Contract Patterns
Contract Types Reference
| Contract |
Purpose |
Who signs |
| NDA (Mutual) |
Protects confidential information during evaluation |
Both parties before sharing sensitive info |
| MSA (Master Services Agreement) |
Governs entire commercial relationship |
Both parties once, referenced by all SOWs |
| SOW (Statement of Work) |
Defines specific project scope, deliverables, timeline |
Both parties per project / engagement |
| Order Form |
Captures commercial terms for a specific purchase |
Both parties per transaction |
| DPA (Data Processing Agreement) |
GDPR/CCPA compliance for data handling |
Both parties when processing personal data |
| SLA (Service Level Agreement) |
Defines service standards and remedies |
Often an exhibit to MSA |
| BAA (Business Associate Agreement) |
HIPAA compliance for health data |
Both parties when handling PHI |
MSA Key Clauses
Intellectual Property
Preferred (vendor-friendly):
All IP developed by Vendor remains with Vendor.
Customer receives a license to use deliverables.
Alternative (customer-friendly):
All work product developed specifically for Customer under this
agreement is work-for-hire and owned by Customer.
Negotiation note:
For SaaS: Vendor always retains platform IP.
For custom development: negotiate based on leverage.
Liability Cap
Standard cap: "Aggregate liability shall not exceed the greater of
(a) fees paid in the 12 months preceding the claim or (b) $[X]."
Watch out for:
- Uncapped liability for: IP infringement, gross negligence,
willful misconduct, indemnification obligations, data breaches
- "Uncapped" clauses can expose vendor to existential risk
Customer push: "Remove the cap for data breaches."
Vendor counter: "Cap applies to all claims including data breaches,
but we carry cyber insurance of $[X]M."
Indemnification
Mutual indemnification covers:
- Each party's IP infringement claims
- Each party's gross negligence / willful misconduct
- Vendor: indemnifies customer if third party claims product infringes their IP
- Customer: indemnifies vendor for customer's data and content
Red flag: one-sided indemnification with unlimited scope.
Termination
Termination for cause:
Either party may terminate if material breach not cured within 30 days notice.
Termination for convenience:
Customer: 30–90 days written notice (negotiate based on contract value)
Vendor: typically not allowed to terminate for convenience in B2B SaaS
Effect of termination:
- Customer data returned or deleted within 30 days
- Fees paid not refunded for current period (pro-rated annual is negotiable)
- Outstanding invoices payable
Governing Law and Dispute Resolution
Vendor preference: Vendor's home state / country
Customer preference: Customer's home state / country
Compromise: neutral jurisdiction or "each party's home jurisdiction for claims against them"
Dispute resolution order:
1. Executive escalation (30 days)
2. Mediation (60 days)
3. Arbitration (AAA / JAMS rules) or litigation
SOW Structure
STATEMENT OF WORK
Reference: MSA dated [Date] between [Vendor] and [Customer]
SOW #: [NNN]
Effective date: [Date]
1. SERVICES
[Specific description of what will be delivered]
Inclusions: [Explicit list of what is in scope]
Exclusions: [Explicit list of what is NOT in scope — prevents scope creep]
2. DELIVERABLES
| Deliverable | Description | Acceptance criteria | Due date |
|-------------|-------------|--------------------|----- ----|
| [Name] | [What it is] | [How customer accepts] | [Date] |
3. TIMELINE
| Milestone | Description | Date |
|-----------|-------------|------|
| Kickoff | Project kickoff meeting | [Date] |
| [Phase 1] | [Deliverables] | [Date] |
| Final delivery | All deliverables accepted | [Date] |
4. FEES AND PAYMENT
Total fee: $[X]
Payment schedule:
[X]% upon signing: $[Y]
[X]% upon [milestone]: $[Y]
[X]% upon final acceptance: $[Y]
Expenses: [reimbursable / included / capped at $X]
Change orders: any scope change requires written change order signed by both parties
5. CUSTOMER OBLIGATIONS
[List what customer must provide: access, data, stakeholder availability, review turnarounds]
Customer delay clause: if customer delays by > [N] days, timeline adjusted accordingly
6. ACCEPTANCE PROCEDURE
Customer has [N] business days to accept or reject each deliverable.
If no response within [N] days, deliverable is deemed accepted.
Rejected deliverables: vendor has [N] days to revise; customer has [N] days to re-review.
7. PROJECT CONTACTS
Vendor: [Name, email, role]
Customer: [Name, email, role]
NDA Essentials
Key Provisions
Definition of Confidential Information:
- Include: technical, business, financial, customer, product information
- Exclude: publicly available, independently developed, received from third party
Obligations:
- Use only for evaluation/business purpose
- Limit disclosure to employees with need to know
- Same protection as own confidential information (not less than reasonable care)
Term:
- Mutual NDA: 2–3 years standard
- Confidentiality obligations often survive termination by 2–5 years
Exceptions:
- Compelled disclosure by law (notify before disclosing if legally permitted)
- Information recipient can independently prove was not derived from disclosing party
Red Flags in Incoming NDAs
- One-sided (only protects discloser's information)
- No carve-outs for publicly available information
- Overly broad definition of confidential (includes "all information shared verbally")
- Perpetual term with no sunset
- Automatic assignment of IP developed using confidential information
Redline Process
Redline Workflow
- Receive contract → send to legal (or contract manager) within 24h
- Legal marks up in track changes with comments explaining each change
- Internal approval of redline before sending (sales + legal sign-off)
- Send redline with cover email explaining major positions
- Counterparty returns counter-redline → repeat
- Issues list: for complex deals, move to issues list to track open points
- Signature: collect via DocuSign / e-signature tool
Negotiation Tiers
| Clause |
Position |
Flexibility |
| Liability cap |
12 months fees paid |
May go to 24 months for high-value deals |
| IP ownership |
Vendor retains all |
Non-negotiable for platform IP |
| Data return |
30 days post-termination |
May extend to 60 days |
| Governing law |
Vendor's home state |
May accept neutral jurisdiction |
| Payment terms |
Net 30 |
May accept Net 45 for enterprise |
| Auto-renewal |
60-day opt-out window |
May reduce to 90 days |
Contract Lifecycle Management
CLM Stages
- Request: contract need identified (new customer, vendor, partnership)
- Drafting: use template; customize for specific deal
- Review: legal review; stakeholder approval per authorization matrix
- Negotiation: redline exchange; issues resolution
- Approval: final version approved per signing authority matrix
- Execution: electronic signature; countersignature
- Repository: filed in CLM system with metadata
- Obligation tracking: renewal dates, SLA reviews, reporting requirements
- Renewal / amendment: proactive outreach 90 days before expiration
Signing Authority Matrix
| Contract value |
Signing authority |
| < $10K / year |
Department head |
| $10K–$50K / year |
VP + Finance |
| $50K–$250K / year |
CFO |
| > $250K / year |
CEO |
| Any contract with IP assignment |
General Counsel |
| Any contract with unlimited liability |
General Counsel + CEO |
Contract Repository Metadata (capture for every contract)
- Counterparty name and entity
- Contract type (MSA / SOW / NDA / Order Form)
- Effective date
- Expiration / renewal date
- Auto-renewal: yes/no; opt-out notice period
- Contract value (annual + total)
- Governing law
- Notice provision (how to send formal notices)
- Owner (internal relationship owner)
- Location (CLM system link)
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