Review Contract
When to use
Run this when the owner receives a contract, lease, vendor agreement, or client SOW and wants to understand it and negotiate before signing.
Not for: legal advice or high-stakes deals on its own — this is a plain-English review; recommend a lawyer when the stakes are high. Not for signing or sending anything on the owner's behalf.
Method
- Read the whole document. Identify the parties, the deal, term length, renewal, and termination mechanics.
- Explain in plain English. What the owner is agreeing to, what they get, and what they owe.
- Scan for risk clauses. Auto-renewal, unilateral changes, liability/indemnification, exclusivity, non-compete, payment terms, late fees, IP ownership, dispute venue.
- Rate each red flag. Severity High/Medium/Low, a one-line "why it matters," and a suggested fix. Decision point: if any High-severity clause is present (uncapped liability, broad IP assignment, auto-renew with a long notice window), say plainly that a lawyer should see it before signing.
- Produce a redline. Original text with proposed edits marked and short margin comments.
- Hand back the decision. The owner decides what to accept, push back on, or walk away from. Nothing is signed or sent on their behalf without approval.
Example
A SaaS vendor agreement: 12-month term, auto-renews for 12 months unless cancelled 90 days out (High — long lock-in, easy to miss; fix: 30-day notice, month-to-month after year one). Liability capped at fees paid (Medium — acceptable). Vendor may change pricing "at any time" (High — fix: cap increases at 5%/year with 60-day notice). Plain-English summary: you commit for a year, hard to exit, and price can jump. Redline marks the two High clauses with suggested language; note recommends a lawyer given the auto-renew lock-in.
Pitfalls
- Summarizing only the friendly clauses and glossing over indemnification or IP ownership buried at the back.
- Rating everything "Medium" — severity has to discriminate or it's noise.
- Flagging a problem with no suggested fix, leaving the owner nothing to negotiate with.
- Presenting the review as legal advice; always steer high-stakes deals to a licensed lawyer.
Output format
- Plain-English summary (5-8 sentences).
- Red-flag table: clause | severity | why it matters | suggested change.
- Redline block: tracked edits + margin comments.
- Closing note: recommend professional legal review when stakes are high; nothing signed or sent without owner approval.
Reference
SMB contract red-flag catalog
| Clause |
Red flag |
Severity |
Owner-friendly fix |
| Auto-renewal |
Renews for a full term unless cancelled 60-90 days out |
High |
30-day notice; month-to-month after year one |
| Unilateral price change |
Vendor may raise fees "at any time" |
High |
Cap increases (e.g. 5%/yr) with 60-day notice |
| Uncapped liability |
No limit on what the owner owes if something goes wrong |
High |
Cap at fees paid in trailing 12 months |
| Broad indemnification |
Owner covers vendor's losses, including third-party claims |
High |
Mutual indemnity, limited to each party's own fault |
| IP assignment |
Vendor/client owns everything the owner creates |
High |
Owner retains pre-existing IP and tools; license only the deliverable |
| Non-compete / exclusivity |
Owner can't work with competitors or other clients |
High |
Narrow scope, geography, and duration; or strike |
| Personal guarantee |
Owner personally liable beyond the business |
High |
Remove; keep liability with the entity |
| Evergreen term |
No end date |
Medium |
Fixed term with renewal option |
| Net-60/90 payment |
Owner waits months to get paid |
Medium |
Net-30 or net-15; deposit up front |
| No late-fee / interest |
Owner has no leverage on slow payers |
Medium |
1.5%/mo interest on overdue |
| Unilateral termination |
Vendor can exit anytime; owner can't |
Medium |
Symmetric termination for convenience |
| Governing law / venue far away |
Disputes must be litigated across the country |
Medium |
Owner's home state, or arbitration nearby |
| Confidentiality one-way |
Only owner bound to secrecy |
Low |
Make mutual |
| Assignment without consent |
Contract can be sold to anyone |
Low |
Require consent to assign |
Severity guide (make it discriminate)
- High = could cost real money, lock the owner in, or transfer ownership/liability. Any High → recommend a lawyer before signing.
- Medium = worth negotiating; not a dealbreaker alone.
- Low = nice-to-fix; note it, don't die on it.
If everything is "Medium," the review is noise — force the ranking.
Plain-English translation cheatsheet
- "Indemnify and hold harmless" → you pay their legal bills if they get sued over this.
- "Sole discretion" → they decide, you don't get a say.
- "Time is of the essence" → deadlines are legally binding, not aspirational.
- "Liquidated damages" → a pre-agreed penalty if you break the deal.
- "Perpetual, irrevocable, worldwide license" → they can use it forever, everywhere, and can't be taken back.
- "Net 60" → payment due 60 days after invoice.
- "Auto-renew" → it continues and re-bills unless you actively cancel in a specific window.
Contract-type quick focus
- Commercial lease: term, renewal, CAM/operating-expense pass-throughs, personal guarantee, assignment/sublease rights, escalation clause.
- Vendor / SaaS: auto-renew, price changes, data ownership + export on exit, uptime SLA, liability cap.
- Client SOW: scope creep / change-order process, payment schedule + deposit, IP ownership of deliverables, kill fee.
- Employment / contractor: classification (W-2 vs 1099), non-compete enforceability (varies by state — many are void), IP assignment, at-will language.
Boundaries
This is a plain-English review, not legal advice. Always steer high-stakes or High-severity deals to a licensed attorney. Never sign, initial, or send the contract on the owner's behalf — the owner decides what to accept, counter, or walk from.
1---2name: smb-review-contract3description: Review a contract in plain English, flag red flags by severity, and return a marked-up redline with suggested edits.4---56# Review Contract78## When to use9Run this when the owner receives a contract, lease, vendor agreement, or client SOW and wants to understand it and negotiate before signing.1011**Not for:** legal advice or high-stakes deals on its own — this is a plain-English review; recommend a lawyer when the stakes are high. Not for signing or sending anything on the owner's behalf.1213## Method141. **Read the whole document.** Identify the parties, the deal, term length, renewal, and termination mechanics.152. **Explain in plain English.** What the owner is agreeing to, what they get, and what they owe.163. **Scan for risk clauses.** Auto-renewal, unilateral changes, liability/indemnification, exclusivity, non-compete, payment terms, late fees, IP ownership, dispute venue.174. **Rate each red flag.** Severity High/Medium/Low, a one-line "why it matters," and a suggested fix. Decision point: if any High-severity clause is present (uncapped liability, broad IP assignment, auto-renew with a long notice window), say plainly that a lawyer should see it before signing.185. **Produce a redline.** Original text with proposed edits marked and short margin comments.196. **Hand back the decision.** The owner decides what to accept, push back on, or walk away from. Nothing is signed or sent on their behalf without approval.2021## Example22A SaaS vendor agreement: 12-month term, **auto-renews for 12 months unless cancelled 90 days out** (High — long lock-in, easy to miss; fix: 30-day notice, month-to-month after year one). Liability capped at fees paid (Medium — acceptable). **Vendor may change pricing "at any time" (High** — fix: cap increases at 5%/year with 60-day notice). Plain-English summary: you commit for a year, hard to exit, and price can jump. Redline marks the two High clauses with suggested language; note recommends a lawyer given the auto-renew lock-in.2324## Pitfalls25- Summarizing only the friendly clauses and glossing over indemnification or IP ownership buried at the back.26- Rating everything "Medium" — severity has to discriminate or it's noise.27- Flagging a problem with no suggested fix, leaving the owner nothing to negotiate with.28- Presenting the review as legal advice; always steer high-stakes deals to a licensed lawyer.2930## Output format31- **Plain-English summary** (5-8 sentences).32- **Red-flag table:** clause | severity | why it matters | suggested change.33- **Redline block:** tracked edits + margin comments.34- **Closing note:** recommend professional legal review when stakes are high; nothing signed or sent without owner approval.3536## Reference3738### SMB contract red-flag catalog39| Clause | Red flag | Severity | Owner-friendly fix |40|--------|----------|----------|--------------------|41| **Auto-renewal** | Renews for a full term unless cancelled 60-90 days out | High | 30-day notice; month-to-month after year one |42| **Unilateral price change** | Vendor may raise fees "at any time" | High | Cap increases (e.g. 5%/yr) with 60-day notice |43| **Uncapped liability** | No limit on what the owner owes if something goes wrong | High | Cap at fees paid in trailing 12 months |44| **Broad indemnification** | Owner covers vendor's losses, including third-party claims | High | Mutual indemnity, limited to each party's own fault |45| **IP assignment** | Vendor/client owns everything the owner creates | High | Owner retains pre-existing IP and tools; license only the deliverable |46| **Non-compete / exclusivity** | Owner can't work with competitors or other clients | High | Narrow scope, geography, and duration; or strike |47| **Personal guarantee** | Owner personally liable beyond the business | High | Remove; keep liability with the entity |48| **Evergreen term** | No end date | Medium | Fixed term with renewal option |49| **Net-60/90 payment** | Owner waits months to get paid | Medium | Net-30 or net-15; deposit up front |50| **No late-fee / interest** | Owner has no leverage on slow payers | Medium | 1.5%/mo interest on overdue |51| **Unilateral termination** | Vendor can exit anytime; owner can't | Medium | Symmetric termination for convenience |52| **Governing law / venue far away** | Disputes must be litigated across the country | Medium | Owner's home state, or arbitration nearby |53| **Confidentiality one-way** | Only owner bound to secrecy | Low | Make mutual |54| **Assignment without consent** | Contract can be sold to anyone | Low | Require consent to assign |5556### Severity guide (make it discriminate)57- **High** = could cost real money, lock the owner in, or transfer ownership/liability. Any High → recommend a lawyer before signing.58- **Medium** = worth negotiating; not a dealbreaker alone.59- **Low** = nice-to-fix; note it, don't die on it.60If everything is "Medium," the review is noise — force the ranking.6162### Plain-English translation cheatsheet63- "Indemnify and hold harmless" → *you pay their legal bills if they get sued over this.*64- "Sole discretion" → *they decide, you don't get a say.*65- "Time is of the essence" → *deadlines are legally binding, not aspirational.*66- "Liquidated damages" → *a pre-agreed penalty if you break the deal.*67- "Perpetual, irrevocable, worldwide license" → *they can use it forever, everywhere, and can't be taken back.*68- "Net 60" → *payment due 60 days after invoice.*69- "Auto-renew" → *it continues and re-bills unless you actively cancel in a specific window.*7071### Contract-type quick focus72- **Commercial lease:** term, renewal, CAM/operating-expense pass-throughs, personal guarantee, assignment/sublease rights, escalation clause.73- **Vendor / SaaS:** auto-renew, price changes, data ownership + export on exit, uptime SLA, liability cap.74- **Client SOW:** scope creep / change-order process, payment schedule + deposit, IP ownership of deliverables, kill fee.75- **Employment / contractor:** classification (W-2 vs 1099), non-compete enforceability (varies by state — many are void), IP assignment, at-will language.7677### Boundaries78This is a plain-English review, not legal advice. Always steer high-stakes or High-severity deals to a licensed attorney. Never sign, initial, or send the contract on the owner's behalf — the owner decides what to accept, counter, or walk from.
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