# Why You Should Read Every Contract Carefully

> A contract review checklist for non-lawyers: parties, scope, payment, renewal and exit, liability, restrictions, red flags, and when to call a lawyer.

## Before you start

Do these three things before you read the contract:

- Get the version that you will sign, with every schedule, exhibit and attachment. Also get each document that it refers to, such as terms on a website.
- Plan time without interruptions, and read all of the contract, also the last pages. Liability caps, renewal terms and dispute terms are often near the end.
- Keep a list of questions and unclear terms. Before you sign, send each question to the other party in writing.

![Contract review steps: read, parties, obligations, payment, exit, risk, questions, decide](/assets/blog/how-to-review-contract-without-lawyer/diagram_read-entire-contract.webp)

## Contract review checklist

### Parties and signatures

- [ ] The full legal name of each party matches its registration. If your company is the party, the contract must name the company, not you. With your own name ("John Smith" instead of "Smith Consulting LLC"), the contract can bind you personally.
- [ ] The other party is the correct legal entity. "ABC Inc." and "ABC Holdings LLC" can be different companies.
- [ ] Each signer has the authority to sign, and the signature block shows the correct title.
- [ ] The contract has no personal guarantee (a promise to pay company debts with your own money) that you did not agree to.

### What and when

- [ ] The deliverables are specific: quantities, specifications, the number of revision rounds.
- [ ] Each deadline or milestone has a date.
- [ ] Acceptance is defined: how the buyer accepts the work, by when, and the result if the buyer says nothing.
- [ ] The contract lists the inputs from each party, such as access, content and approvals. It also says what happens to deadlines if an input is late.
- [ ] A process for changes to the scope exists. It says how a party requests a change, and how the parties price and approve it.

### Money

- [ ] The total price is clear. The contract says what the price includes, such as taxes, shipping, setup, training, support and licenses.
- [ ] The payment schedule says what triggers each payment.
- [ ] You accept the terms for late payment, such as interest, fees, suspension of service, or the full balance due at once.
- [ ] Price increases during the term state when, how much and with how much notice.
- [ ] The contract covers expenses, deposits and refunds.

![Payment terms: total price, schedule, hidden costs, late penalties](/assets/blog/how-to-review-contract-without-lawyer/diagram_total-price-payment.webp)

### Term, renewal and exit

- [ ] The contract states the start date, the length and the end date.
- [ ] For automatic renewal, find the length of each renewal and the last day to cancel. Put that date in your calendar now.
- [ ] For termination, find out if a party can end the contract without a reason, or only after a breach. Find the notice period, for example 30, 60 or 90 days. Also find the required form, such as a letter or an email.
- [ ] A cure period exists. A cure period is the time to correct a breach before the other party can end the contract.
- [ ] The contract covers the end: final payments, refunds, early termination fees, the return of materials, and the export of your data.

### Risk

- [ ] Indemnification (a promise to pay the losses of another party): who must pay, for which claims, and if the promise applies to both parties.
- [ ] Limitation of liability (a cap on the damages that a party pays): whose liability it limits, the amount, and the exclusions. Compare the cap with the cost of a failure for you.
- [ ] Warranties (promises about quality or performance): what the contract promises and what it disclaims. "As is" means that you get no promise about quality.
- [ ] Insurance: which policies and amounts each party must have. Also find out if you must name the other party as an additional insured.

![Contract risk clauses: indemnification, liability limits, warranties, insurance](/assets/blog/how-to-review-contract-without-lawyer/diagram_contract-risk-indemnification.webp)

### Restrictions

- [ ] Non-compete and non-solicitation: which activity, where, and for how long after the end of the contract. A non-compete bans competing work. Non-solicitation bans approaching the staff or clients of the other party.
- [ ] Exclusivity: whether you can work with others or buy from others.
- [ ] Confidentiality: what it covers, for how long, and the exceptions, such as your accountant, your lawyer and legal requirements.
- [ ] Intellectual property: who owns the work product and from when (often only after payment). Also find out if your existing tools and know-how stay yours.
- [ ] Assignment: whether a party can transfer the contract to another company, for example when it sells its business.

### Disputes and fine print

- [ ] [Governing law](https://www.law.cornell.edu/wex/governing_law) and venue: whose law applies, and where a court or an arbitrator hears a dispute.
- [ ] Arbitration (a private judge instead of a court), a jury trial waiver, or a class action waiver.
- [ ] A right of the other party to change the terms alone, for example when it posts new terms online.
- [ ] An entire agreement clause. With this clause, earlier promises in emails or calls usually [do not count](https://www.law.cornell.edu/wex/integration_clause) unless the contract contains them.
- [ ] The address or the email for formal notices.
- [ ] The definition of each capitalized term. A definition can change the meaning of a full clause.
- [ ] Blanks are filled in, all exhibits are attached, and the final text matches what you negotiated. Compare the final file with the last draft, line by line.

## Red flags: stop and get advice

| Clause | What it looks like | Why it matters |
|---|---|---|
| One-sided indemnity | Only you pay for their losses | You carry the legal risk of both parties |
| Uneven liability | Their liability has a cap, your liability has no cap | One mistake can cost much more than the contract is worth |
| Personal guarantee | You personally guarantee the obligations of your company | Your own assets are at risk |
| Changes by one party | They can change the terms at any time | The deal that you signed can become a different deal |
| Broad non-compete | No similar work, in any place, for years | It can keep you out of your own field |
| Distant forum | Arbitration or court in another state or country | A claim becomes expensive to bring or to defend |
| Silent renewal | A long term, automatic renewal and a short window to cancel | One missed date keeps you in the contract |
| Total IP transfer | All that you create, also your existing tools, goes to them | You can lose the right to reuse your own work |

## Two more terms to know

Many contracts contain two more standard clauses. A force majeure clause releases the parties from their obligations when an extraordinary event outside their control prevents performance ([LII](https://www.law.cornell.edu/wex/force_majeure)). Read which events it lists. A severability clause keeps the rest of the contract valid if a court finds one clause invalid ([LII](https://www.law.cornell.edu/wex/severability_clause)).

## When a lawyer is worth it

Ask a lawyer to review the contract in these cases:

- The value is large compared with your income or the revenue of your company.
- The term is long, or the renewal is automatic and hard to stop.
- The contract includes a personal guarantee, unlimited liability or a broad non-compete.
- You work in a regulated field, such as health, finance or government contracts.
- The lawyers of the other party wrote the contract, and the other party does not accept changes.
- You found several red flags, or a clause that you still do not understand.

Ask for a fixed fee for the review of one contract. Bring your list of questions, so that the review focuses on them.

## Use this checklist with Claude or ChatGPT

You can paste this checklist and the contract into Claude or ChatGPT. Ask the AI to go through the items. The AI can find where each topic is in a long contract. It can show which items are missing, and it can explain legal wording in plain language.

```text
Below are a contract review checklist and a contract. For each
checklist item, say "covered", "unclear" or "missing", quote the clause
number and wording that covers it, and explain in plain English what it
means for me as [buyer / seller / contractor]. Then list the red flags
you found and the questions I should ask the other party.

CHECKLIST:
[paste the checklist]

CONTRACT:
[paste the contract]
```

Compare each quote from the AI with the contract before you rely on it. The AI can misread a clause, miss a clause, or quote wording that is not in the contract.

Remove names, prices and personal details before you upload a draft that is confidential. Also read the data settings of your workspace.

An AI summary is not legal advice. For an important contract, a lawyer with a license where the contract applies has the final word.

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## Frequently Asked Questions

### Can I change a contract before I sign it?

Usually, yes, unless the contract is a fixed form that the other party does not change. Mark the changes that you want, and explain each change in one sentence. Sign only a final version that contains the changes. If the contract has an entire agreement clause, promises in emails or calls can lose their effect. Write every agreed change into the contract itself.

### Is an electronic signature as binding as a paper signature?

In the US, generally yes. The federal ESIGN Act (15 U.S.C. 7001) covers this. Under the act, a contract does not lose legal effect, validity or enforceability only because the parties used an electronic signature or record to form it. Read a contract before you click "I agree" or type your name, as you do on paper.

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