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Legal Audits (Vol 3, Pt 1) – Clauses

Patrick Lim
Partner at Raj, Ong & Yudistra

In the previous volumes of this series of articles, we took a macro look at legal contract audits, such as benefits, risks, overall strategy, and examples.

In this volume, we start looking at the contracts themselves. The goal is for you to be able to carry out basic legal contract audits and get started down the path of good corporate governance and preventing collateral damage (another topic for another day).

Here is a checklist of items to consider when reviewing a contract:

  1. Parties: Identify the parties to the contract and confirm that they are properly identified and authorized to enter into the contract.
  2. Purpose: Understand the purpose of the contract and confirm that it aligns with the company’s business objectives.
  3. Term: Review the term of the contract and confirm that it is appropriate for the company’s needs.
  4. Termination: Review the provisions related to termination of the contract and confirm that they are fair and reasonable.
  5. Obligations: Review the obligations of the parties under the contract and confirm that they are clear and realistic.
  6. Performance standards: Review any performance standards or requirements that are included in the contract and confirm that they are achievable.
  7. Compensation: Review the provisions related to compensation and confirm that they are fair and reasonable.
  8. Indemnification: Review the provisions related to indemnification and confirm that they are appropriate for the company’s needs.
  9. Dispute resolution: Review the provisions related to dispute resolution and confirm that they are fair and reasonable.
  10. Governing law: Review the provisions related to governing law and confirm that they are appropriate for the company’s needs.

Overall, this checklist provides a general outline of the items to consider when reviewing a contract. The specific items that are included in the checklist may vary depending on the specific needs and objectives of the review, and the specific provisions that are included in the contract.

The rest of the parts in this volume of articles will be to explore each of these types of clauses. Catch you in the next article.

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