mkurman |---|---|---| | Liability Cap | Capped at fees paid in prior 6 months | Yellow | Low cap for potential damages | Negotiate to 12-month cap | | IP Assignment | Broad assignment of all work product | Red | Could capture pre-existing IP | Add carve-out for pre-existing IP |
Missing Protections Checklist
Bulleted list of protections that should be present but are not.
Prioritized Action Items
Numbered list of what to do, in order of importance.
Frameworks & Best Practices
The Red/Yellow/Green Flagging System
Red Flags — Immediate concern, do not sign without modification:
- Unlimited liability or liability cap below a reasonable threshold
- Broad IP assignment that could capture pre-existing IP or IP unrelated to the engagement
- Non-compete clauses that are overly broad in scope, geography, or duration
- Unilateral termination rights without cure period for one party only
- Automatic renewal with no opt-out window or unreasonable notice requirements
- Indemnification obligations that are uncapped or wildly asymmetric
- Most-favored-nation clauses that constrain your pricing with other customers
- Exclusivity provisions that limit your ability to work with competitors
- Audit rights with unreasonable scope or no notice requirement
- Governing law in an unfavorable or distant jurisdiction with no negotiation
Yellow Flags — Worth negotiating, but not necessarily deal-breakers:
- Liability caps that are low relative to the contract value
- Warranty periods or SLA credits that are below industry standard
- Payment terms exceeding net-60
- Change-of-control provisions that allow termination on acquisition
- Broad confidentiality definitions with long or indefinite survival periods
- Assignment restrictions that prevent assignment in an acquisition scenario
- Force majeure clauses that are overly broad or favor one party
- Data handling terms that are vague about deletion, portability, or sub-processors
Green Flags — Standard and reasonable:
- Mutual confidentiality obligations
- Balanced termination rights with cure periods
- Liability capped at 12 months of fees paid
- Standard representations and warranties
- Clear payment terms (net-30)
- Reasonable non-solicitation (employees only, 12 months)
Negotiation Principles
- Symmetry first. Any obligation imposed on one party should apply to both unless there is a clear business reason for asymmetry.
- Cap everything. Liability, indemnification, and damages should all have explicit caps.
- Cure periods. Both parties should have the opportunity to fix a breach before termination.
- Specificity over breadth. Narrow definitions protect both parties. "Confidential Information means everything" protects nothing.
- Survival clarity. Specify exactly which clauses survive termination and for how long.
Related Skills
terms-of-service— When reviewing a customer's redlines to your terms of service, use contract-review to assess their proposed modifications.privacy-policy— Data processing addendums and DPAs often accompany contracts. Review these for consistency with your privacy commitments.
Examples
Example 1: Reviewing a vendor SaaS agreement
User: "We're about to sign a contract with a data enrichment vendor. Here are the terms. Can you flag anything concerning?"
Good output excerpt:
Overall Risk Level: Yellow
The agreement is mostly standard but has three issues worth negotiating before signing.
Section Flag Issue 4.2 Data Rights Red Vendor claims a "perpetual, irrevocable license to use Customer Data for product improvement and benchmarking." This means they keep and use your data forever, even after termination. Negotiate to: license limited to providing the service, terminates on contract end, anonymization required for any aggregate use. 7.1 Liability Yellow Cap is set at "fees paid in the prior 3 months." For a $2K/month contract, that is a $6K cap. If they cause a data breach affecting your customers, your exposure could be much higher. Negotiate to: 12 months of fees, with a carve-out for uncapped liability on data breaches and IP infringement. 9.3 Termination Yellow 90-day notice required to cancel, even on annual renewal. Combined with auto-renewal, this means you need to decide 3 months before your renewal date. Negotiate to: 30-day notice, or set a calendar reminder now. Missing Protections:
- No data deletion timeline after termination
- No breach notification obligation
- No sub-processor list or approval rights
- No SLA or uptime commitment
Example 2: Reviewing an IP assignment in an employment agreement
User: "A new engineer's offer letter has an IP assignment clause. They're concerned about their open-source side projects. Can you review?"
Good output excerpt:
Section 8 — Invention Assignment: Red Flag
The current language reads: "Employee assigns to the Company all right, title, and interest in any invention, improvement, or work of authorship created during the term of employment."
This is overly broad. It captures the engineer's weekend open-source contributions, personal projects, and anything they create during employment regardless of whether it relates to company business.
Recommended revision: Add a carve-out: "...created during the term of employment that (a) relates to the Company's current or reasonably anticipated business, (b) was developed using Company resources, or (c) resulted from work performed for the Company."
Also add a Schedule A listing the engineer's pre-existing IP and active side projects, explicitly excluded from assignment. Note: California Labor Code Section 2870 already provides some protection, but an explicit carve-out is clearer and avoids disputes.
Disclaimer: This skill provides contract analysis for educational and planning purposes only. It does not constitute legal advice. Contract interpretation depends on jurisdiction-specific law, the full context of the business relationship, and facts that may not be apparent from the document alone. Always have a qualified attorney review contracts before signing, especially those involving significant financial commitments, IP rights, or liability exposure.