Contract Clause Extractor

What it is: Restricts you from working for competitors or starting a competing business after the contract ends.

Why it matters: Enforceability varies dramatically by jurisdiction. California voids nearly all non-competes. Texas enforces them if reasonable. Ontario banned them for non-executives in 2021. A non-compete that is legal in one state may be void in another.

What it is: Prohibits you from recruiting the other party's employees or poaching their customers after the contract ends.

Why it matters: Narrower than non-competes and generally more enforceable, but still jurisdiction-dependent. An overbroad non-solicitation can prevent you from hiring anyone from a large company.

What it is: Requires one party to compensate the other for losses, damages, or legal costs arising from certain events.

Why it matters: Unlimited, one-sided indemnification is one of the most dangerous clauses in commercial contracts. A single lawsuit against your customer could become your financial liability. Always look for mutual indemnification, carve-outs for gross negligence, and liability caps.

What it is: Caps the maximum amount one party can recover from the other, typically at the contract value or fees paid.

Why it matters: A missing liability cap can expose you to unlimited damages. A cap that is too low may be inadequate. Standard is 12 months of fees paid. Watch for carve-outs that exclude IP infringement or data breaches from the cap.

What it is: Transfers ownership of intellectual property (code, creative work, inventions) created during the engagement.

Why it matters: Overbroad IP assignment can strip you of rights to work you created independently. California Labor Code § 2870 limits what employers can claim. Always check if the assignment covers pre-existing IP and work done outside the scope of the contract.

What it is: Requires parties to keep certain information secret and limits how it can be used.

Why it matters: Overly broad confidentiality clauses can prevent you from discussing your own work history or using general skills developed during the engagement.

What it is: Defines when and how the contract can be ended, and what happens on termination.

Why it matters: One-sided termination rights, short notice periods, and "termination for convenience" clauses with no compensation can leave you exposed. Look for whether termination for cause requires notice and opportunity to cure.

What it is: Excuses non-performance due to extraordinary events outside the parties' control.

Why it matters: Became critical during COVID-19. Narrow force majeure clauses (e.g. only covering "acts of God") may not cover pandemics, government shutdowns, or supply chain disruptions.

What it is: Specifies how disputes must be resolved — litigation, arbitration, or mediation.

Why it matters: Mandatory arbitration with class action waivers is common in consumer and employment contracts. Arbitration can be faster and cheaper, but limits your ability to appeal.

What it is: Determines which state or country's laws apply to interpret and enforce the contract.

Why it matters: The same clause can be enforceable under one jurisdiction's law and void under another. This is especially important for non-competes, non-solicitation, and employment protections.

What it is: Controls whether either party can transfer their rights and obligations under the contract to a third party.

Why it matters: Without an anti-assignment clause, the other party could sell or transfer the contract to a company you'd never choose to work with. Key in M&A situations.

What it is: Specifies how the contract can be modified.

Why it matters: Contracts without written amendment requirements can be varied by email or verbal agreement, which creates disputes. Always require written amendments signed by both parties.

What it is: States that the written contract is the complete agreement, superseding all prior negotiations and representations.

Why it matters: Protects both parties from claims based on verbal promises made during negotiations, but also means that side letters and prior commitments are not enforceable unless included in writing.

What it is: Provides that if one clause is found unenforceable, the rest of the contract remains valid.

Why it matters: Without severability, a single unenforceable clause could void the entire contract. Important in jurisdictions that void rather than reform overbroad clauses.

What it is: Disclaims implied warranties, such as merchantability or fitness for a particular purpose.

Why it matters: "AS IS" disclaimers are standard in software and SaaS contracts, but in B2C contexts they may not be enforceable. Watch for one-sided disclaimers that protect only the vendor.