1. Payment and Fee Structure
Before signing, validate every dollar figure in the contract. Is the price what you agreed to verbally? Are there additional fees for expenses, materials, or travel? Look for escalation clauses that allow the other party to raise prices during the contract term. Understand when payments are due and what the penalties are for late payment.
If you're the one receiving payment, check how and when you'll get paid. Net 30 or net 60 terms, invoicing requirements, and approval processes can significantly delay your cash flow.
- Verify all dollar amounts match your verbal agreement
- Identify any hidden fees (expenses, surcharges, additional services)
- Check payment schedule and late payment penalties
- Look for price escalation or automatic increase clauses
2. Scope of Work and Deliverables
A vague scope of work is the number one source of contract disputes. The contract should spell out exactly what will be delivered, by when, and to what standard. If something important is described as 'as needed' or 'as agreed,' ask for specifics in writing.
Look for exclusivity clauses that prevent you from working with competitors, and non-solicitation clauses that restrict your ability to hire the other party's employees.
3. Termination and Renewal Terms
Always check how you can exit the agreement. A fair contract allows either party to terminate with reasonable notice (typically 30 days). Auto-renewal clauses are common but dangerous — they can lock you in for another full term if you miss a narrow cancellation window.
Set a calendar alert for any renewal deadlines the day you sign. If you see 'evergreen renewal' without a clear opt-out mechanism, negotiate for a mutual termination-for-convenience clause.
4. Liability and Indemnification
Liability caps should be reasonable and mutual. If one party's liability is capped at the fees paid while yours is unlimited, that's a red flag. Indemnification means one party agrees to cover the other's losses — it should be mutual, not one-sided.
5. Intellectual Property Rights
Who owns the work product? In creative or development contracts, IP ownership is critical. The default rule is that the creator owns the IP unless the contract explicitly transfers it. Make sure 'work made for hire' language and IP assignment clauses are clear and complete.
6. Confidentiality Obligations
Confidentiality clauses should be specific about what information is protected, how long the obligation lasts, and what happens to confidential materials when the contract ends. Watch for overly broad definitions — 'all information disclosed' is much broader than 'information marked confidential.'
7. Dispute Resolution
Check where disputes would be resolved. If the governing law is in a different state or country, you may need to travel (and hire local counsel) to enforce your rights. Arbitration clauses can be faster and cheaper than court, but they also limit your ability to appeal. Consider whether mandatory arbitration is in your interest.
Final Check Before You Sign
Before putting pen to paper, ask yourself: Do I understand every clause? Are the agreed-upon changes reflected in the document? Is there anything hand-written or cross-out that doesn't match my understanding? If contract language is confusing, don't assume it means what you hope it means — clarify it or walk away.
Using an AI contract review tool like ContractRev can catch risks you might overlook. It scans your contract for unfair terms, missing clauses, and high-risk language in under 30 seconds, giving you a detailed report before you sign.
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