Contract patterns

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

1. Receive contract → send to legal (or contract manager) within 24h
2. Legal marks up in track changes with comments explaining each change
3. Internal approval of redline before sending (sales + legal sign-off)
4. Send redline with cover email explaining major positions
5. Counterparty returns counter-redline → repeat
6. Issues list: for complex deals, move to issues list to track open points
7. 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

1. Request: contract need identified (new customer, vendor, partnership)
2. Drafting: use template; customize for specific deal
3. Review: legal review; stakeholder approval per authorization matrix
4. Negotiation: redline exchange; issues resolution
5. Approval: final version approved per signing authority matrix
6. Execution: electronic signature; countersignature
7. Repository: filed in CLM system with metadata
8. Obligation tracking: renewal dates, SLA reviews, reporting requirements
9. 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)