Many entrepreneurs struggle when it comes to reviewing contracts. Here’s a two step process to make it a little easier for you.
At the outset, you should look at things from a high level. Then, dive deep into the nitty gritty.
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At a high level you can use these five steps to make sure the contract accurately reflects the deal terms as you understand them:
When reviewing the contract’s terms you might consider using the checklist below to make sure you hit the key points:
□ Are any capitalized terms not defined?
□ Are references to exhibits and schedules correct? Are they attached?
□ Have you double checked all mathematical formulas?
Term & Termination
□ Is the term and expiration identified?
□ Can you terminate early? If so, how?
□ Can the other party terminate early? If so, how?
□ What are the rights of the parties following an early termination?
□ Are your performance obligations accurate? (Learn more.)
□ Are the other party’s performance obligations accurate?
□ Are the payment terms accurate?
□ Are the payment dates and payment methods accurate?
□ Are expenses reimbursable? If so, how?
Representations & Warranties
□ Are your representations and warranties accurate?
□ Are you asking the other party for sufficient representations and warranties?
Other Legal Terms (depending on your circumstances, these may not be necessary)
□ Is there a well-drafted confidentiality provision?
□ Who will own the intellectual property created under the agreement?
□ Are indemnifications provided?
□ Is insurance required? Should it be?
□ Are the “boilerplate” provisions present?
□ Do you agree to the governing law, jurisdiction, and venue?
□ Do you want an attorneys fee provision?
□ If the agreement is an MSA to which SOWs will be attached, is it clear which precedes the other if the MSA and SOW have conflicting terms?
After reviewing your contract, you should consider how to negotiate it. Check out this post for more: How to Negotiate a Contract.
(This article is general in nature and is not legal advice.)
How to draft and negotiate contracts to create better deals.
What is a Contract?
Essential Contract Terms
Reviewing & Negotiating