A contract redline checklist for B2B software

Pass one: the commercial terms

Do the numbers in the document match the deal that was actually agreed? This sounds obvious and is missed constantly.

• Fees, currency, payment terms, late payment interest.
• Term length, start date, and whether the start date is signature, delivery or go-live.
• Renewal: automatic or not, notice period, any cap on price increases.
• Scope: what is actually being bought, in enough detail that a dispute about it could be resolved from the document.
• Volume or usage limits, and what happens on overage.

Pass two: the risk allocation

• Limitation of liability — the cap, the exclusions, and the carve-outs from both.
• Indemnities — who gives what, for what, and whether they sit inside or outside the cap.
• Warranties — what is promised about the product or service, and the remedy if the promise is broken.
• Data protection — DPA attached or incorporated, transfer mechanism addressed, breach notification timing realistic.
• Insurance — required coverage and whether you actually hold it.
• Intellectual property — ownership of pre-existing IP, deliverables, feedback, derived data.

Pass three: the operational terms

These are the clauses that determine whether the relationship works day to day, and they are the ones most often accepted unread.

• Termination — for cause with a cure period; for convenience if any; for insolvency; consequences on exit.
• Service levels — the commitment, the measurement window, the remedy, and whether the remedy is exclusive.
• Support — hours, channels, response and resolution targets.
• Change control — how scope changes are agreed and priced.
• Assignment — can either party assign, and does a change of control count.
• Subcontracting — permitted, and on what notice.
• Notices — addresses that are current and a method that will actually be read.

Pass four: the drafting

Only now, with the substance understood, read the parts that change what the substance means.

• Definitions. Does “Confidential Information”, “Services” or “Fees” mean what the body of the document assumes it means? A narrow definition of Services can turn a broad warranty into a hollow one.
• Order of precedence. Which document wins when the MSA, the order form and the SLA disagree.
• Survival. Which clauses continue after termination. Confidentiality, liability, indemnity and payment should. A survival clause that lists only three of the four is a defect.
• Entire agreement. Does it wipe out the pre-contract promises the sales team relied on to close?
• Cross-references. Every “subject to clause 14.2” should point at a clause 14.2 that says what the drafter thought it said. Renumbering during negotiation breaks these silently.
• Blanks and brackets. Search the document for “[” and “TBD” before signing. It is embarrassing how often this catches something.