If you have been handed a contract and told to review it, and you are not sure where to start or when to stop, this is the method and the checklist. The downloadable version is below.
Reviewing a contract means running a defined process rather than reading it slowly. Work in six passes: confirm the commercial deal, check the parties and execution, read the operative clauses, then the risk clauses, then the exit clauses, and finally check what is missing. Most contract disputes arise from omissions rather than badly worded terms, so the last pass matters most.
Key points
- Read the contract against the deal, not on its own. A clause that is legally sound but does not reflect what was agreed is still wrong.
- Six clauses decide most disputes: payment, liability cap, indemnity, termination, dispute resolution and the definitions that feed them.
- Omissions cause more litigation than bad drafting. The final pass looks for what is absent, not what is present.
- Check execution and stamping before anything else substantive. An unstamped agreement is inadmissible in evidence until duty and penalty are paid.
- Never review in isolation. Cross-clause interactions, particularly between the indemnity and the liability cap, are where the expensive mistakes hide.
This guide covers the six pass method, the 60 point checklist, the red flags worth stopping for, and how the review changes depending on which side you act for.
Download the free contract review checklist in Word or PDF. Sixty points across five sections, with space to record findings and a red flags page.
What Does Reviewing a Contract Actually Involve?
Three activities get called contract review and they are not the same thing.
| Basis | Proofreading | Reviewing | Negotiating |
|---|---|---|---|
| Question asked | Is it internally consistent? | Does it protect my client? | Can I change it? |
| Looks for | Typos, cross-reference errors, defined terms | Risk allocation, gaps, unfavourable terms | Leverage and trade-offs |
| Output | A clean document | A marked-up document and an advice note | An agreed position |
| Skill required | Attention | Judgement | Commercial awareness |
| Time | An hour | Half a day for a substantial contract | Days or weeks |
A junior asked to “review” a contract who returns it with the typos fixed has done the first job and not the second. The gap between the two is judgement about risk, which is also the gap between drafting and negotiating a contract.
The Six Pass Contract Review Method
Do not read a contract front to back once. Read it six times, each time looking for one thing. It is faster and it catches more.
Pass 1: Confirm the commercial deal
Before opening the document, write down in one paragraph what you understand the deal to be. Who is supplying what, for how much, over what period, and what happens if it goes wrong.
Then read the contract and ask whether it says that. A contract that is perfectly drafted for a deal nobody agreed to is the most common serious error in commercial practice, and it usually happens because the reviewer never established the deal independently.
Pass 2: Parties, capacity and execution
Fast, mechanical, and skipped surprisingly often:
- Are the parties correctly named, with the full legal entity name rather than a trading name?
- Is the signatory authorised? For a company, is there a board resolution or delegated authority?
- Where there are co-owners or joint holders, is every one of them a party?
- Are the addresses correct, since they govern service of notices?
- Is the date filled in?
- Are all schedules and annexures actually attached?
- Has the agreement been stamped at the value prescribed by the State?
That last point is the one that surfaces at the worst moment. An instrument chargeable with duty that is not duly stamped is inadmissible in evidence until the deficiency and a penalty are paid, and the general stamp duty position on agreements applies to almost every commercial contract.
Pass 3: The operative clauses
What each party must actually do:
- Scope. Is it defined by reference to a schedule, and is the schedule specific enough to enforce? “As mutually agreed” is not a scope.
- Price and payment. Amount, timing, invoicing requirements, taxes, and consequences of late payment.
- Delivery or performance. Standards, timelines, acceptance criteria and what happens on rejection.
- Term. Start date, end date, renewal mechanism, and whether renewal is automatic.
Check that defined terms are used consistently. A contract that defines “Services” in clause 1 and then refers to “the Work” in clause 8 has created an ambiguity that somebody will exploit.
Pass 4: The risk clauses
This is where the money is, and where most reviews are too quick.
- Warranties. What is being promised, and what remedy follows a breach.
- Indemnities. What triggers them, what loss they cover, and who controls the defence of third party claims. A contract of indemnity creates primary liability, unlike a guarantee, so the distinction changes who you can recover from.
- Limitation of liability. The cap, what sits outside it, and whether indirect loss is excluded.
- Insurance. What cover is required and whether certificates must be produced.
- Force majeure. Which events qualify, and what happens to payments already made.
The cross-clause check that matters most: read the indemnity and the liability cap together, always. An indemnity clause silently subject to a low cap is commercially worthless, and one silently excluded from the cap creates unlimited exposure. Parties negotiate the indemnity hard and then leave the cap twenty pages away unexamined.
Pass 5: The exit clauses
How the relationship ends, which nobody wants to discuss and everybody eventually needs:
- Termination for convenience. Who has it, on what notice, and is it mutual?
- Termination for cause. What counts as material breach, and is there a cure period?
- Consequences of termination. Payment for work done, return of property, transition assistance.
- Survival. Which clauses continue after termination. Confidentiality, indemnities and dispute resolution should all survive.
A termination clause that confers a right without setting out the process is the single most common defect in this pass.
Pass 6: What is missing
The most valuable pass and the one juniors skip, because it requires knowing what should be there rather than reading what is.
Work from a checklist rather than memory. The essential clauses every commercial contract must contain are the baseline, and the omissions that recur are:
- No dispute resolution or jurisdiction clause
- No survival provision
- No notice mechanism, or one that omits email
- No assignment restriction
- No severability clause
- No entire agreement clause, leaving pre-contractual statements in play
- No cap on liability at all
- Nothing on intellectual property in a contract that creates it
Most contract disputes arise from what was left out, which is the consistent pattern behind common mistakes made while drafting business contracts.
Which Clauses Should You Review Most Carefully?
If you have limited time, spend it here. These six decide the outcome of most commercial disputes.
| Basis | Clause | What to check |
|---|---|---|
| 1 | Payment | Trigger for payment, credit period, late payment consequence, whether taxes are inclusive |
| 2 | Limitation of liability | The cap amount, the carve-outs, whether indirect loss is excluded |
| 3 | Indemnity | Trigger events, scope of recoverable loss, conduct of third party claims, interaction with the cap |
| 4 | Termination | Notice, cure period, consequences, survival |
| 5 | Dispute resolution | Arbitration or courts, seat, governing law, and whether they conflict with each other |
| 6 | Definitions | Whether defined terms are used consistently, and whether any definition quietly expands an obligation |
Definitions belong on this list because they are read last and drafted first. A wide definition of “Confidential Information” or “Deliverables” can expand an obligation far beyond what the operative clause appears to say.
What Are the Red Flags in an Indian Commercial Contract?
Stop and take instructions when you see any of these.
Payment terms beyond 45 days with an MSME supplier
Where the supplier is a registered micro or small enterprise, a credit period beyond forty five days is void to that extent under the MSMED Act, 2006, and late payment triggers disallowance under Section 43B(h) of the Income Tax Act plus non-deductible compound interest. This is now the most common defect in Indian vendor agreements.
A unilateral arbitrator appointment clause
A clause allowing one party to appoint the sole arbitrator, or requiring the other to choose from a panel it curated, was standard until November 2024 and is now invalid. Any arbitration clause drafted before then needs checking.
Seat and jurisdiction in conflict
An arbitration clause naming a seat in one city, and a jurisdiction clause conferring exclusive jurisdiction on the courts of another. This creates the exact dispute the clause exists to prevent.
A post-employment or post-engagement non-compete
Void under Section 27 of the Indian Contract Act, which places it among the void agreements in contract law that no reasonableness test can save. Its presence often signals drafting copied from an English or American precedent, which means other clauses may be equally unsuited. The full position is set out in the analysis of non-compete clauses in India.
An unlimited indemnity with no cap
Or a heavily negotiated indemnity that is silently subject to a low cap. Both are drafting failures, in opposite directions.
An automatic renewal with no exit
Evergreen contracts with no practical termination right, where prices drift upward without renegotiation.
Security described but never created
A clause stating that a loan “is secured by” property, with no mortgage deed executed and registered, creates nothing. Check that any loan agreement security has actually been perfected.
An agreement that should be registered and is not
Conveyances of immovable property and leases exceeding one year require registration. The consequence of non-registration is set out in the general law on the sale of immovable property under the Transfer of Property Act, 1882.
How Does Contract Review Change Depending on Which Side You Act For?
The same document reads differently from each side, and a reviewer who does not know which side they are on will produce generic comments.
| Basis | Acting for the buyer or customer | Acting for the supplier or contractor |
|---|---|---|
| Liability cap | Push it up, or carve out key indemnities | Push it down, keep everything inside it |
| Termination | Want convenience termination on short notice | Want a lock-in and payment for work done |
| Scope | Want it broad, so more is included in the price | Want it precise, so extra work is chargeable |
| Payment | Want milestones tied to acceptance | Want payment on delivery or on time |
| IP | Want full assignment of deliverables | Want to retain background IP and licence it |
| Warranties | Want long periods and specific remedies | Want short periods and repair or replace only |
Establish the side before the first pass. It changes what counts as a problem.
How Do You Mark Up a Contract Professionally?
Three conventions that separate a usable mark-up from an unusable one.
Use tracked changes for edits and comments for reasoning
Edits go in the document. The reason for each edit goes in a comment, addressed to your own client rather than the other side. Never send a document with internal comments still attached, which is a genuine and recurring professional embarrassment.
Categorise your points
Do not present twenty comments of equal weight. Sort them:
- Deal breakers. Points the client cannot accept.
- Important. Worth negotiating hard.
- Preference. Worth raising, cheap to concede.
- Housekeeping. Typos, cross-references, defined terms.
A partner or client reading your mark-up needs to know which three points matter, not which twenty exist.
Write a covering note
Two paragraphs at most. What the contract does, the three biggest risks, and your recommendation. The mark-up is the detail; the note is what actually gets read. Where the analysis is substantial, it belongs in a legal memo rather than in the margin.
Contract Review Checklist
Work through this in order. The full version with all sixty points, space to record findings and a red flags page is available as a Word document or PDF.
Execution and formalities
- Parties correctly named with full legal entity names
- Signatory authority confirmed
- Date completed
- All schedules and annexures attached
- Stamped at the correct State value
- Registered where registration is compulsory
- Two witnesses where required
Commercial terms
- Scope defined by reference to a specific schedule
- Price stated, with taxes clearly inclusive or exclusive
- Payment trigger, credit period and late payment consequence stated
- MSME payment limit observed where applicable
- Delivery, acceptance and rejection process defined
- Term, renewal and notice to prevent renewal stated
Risk
- Warranties stated with a remedy and a period
- Indemnity triggers defined specifically
- Conduct of third party claims addressed
- Liability cap stated, with carve-outs
- Indemnity and cap read together and the position confirmed
- Insurance requirements and certificate production
- Force majeure events and consequences
Exit
- Termination for convenience and for cause, with notice periods
- Cure period for remediable breach
- Consequences of termination, including payment for work done
- Transition or exit assistance
- Survival clause covering confidentiality, indemnity and dispute resolution
Boilerplate
- Governing law
- Dispute resolution, with seat if arbitration
- Jurisdiction clause consistent with the dispute resolution clause
- Notices, including email
- Assignment restriction
- Severability
- Entire agreement
These are the boilerplate clauses that get copied without thought and then determine how a dispute is actually fought.
Learning to Review Contracts Properly
Contract review is the first substantive task most juniors are given and the one least often taught. The instruction is usually “have a look at this”, and the unstated expectation is a marked-up document, a categorised list of issues and a view on whether the client should sign.
The difference between a reviewer who spots typos and one who spots that the indemnity is capped is not knowledge of the law. It is having a process, working from a checklist, and knowing what should be in a contract of that type. That comes from having drafted the document yourself, which is why review and drafting are two halves of one skill and why contract drafting is the foundation for both.
LawMento’s Practical Training in Drafting of Contracts covers 30+ contract types across 26 hours, so that when a contract is handed to you, you already know what should be in it.
Contract Review FAQs
How long should a contract review take?
A short standard-form agreement might take an hour. A substantial commercial contract with schedules takes half a day or more. The variable is not length but risk: a two page guarantee can need more thought than a forty page services agreement.
What is the difference between contract review and contract drafting?
Drafting creates the document from the deal. Review tests an existing document against the deal and against the client’s risk position. Reviewing is often harder, because you are working inside someone else’s structure and looking for what is absent.
What should I look for first when reviewing a contract?
Confirm what the commercial deal actually is, in your own words, before reading. Then check parties, authority and execution. Only then start on the substance. Reviewers who begin at clause 1 and read forward routinely miss that the contract does not match the deal.
What are the most important clauses in a contract?
Payment, limitation of liability, indemnity, termination, dispute resolution, and the definitions that feed them. Most commercial disputes turn on one of those six.
Can AI review a contract?
It can flag missing clauses, summarise long documents and compare a draft against a playbook, which saves real time. It cannot judge whether a risk is acceptable to your client, and it will state repealed provisions with confidence. Use it to speed the mechanical passes, not to replace passes four and six.
What is redlining a contract?
Marking proposed changes in the document using tracked changes, so the other side can see exactly what has been altered. Comments explaining the reasoning are addressed to your own client and must be removed before the document is sent.
Should I review a contract that has already been signed?
Yes, where a dispute is developing or a decision depends on it. The review is different: you are establishing what the parties are bound by rather than what they should agree to, and the questions become admissibility, stamping and interpretation.
How do I review a contract if I am not a lawyer?
Use the checklist for the mechanical passes and take advice on the risk clauses. Payment, liability, indemnity and termination are where non-lawyers most often accept terms they would not have accepted if they understood them.
This guide explains general practice and is not legal advice on any specific contract. The significance of any clause depends on the surrounding agreement and the commercial context. Take advice on your own facts before signing or advising on a contract.
