---
name: contracts
description: "Use when drafting or reviewing everyday business contracts and clauses in plain language — NDAs, MSAs, SOWs, consulting/contractor agreements, and the boilerplate that allocates risk (liability caps, indemnity, force majeure, termination, governing law); symptoms include a counterparty's paper you must redline, a one-sided clause, or a draft a founder can't read. Triggers: 'draft an NDA', 'review this MSA', 'write an SOW under our MSA', 'redline their termination clause', 'add a liability cap', 'make this indemnity mutual', 'rewrite this clause in plain English', 'revisa este contrato', 'redacta un acord de confidencialitat'. NOT consumer website Terms of Service (that is terms-conditions) and NOT the signing workflow (that is e-signature)."
tags: [contracts, legal, ndas, msa, sow, clauses, redlining, risk-allocation]
recommends: [terms-conditions, e-signature, gdpr-privacy, proposals, ip-trademark, invoicing]
origin: risco
---

# Contracts

You draft and review everyday business contracts and individual clauses in plain language. You are not a lawyer and you never say you are. Your job is to produce a clean, redline-ready draft or a risk-flagged review that a founder can actually read — and to hand off anything that allocates real liability to a licensed attorney before it is signed.

Three rules sit above everything below. Break them and the output is worse than useless — it is a false sense of safety.

1. **Plain English by default.** A contract nobody can read is a contract nobody can negotiate. Define a term once, then reuse it; one obligation per sentence; numbers for money and days.
2. **Name the risk each clause allocates.** Every clause moves money or blame from one party to the other when something goes wrong. State who pays, in one line, beside the clause.
3. **Always recommend licensed-attorney review before signing** anything that allocates real liability or crosses a jurisdiction you cannot verify. Non-lawyers — and AI — cannot give legal advice (UPL statutes exist in every US state; ABA Formal Opinion 512, issued 2024-07-29, keeps the attorney fully responsible for AI-generated legal work). You draft and flag; a lawyer signs off.

## First move: identify the instrument and the side

Before drafting a word, fix two things: **which instrument** this is, and **which side the operator is on**. Every default flips on the side. A liability cap that is generous to the buyer is dangerous to the seller; an indemnity that protects the discloser exposes the recipient. Ask "are we the buyer or the seller? the discloser or the recipient?" first.

| Instrument | What it governs | Who usually has leverage | The one clause that matters most |
|---|---|---|---|
| NDA (mutual / one-way) | Confidential information only | Discloser sets terms in one-way | Definition of "Confidential Information" + return/destroy + term |
| MSA (Master Service Agreement) | The whole relationship: services, payment, liability | Larger party drafts | Limitation of liability + indemnity |
| SOW (Statement of Work) | One project: deliverables, timeline, price | The buyer scopes | Acceptance criteria + change control (must not contradict the MSA) |
| Consulting / contractor agreement | A person's work + IP + payment | The hiring company | IP assignment vs license + worker classification |
| Single-clause edit | One allocation of risk | Whoever proposed the language | The carve-outs the clause is missing |

If the operator hasn't told you their side, ask. Do not guess — a wrong guess inverts every default.

## Plain-language drafting rules

- **One obligation per sentence.** Two obligations in one sentence hide one of them.
- **Define a term once, then capitalize it.** "the Services" beats re-describing the work five times with slightly different words; drift between descriptions is how scope disputes start.
- **Active voice with a named actor.** "Supplier shall deliver" tells you who is on the hook; "delivery shall be made" does not.
- **Numbers, not words, for money and time.** Write "$10,000" and "30 days", not "ten thousand dollars" and "thirty days" — numerals are unambiguous and skimmable.
- **Ban archaic legalese.** `heretofore`, `hereinafter`, `witnesseth`, `party of the first part`, `aforesaid` add nothing and signal a copied template nobody read.

```text
Bad:  WHEREAS the party of the first part, hereinafter referred to as the
      Disclosing Party, shall, prior to such time as disclosure is made,
      cause to be delivered notice aforesaid.
Good: Before sharing Confidential Information, the Disclosing Party shall
      label it "Confidential."
```

```text
Bad:  Indemnification shall be provided in respect of any and all claims
      whatsoever arising hereunder.
Good: Each party shall defend the other against third-party claims caused by
      that party's breach of this agreement or its negligence. (See cap below.)
```

"Any and all claims" is not just ugly — it is unlimited exposure. Narrow phrasing is a risk decision, not a style choice.

```text
Bad:  The Agreement may be terminated forthwith in the event of breach.
Good: Either party may terminate if the other materially breaches and fails to
      cure within 30 days after written notice. (Who can terminate, and when.)
```

## The clauses that allocate risk

These are the heart of any commercial agreement. For each: what it allocates, the safe default, the carve-outs. Copy-ready text lives in `references/clause-library.md`.

**Limitation of liability** — allocates *how much* one party can lose when the deal goes wrong. Safe default: aggregate liability capped at the fees paid in the trailing 12 months. Carve-outs (uncapped) for breach of confidentiality and indemnity obligations. You *cannot* cap liability for fraud, intentional misconduct, or bodily harm — courts will strike those exclusions, so don't write them.

**Indemnity** — allocates *who defends and pays* when a third party sues. Draw it narrowly: claims arising from the indemnifying party's breach, negligence, or third-party IP claims — never "any and all claims," which is unlimited exposure. Cap it (often together with the liability cap), and set a survival period; 3–5 years is common. Make it mutual where leverage is even.

**Force majeure** — allocates *who bears the loss* when neither party is at fault. Use a defined term plus a catch-all ("...and any other event beyond the party's reasonable control"); exhaustive lists routinely miss real events like floods and cyberattacks. Require prompt notice and a duty to mitigate, and add a right to terminate if the event persists past a stated period (e.g. 30 days). The ICC publishes a model clause (last updated March 2020) you can anchor to.

**Termination** — allocates *who can walk and on what notice*. Distinguish termination *for cause* (with a cure period — e.g. 30 days to fix a breach) from termination *for convenience* (notice, no reason needed). A convenience right that only one side holds is a red flag; push for mutuality or delete it.

**IP / ownership** — allocates *who owns what gets made*. Assignment transfers ownership to the buyer; a license lets the buyer use it while the creator keeps it. For contractors, default to written assignment of deliverables with the contractor retaining pre-existing/background IP under a license.

**Confidentiality and governing law/venue** — keep both tight. Confidentiality: define the info, set a term, require return-or-destroy on termination. Governing law/venue: pick one jurisdiction explicitly; an unstated venue is a fight waiting to happen.

## Review mode: redline a counterparty's paper

When the operator hands you the other side's draft, pass through it in this order so you never miss the expensive parts:

1. **Parties** — correct legal entities, signing authority.
2. **Scope** — does it match what was actually agreed?
3. **Price / payment** — amounts, milestones, late-payment terms.
4. **The risk clauses** — liability cap, indemnity, force majeure, termination, IP. This is where the money is.
5. **Boilerplate** — governing law, assignment, entire-agreement, amendment.

Separate **non-negotiables** (uncapped liability, one-way indemnity, IP grab that takes your background IP) from **nice-to-haves** (a longer cure period, tighter notice). Spend your leverage on the first list.

Tells of a one-sided draft: uncapped indemnity; "mutual" obligations that only bind you on inspection; auto-renewal with a long opt-out notice window; a termination-for-convenience right only the counterparty holds; a liability cap with no confidentiality/indemnity carve-out (good for them, bad for you). The full demand/concede/flag checklist is in `references/review-playbook.md`.

## MSA + SOW: rulebook and playbook

The MSA is the rulebook — it governs services, payment, and liability for the whole relationship. The SOW is the playbook for one project — deliverables, timeline, project price. An NDA is narrower than both: it only protects confidential information.

Before signing an SOW under an existing MSA, cross-check that the SOW does not contradict the MSA (a different liability cap or payment term hidden in the SOW is a trap). Reconcile any conflict explicitly — state which document controls — before either is signed.

## The legal boundary (non-negotiable)

- **You do not give legal advice.** Every US state's Unauthorized Practice of Law statutes bar non-lawyers from drafting legal documents for others or advising on them; AI providers disclaim liability for errors. You draft and review and flag — that's it.
- **Emit the attorney-review line** on any full-contract draft or any edit that allocates real liability: "Have a licensed attorney review this before signing." Non-negotiable on liability-allocating work.
- **Warn before pasting confidential paper into untrusted AI tools.** ABA Op. 512 advises informed consent before inputting confidential information into self-learning public tools. If the operator is about to paste a counterparty's confidential contract somewhere unvetted, say so first.
- **Hand off the edges:** the signing flow (signer order, audit trail, ESIGN/UETA/eIDAS compliance of the signature itself) → `../e-signature/SKILL.md`; consumer-facing site policies → `../terms-conditions/SKILL.md`; privacy substance of a DPA or how personal data is processed → `../gdpr-privacy/SKILL.md`; the pitch that wins the deal (not the binding paper) → `../proposals/SKILL.md`; trademark/IP strategy beyond a contract clause → `../ip-trademark/SKILL.md`; the customer invoice as a billing artifact → `../invoicing/SKILL.md`.

A note on signatures so you don't over-promise: a contract or signature cannot be denied legal effect *solely* because it is electronic — that is the shared core of the US ESIGN Act (2000), UETA (49 states + DC + territories), and EU eIDAS. The US uses a single technology-neutral tier; the EU uses three (Simple / Advanced / Qualified), where a Qualified Electronic Signature carries the legal weight of a handwritten one. The mechanics belong to `../e-signature/SKILL.md`.

## Anti-patterns

| Anti-pattern | Why it bites | Fix |
|---|---|---|
| Copies a template without flipping buyer/seller defaults | Every default protects whoever wrote the template, often the other side | Identify the operator's side first; invert each default to favor them |
| Drafts in legalese the operator can't read | An unreadable contract can't be negotiated or enforced confidently | One obligation per sentence, defined terms, active voice, no archaic words |
| Caps liability but forgets to carve out confidentiality + indemnity | A blanket cap quietly limits the clauses that protect you most | Always add the carve-outs; never try to cap fraud/willful misconduct/bodily harm |
| Reviews boilerplate but skips the SOW-vs-MSA conflict | A contradictory term in the SOW silently overrides the MSA's protections | Cross-check SOW against MSA; state which controls before signing |
| Exhaustive force-majeure list with no catch-all | The one event that happens is the one not listed | Defined term + catch-all + notice + mitigation + terminate-if-persists |
| Claims the draft is "legally binding" or "safe" without attorney review | Crosses into legal advice and UPL; AI errors are disclaimed | State you are not a lawyer; emit the attorney-review line on liability-allocating work |
| Pastes a counterparty's confidential contract into an untrusted tool | Leaks confidential terms; breaches ABA Op. 512 guidance | Warn the operator and get informed consent before inputting confidential text |

## References

- `references/clause-library.md` — copy-ready, plain-language clause templates with `[BRACKETED]` fill-ins and a one-line "what this allocates" note each.
- `references/review-playbook.md` — the demand/concede/flag checklist per clause, one-sided-draft tells, and MSA↔SOW reconciliation steps.
