Legal Best Practices
Contract Compliance Checklist: 20 Points to Verify Before Signing
Signing a contract without reading it is like signing a blank cheque. Yet 70% of professionals admit to signing contracts they haven't fully read. Here's a systematic 20-point checklist to verify every contract before you put pen to paper.
Category A: Party & Authority Verification
☑️ 1. Correct Legal Names
Verify full legal names match government IDs (for individuals) or MCA registration (for companies). "ABC Pvt Ltd" vs "ABC Private Limited" , use the exact registered name.
☑️ 2. Signatory Authority
Confirm the person signing has authority. For companies: check board resolution or power of attorney. For partnerships: check partnership deed for authorization. An unauthorized signature makes the contract voidable.
☑️ 3. Company/Entity Status
Verify the entity is active on MCA portal (not struck off, dissolved, or under liquidation). For LLPs: check on LLP portal. For foreign entities: verify local registration or foreign qualification.
☑️ 4. Registered Address
Ensure the registered address matches official records. This is the address where legal notices will be sent. Verify notice delivery mechanism (email + physical copy recommended).
Category B: Core Terms
☑️ 5. Clear Scope of Work
Deliverables must be specific and measurable. "Develop an app" is vague. "Develop an iOS and Android app with X features, Y screens, meeting Z specifications" is enforceable.
☑️ 6. Payment Terms
Amount, currency, schedule (milestone-based recommended), payment method, invoice format, TDS applicability, GST breakout, and late payment interest rate.
☑️ 7. Timeline & Milestones
Start date, end date, key milestones with specific dates, and consequences of delay. Include buffer for dependencies outside your control.
☑️ 8. Warranties & Representations
What each party guarantees. Check for hidden warranty disclaimers like "as is" or "without warranty." Ensure warranties survive the contract term.
Category C: Risk & Liability
☑️ 9. Limitation of Liability
Check the cap on total liability. Common: limited to contract value or fees paid in last 12 months. Ensure carve-outs for fraud, willful misconduct, IP infringement, and confidentiality breaches.
☑️ 10. Indemnification
Is it mutual or one-sided? What triggers indemnification? Is there a process for claims (notice, defense, settlement)? Include caps on indemnification amounts.
☑️ 11. Insurance Requirements
Professional liability, general liability, cyber insurance. Verify the other party maintains adequate coverage for the contract value and duration.
☑️ 12. Force Majeure
List of covered events (natural disasters, pandemics, government actions, war). Notice requirements. Impact on obligations. Post-pandemic: ensure "pandemic/epidemic" is explicitly listed.
Category D: IP & Confidentiality
☑️ 13. IP Ownership
Who owns the work product? Background IP vs foreground IP. License rights upon termination. Open-source component disclosure.
☑️ 14. Confidentiality/NDA
Definition of confidential information. Exclusions. Duration (typically 2-5 years, or perpetual for trade secrets). Return/destruction of materials upon termination.
☑️ 15. Data Protection
DPDP Act 2023 compliance. Data processing terms. Cross-border transfer restrictions. Breach notification timelines. Data retention and deletion policies.
Category E: Termination & Disputes
☑️ 16. Termination Rights
Termination for cause (material breach + cure period). Termination for convenience (notice period + termination fees). Effect of termination on accrued rights and obligations.
☑️ 17. Notice Period
How much notice is required? Written vs email. When is notice deemed received? Ensure notice addresses are current and include email as an additional method.
☑️ 18. Dispute Resolution
Escalation mechanism (negotiation → mediation → arbitration/litigation). Arbitration seat and rules. Number of arbitrators. Governing law. Emergency interim relief provisions.
☑️ 19. Governing Law & Jurisdiction
Which state/country's law governs? Which courts have jurisdiction? For cross-border: check enforceability of foreign judgments/awards in India.
☑️ 20. Stamp Duty & Registration
Is the contract properly stamped per state requirements? Does it need registration (agreements over 11 months involving immovable property)? Unstamped agreements are inadmissible as evidence in court.
Don't Sign Blindly.
Templates are just a start. Use AI to scan your specific contract for hidden risks and unfair clauses in 60 seconds.
Analyze Your Contract Free →Key Takeaways
- ✅ Always verify signatory authority before signing
- ✅ Scope, payment, and timeline must be specific and measurable
- ✅ Check liability caps and indemnification , one-sided terms are red flags
- ✅ IP ownership and confidentiality need explicit, detailed clauses
- ✅ Ensure proper stamp duty and registration for enforceability
- ✅ Never skip dispute resolution , arbitration saves time and money
Frequently Asked Questions
What should I check before signing a contract?
Key items to verify include: correct legal names and addresses of all parties, clear scope of work and deliverables, payment terms and amounts, liability caps and indemnification clauses, termination conditions, dispute resolution mechanism, confidentiality obligations, and governing law and jurisdiction.
What makes a contract legally enforceable in India?
Under Section 10 of the Indian Contract Act 1872, a valid contract requires free consent of competent parties, lawful consideration, lawful object, and must not be expressly declared void. Additionally, certain contracts require writing, stamping, and registration to be enforceable.
What are contract red flags to watch for?
Watch for one-sided indemnification clauses, unlimited liability, automatic renewal without notice, non-compete clauses that are overly broad, vague scope of work, missing termination rights, no dispute resolution mechanism, and clauses that allow unilateral amendment of terms.
How often should contracts be reviewed?
Contracts should be reviewed at least annually or at each renewal date. Additionally, review contracts when there are changes in law (like the DPDP Act 2023), changes in business relationship, or when performance issues arise. AI-powered contract review tools can help automate this process.
Related reads: How to Draft a Legal Contract · Breach of Contract Remedies · DPDP Act Impact on Contracts