The systematic inspection list for commercial contracts: twelve areas — liability, indemnification, termination, payment, IP, confidentiality, warranties, limitation of remedies, assignment & change of control, governing law, force majeure, data protection — each to be stated, cited as [Document § section], and flagged when missing, one-sided or ambiguous. Structuring a review or checking why a risk area was (or wasn't) inspected.
name: contract-risk-checklist description: The canonical 12-area risk checklist for commercial contract review, with the red-flag patterns that mark each area as one-sided or dangerous. Use when reviewing any contract for risk — an NDA, MSA, SaaS agreement, services or consulting agreement, license, vendor terms, or order form — or when asked to spot issues, find red flags, assess a draft, mark up a counterparty's paper, or answer "what's wrong with this contract."
Review every contract against all twelve areas below. For each area: state what
the contract says, cite the governing clause as [<Document> § <section>] (or
note its absence — a missing clause is a finding, not a pass), and flag
anything matching the red-flag patterns. Establish the governing-law clause
first and qualify jurisdiction-sensitive findings against the matter's
jurisdiction pack. For balanced market positions and fallback ladders per
area, load the clause-library skill. A mapping of CUAD's 41-category clause
taxonomy onto these twelve areas is in references/cuad-taxonomy.md.
1. Liability
Inspect: caps, exclusions, carve-outs, mutuality, super-caps for sensitive exposure.
What bad looks like:
- Carve-outs from the cap so broad they swallow it — "any breach of this Agreement," all indemnification obligations, or all confidentiality breaches uncapped in one direction.
- One party's liability uncapped while the other's is capped.
- A cap far below realistic exposure (one month's fees) with no separate super-cap where the deal involves sensitive data or high-value IP.
2. Indemnification
Inspect: scope, triggers, who indemnifies whom, defense and settlement control, relationship to the liability cap.
What bad looks like:
- One-way indemnity in a deal where both sides create risk.
- Indemnity triggered by "any breach of this Agreement," converting every contract claim into an uncapped indemnified claim.
- Indemnitee controls defense and may settle at the indemnitor's cost without the indemnitor's consent.
- Indemnity covering first-party (direct) claims, not just third-party claims; or no IP-infringement indemnity from the provider in a technology deal.
3. Termination
Inspect: for cause, for convenience, notice periods, cure rights, renewal mechanics, effect on fees and data.
What bad looks like:
- Evergreen auto-renewal with a short or early opt-out window (non-renewal notice due 90+ days before renewal) that is easy to miss.
- One party may terminate for convenience but the other cannot; or cure periods granted to only one side.
- Termination accelerates all remaining committed fees regardless of cause.
- No wind-down, transition assistance, or data-return obligation on exit.
4. Payment
Inspect: amounts, schedule, late fees, set-off, escalation, currency, taxes, refundability.
What bad looks like:
- Unilateral price escalation — fees change on notice with no cap and no corresponding termination right.
- All fees non-refundable even where the provider is in breach; or payment obligations that survive termination regardless of cause.
- Set-off prohibited for one party while the other keeps broad set-off or withholding rights.
- All taxes and gross-up obligations shifted to one party.
5. Intellectual property
Inspect: ownership, license scope, work product, feedback and data rights, residuals.
What bad looks like:
- Assignment of pre-existing IP, or of improvements to it, to the other side.
- Customer-paid work product owned by the provider, or joint ownership with no exploitation and accounting rules.
- A license to customer data or feedback broader than needed to operate the service (perpetual, irrevocable, "any purpose").
- License grants that are silently perpetual or irrevocable where the commercial intent is term-limited.
6. Confidentiality
Inspect: definition, duration, exclusions, permitted disclosures, return/destruction, adjacent restrictive covenants (non-solicit, non-compete, exclusivity).
What bad looks like:
- One-way obligations where both parties disclose.
- Marking-only definition with no reasonable-person catch-all; or a residuals clause permitting use of anything retained in unaided memory.
- Compelled-disclosure permission with no notice or minimization obligation.
- Restrictive covenants smuggled in: no-hire (vs. no-solicit) provisions, non-competes, or exclusivity beyond the deal's scope — enforceability is highly jurisdiction-dependent; qualify against the matter's pack.
7. Warranties
Inspect: express warranties, disclaimers, duration, remedies for breach.
What bad looks like:
- "As is" disclaimer that reaches the core service commitment itself.
- Warranty remedy that is illusory — sole remedy is re-performance at the warrantor's discretion with no refund backstop.
- One-sided compliance-with-laws or non-infringement warranties.
- Disclaimers of implied warranties without the conspicuousness or scope limits some jurisdictions require — qualify; do not assert a specific rule.
8. Limitation of remedies
Inspect: exclusive remedies, consequential-damages waivers, liquidated damages, who may enforce.
What bad looks like:
- Consequential-damages waiver applied one-way.
- Waiver listing "lost profits" without limiting it to consequential losses — lost profits can be direct damages, so this quietly guts direct recovery.
- An exclusive remedy that can fail of its essential purpose with nothing behind it.
- Liquidated damages that look punitive rather than a genuine pre-estimate of loss — enforceability varies by jurisdiction; qualify.
9. Assignment and change of control
Inspect: consent requirements, deemed-assignment language, change-of-control triggers, affiliate and sale-of-business carve-outs.
What bad looks like:
- Consent withholdable in sole discretion, combined with a deemed-assignment clause making any change of control a breach — a hidden M&A blocker.
- One side assigns freely while the other needs consent.
- Termination right triggered by a change of control of one party only.
- No carve-out for assignment to affiliates or in connection with a sale of substantially all assets.
10. Governing law and dispute resolution
Inspect: governing law, venue, arbitration, jury waiver, fee shifting, equitable relief.
What bad looks like:
- Counterparty home-court stack: their governing law, exclusive venue in their forum, and a jury waiver together.
- Mandatory arbitration with no carve-out to seek injunctive relief for confidentiality or IP breaches.
- One-way fee shifting (loser pays only when one side wins).
- Shortened limitations periods or class waivers — enforceability varies by jurisdiction; qualify.
11. Force majeure
Inspect: covered events, obligations during the event, notice and mitigation, exit rights.
What bad looks like:
- Coverage of "economic hardship," market changes, or supplier cost increases — turning ordinary business risk into an excuse for non-performance.
- Only one party's performance excused.
- No right to terminate after a prolonged event (commonly 30-90 days).
- No notice or mitigation obligation on the party invoking it; or payment obligations excused alongside performance.
12. Data protection
Inspect: controller/processor roles, security obligations, breach notice, subprocessors, international transfers.
What bad looks like:
- Processing roles unassigned, or a processor granted rights to use personal data for its own purposes.
- Breach notification replaced by a long fixed window or omitted entirely.
- No subprocessor flow-down, approval, or audit mechanism.
- International transfers unaddressed where data will cross borders — the required mechanism depends on the jurisdictions involved; check the matter's jurisdiction pack rather than assuming one regime.
These red-flag patterns are US commercial-market reference points, not legal standards; verify jurisdiction-sensitive items against the matter's jurisdiction pack before presenting them as findings.