# Contracts and terms

## Not legal advice; escalate when

This skill explains common contract types and what their clauses mean. It does not draft binding language for execution. Escalate to counsel when contract value exceeds $25k, when the other side has counsel and you don't, when the deal is cross-border, when the agreement involves equity, or when an active dispute is in play.

## When to load this mode

The user has been handed a contract to sign, is about to send one, is setting up terms of service or a privacy policy, or is hiring a contractor. Load when they ask "is this NDA fair," "what should be in my MSA," "do I need ToS," or "what's a fair contractor agreement."

## Procedure

Six common contract types. For each, what it does and what to watch for.

**1. Mutual NDA.** Two parties share confidential information without either being free to use or disclose it. Templates exist (Common Paper, Y Combinator). Watch for: definition of confidential information (reasonable, not "everything we ever say"), term (typically 2–5 years post-disclosure), exclusions (info already public, info independently developed), return-or-destroy on termination. Red flag: one-way NDA when the relationship is mutual. Red flag: perpetual term.

**2. MSA + SOW.** For ongoing services. MSA covers legal terms once (payment, IP, liability, termination); each SOW covers a specific engagement (scope, deliverables, timeline, price). Watch for: who owns the work product (usually the client, on full payment), liability cap (typically fees paid in the prior 12 months), payment terms (net-30 standard), termination (cause vs. convenience).

**3. Contractor agreement.** To hire an individual or small firm for a defined scope. Distinct from employment — misclassifying an employee as a contractor is a real risk, especially in California and New York. Watch for: scope, IP assignment (written), confidentiality, term and termination, non-solicitation (reasonable scope and duration), clear statement of independent-contractor relationship. Templates: Common Paper, GitHub's Contractor Agreement.

**4. Terms of Service and Privacy Policy.** Required for any consumer-facing site or app collecting data. ToS sets the rules; Privacy Policy explains what data is collected and how. Privacy Policy is the riskier one — getting it wrong has regulatory consequences (GDPR, CCPA). Termly / iubenda are starting points, not finished products. Custom data (health, financial, biometric) requires custom drafting.

**5. SaaS / customer agreement.** License grant, fees, data handling (via DPA under GDPR), liability, indemnification, term and renewal, termination. Watch for: auto-renewal (must be clearly disclosed in many jurisdictions), DPA presence if any EU customer is in scope, security commitments (SOC 2, ISO 27001) the seller can honor, SLA terms with realistic credits.

**6. Sales contract / order form.** Thinnest version, one-shot product sales. Usually points to the MSA for legal terms. Watch for: payment terms, delivery timeline, acceptance criteria, return policy.

## Decision rules

- **Match contract weight to deal weight.** A Common Paper one-pager beats a 30-page MSA for a 3-month engagement under $10k.
- **Ask "what happens when this goes wrong?"** If the bad day isn't named (late payment, scope creep, breach, departure, IP dispute), the contract is incomplete.
- **Watch the liability cap.** "Unlimited liability" on your side is almost never appropriate. Cap at fees paid in the prior 12 months.
- **IP assignment must be written.** Verbal work-product ownership is not enforceable in most jurisdictions.
- **Read the auto-renewal clause.** Surprise renewals are a top complaint category.

## Anti-patterns

- **Signing the other side's paper without redlining.** A 15-minute read with three pushbacks improves your position.
- **No written contractor agreement, "we trust each other."** When the relationship sours, no paper to fall back on.
- **Generic ToS and Privacy Policy lifted from a competitor.** You inherit their disclosures and are enforced on your reality.
- **Indemnification clauses no one read.** "Each party indemnifies the other" sounds mutual; in practice it can shift catastrophic liability to the smaller party.
- **Verbal NDAs.** Not a thing.

## Before / after

**Before:** *A solo consultant lands a $30k engagement. The client sends their standard MSA — 22 pages, unlimited liability on the consultant's side, unlimited indemnification, IP assignment of all "related work" forever. The consultant signs without redlining.*

**After:** *Same engagement. The consultant flags the unlimited-liability clause (asks for a cap at the engagement fee), the indemnification (asks for mutual indemnification with a cap), and the "related work" IP language (asks for it scoped to deliverables actually produced under this MSA). The client's lawyer pushes back on one of three; the other two accepted. Cost: one $400 lawyer hour for the redline.*

**Disclaimer:** I am not your lawyer. This is a framework, not legal advice. For redlining a specific contract, drafting your privacy policy on real data flows, or any agreement over $25k, you need actual counsel.
