agreement, service contract, or partnership deal, this guide ensures you won't miss critical terms that could impact your business.
How to Use This Checklist
- 1
First Read-Through
Read the entire contract once without marking anything. Get a general understanding of the agreement's structure and purpose.
- 2
Detailed Analysis
Go through section by section using this checklist. Highlight concerning provisions and flag items that need clarification or negotiation.
- 3
Risk Assessment
Identify and categorize risks: deal-breakers, significant concerns, and minor issues. Prioritize what needs to be addressed.
- 4
Comparison to Standards
Compare terms to your company's standard positions, industry norms, and previous similar agreements.
- 5
Stakeholder Review
Share relevant sections with internal stakeholders (finance, IT, operations) to ensure all requirements are met.
- 6
Documentation
Create a summary of key terms, risks identified, and recommended changes before negotiation or approval.
Comprehensive Contract Review Checklist
Parties and Definitions
Are all parties correctly identified with full legal names?
Why it matters: Ensures enforceability and clarity about who is bound by the agreement.
Are party addresses and contact information accurate and current?
Why it matters: Critical for notices, service of process, and communication.
Are key terms clearly defined (e.g., 'Services,' 'Deliverables,' 'Confidential Information')?
Why it matters: Prevents disputes about what specific terms mean throughout the contract.
Is the effective date clearly stated and logical?
Why it matters: Establishes when obligations begin and when the contract term starts.
Are representatives signing the contract authorized to bind their organizations?
Why it matters: Prevents later claims that the contract is unenforceable due to lack of authority.
Term and Termination
What is the initial term length and is it appropriate for the transaction?
Why it matters: Ensures you're not locked in for longer than necessary or practical.
Are renewal terms clearly specified (automatic vs. manual)?
Why it matters: Prevents surprise renewals and unwanted long-term commitments.
What notice period is required to prevent renewal or terminate?
Why it matters: Ensures adequate time to make decisions and transition to alternatives.
Can either party terminate for convenience, and under what conditions?
Why it matters: Provides flexibility to exit if business needs change.
What constitutes a material breach allowing termination?
Why it matters: Defines your exit rights if the other party fails to perform.
What are the obligations upon termination (data return, transition assistance)?
Why it matters: Ensures smooth exit and protects your business interests after the relationship ends.
Are there any early termination fees or penalties?
Why it matters: Quantifies the cost of exiting the contract before the term ends.
Payment and Pricing
Are all fees, charges, and pricing clearly specified?
Why it matters: Prevents disputes and surprise costs during the contract term.
What payment terms apply (net 30, 60, etc.)?
Why it matters: Impacts cash flow and financial planning.
Are there provisions for price increases, and how are they triggered?
Why it matters: Allows you to budget for future costs and negotiate caps on increases.
What happens if payment is late (interest, late fees, suspension of services)?
Why it matters: Helps you understand consequences of payment delays.
Are there volume discounts, tiered pricing, or overage charges?
Why it matters: Ensures pricing structure aligns with your expected usage patterns.
Are expenses, reimbursements, and taxes addressed?
Why it matters: Clarifies who bears additional costs beyond base fees.
What are the refund or credit policies?
Why it matters: Protects you if services aren't delivered or don't meet expectations.
Performance and Deliverables
Are deliverables, milestones, and deadlines clearly specified?
Why it matters: Ensures both parties understand what's expected and when.
What are the acceptance criteria and testing procedures?
Why it matters: Defines what constitutes successful completion of obligations.
Are service level agreements (SLAs) included with specific metrics?
Why it matters: Provides measurable standards and remedies for performance failures.
What remedies exist if performance standards aren't met?
Why it matters: Ensures you have recourse beyond just termination rights.
Who owns work product, deliverables, and intellectual property created?
Why it matters: Clarifies ownership rights to avoid future disputes.
Are there quality standards, warranties, or representations about the services/products?
Why it matters: Establishes expectations for quality and fitness for purpose.
Liability and Risk Allocation
What are the liability caps for each party?
Why it matters: Defines maximum exposure in case of breach or damages.
Are there carve-outs from liability limitations (e.g., for gross negligence, IP infringement)?
Why it matters: Ensures serious misconduct isn't protected by liability caps.
What types of damages are excluded (consequential, indirect, punitive)?
Why it matters: Limits recovery options if you suffer losses beyond direct damages.
Are indemnification obligations mutual and reasonable?
Why it matters: Ensures fair allocation of risk for third-party claims.
What insurance coverage is required and are you named as additional insured?
Why it matters: Provides additional protection beyond contractual obligations.
Is there a force majeure clause, and is it reasonable?
Why it matters: Defines excused performance during extraordinary events.
How are warranty disclaimers addressed?
Why it matters: Identifies what guarantees (if any) are being made.
Dispute Resolution and Governing Law
What is the governing law and is it favorable to your interests?
Why it matters: Determines which state's laws will interpret the contract.
What is the dispute resolution mechanism (litigation, arbitration, mediation)?
Why it matters: Defines the process and costs for resolving disagreements.
Where is the venue or arbitration location?
Why it matters: Impacts convenience and cost of pursuing or defending claims.
Are attorney's fees and costs addressed?
Why it matters: Determines whether the prevailing party can recover legal expenses.
Is there a requirement for good faith negotiations before formal proceedings?
Why it matters: May provide opportunity to resolve disputes without expensive litigation.
Are there any waivers of jury trial or class action rights?
Why it matters: Limits your legal options in case of disputes.
Miscellaneous but Important Clauses
Are confidentiality obligations appropriate and reciprocal?
Why it matters: Protects sensitive business information shared during the relationship.
Is there a non-solicitation or non-compete clause, and is it reasonable?
Why it matters: May restrict your future business activities or hiring.
How are notices to be delivered (email, certified mail)?
Why it matters: Ensures important communications are properly sent and received.
Is there an assignment clause, and can you assign the contract if needed?
Why it matters: Impacts your ability to transfer rights during M&A or restructuring.
Does the contract include an integration/entire agreement clause?
Why it matters: Supersedes prior negotiations and side agreements not in the written contract.
Are amendment procedures clearly specified?
Why it matters: Defines how changes to the contract must be documented.
Is there a severability clause?
Why it matters: Allows the rest of the contract to remain valid if one provision is found unenforceable.
For data processing, are GDPR/privacy requirements addressed?
Why it matters: Ensures compliance with data protection regulations.
Best Practices for Contract Review
Take Your Time
Don't rush the review process. Most contract mistakes happen when people feel pressured to sign quickly. Ask for adequate time to review, and don't hesitate to request extensions if needed.
Involve the Right People
Share relevant sections with stakeholders who will be affected: finance for payment terms, IT for technical requirements, operations for performance obligations.
Document Everything
Keep notes on your review findings, questions asked and answered, and changes negotiated. Create a summary of key terms for easy reference during the contract term.
Use Technology
Consider using AI-powered contract analysis tools to supplement your manual review. They can quickly identify standard issues and flag unusual provisions for closer examination.
Common Contract Review Mistakes to Avoid
Focusing Only on Price
Many businesses review payment terms carefully but gloss over liability, termination, and performance provisions that can be equally or more costly.
Accepting the First Draft Without Negotiation
Initial drafts are typically weighted in favor of whoever drafted them. Almost everything in a contract is negotiable if you ask.
Ignoring the "Boring" Provisions
Dispute resolution, governing law, and notice provisions seem mundane but can dramatically impact your ability to enforce the contract or resolve problems.
Not Reading the Fine Print
Important limitations, exclusions, and qualifications are often buried in footnotes, appendices, or dense paragraphs. Read everything, no matter how small the font.
Relying on Verbal Promises
If it's important, it needs to be in writing. Verbal assurances won't help you if the contract says something different and includes an integration clause.
Make Contract Review Systematic, Not Overwhelming
A comprehensive checklist transforms contract review from an ad-hoc process into a systematic approach that ensures consistency and thoroughness. By working through each category methodically, you can be confident that you've examined all critical aspects of the agreement.
Remember that this checklist is a starting point. Depending on your industry, the type of contract, and your company's specific needs, you may need to add additional items or focus more heavily on certain categories.
The time you invest in thorough contract review pays dividends by preventing costly mistakes, ensuring favorable terms, and protecting your business interests throughout the contract relationship.
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