What is contract review?

Contract review is a legal service in which a lawyer reviews a contract before it is signed, identifies risks and ambiguities, and advises on whether and how the terms should be negotiated or amended. Contract review is one of the most universally applicable legal services as almost every business and individual signs contracts. Contract review is particularly important for the party who receives the contract – they tend to be skewed in favor of the drafting party. A thorough contract review identifies what the contract actually says, what it should say, and where you can push for better terms.

Why you should consider contract review

Catching unfavourable terms before signing. Contract review identifies clauses that allocate risk unfavourably, impose obligations the signer did not intend to take on, or limit rights more than the commercial deal requires. Once a contract is signed, those terms are generally binding, and the cost of fixing them — through amendment, dispute, or litigation — is far higher than the cost of contract review at the negotiation stage.

Identifying missing terms and silent risks. Contract review surfaces issues the contract does not address — common examples include unclear ownership of work product, no defined termination rights, no limitation of liability, undefined confidential information and data, and no governing law or dispute resolution clause. A contract is sometimes more dangerous for what it leaves out than for what it includes, and contract review is the standard way of catching those gaps.

Negotiating from an informed position. Contract review prepares a party for negotiation by identifying which terms are favourable, which are unfavourable, which are standard, and which are unusual. Walking into a negotiation with a clear list of priorities and fallback positions is a far stronger position than negotiating clause-by-clause without preparation.

Allocating risk through key contractual mechanisms. Contract review focuses attention on the provisions that allocate risk — limitation of liability, indemnification, warranties, insurance, and termination — and on whether those provisions reflect the commercial deal. These provisions are often the most heavily contested in disputes, and a contract review that calibrates them to the commercial risk profile pays for itself many times over if a problem arises.

Relevant laws and regulations

Sale of Goods Act, RSA 2000, c S-2. Alberta’s legislation governing contracts for the sale of goods, which can imply terms into a contract that contract review needs to identify and address through express contractual provisions.

Electronic Transactions Act, SA 2001, c E-5.5. Alberta’s legislation governing electronic contracts and signatures, which is relevant in any contract review involving online agreements, click-through terms, and electronically signed documents.

Consumer Protection Act, RSA 2000, c C-26.3. Alberta’s consumer protection legislation, which can apply to a contract review involving consumer transactions, internet sales contracts, gift cards, and other consumer-facing arrangements.

Competition Act, RSC 1985, c C-34. Canada’s federal competition legislation, which can apply to a contract review involving exclusivity provisions, restrictive covenants, pricing arrangements, and representations about goods and services.

Common legal issues

Limitation of liability and indemnification. The most consequential clauses in many contracts are often the limitation of liability and indemnification provisions, which determine each party’s financial exposure if something goes wrong. Contract review focuses on whether the cap on liability is proportionate to the value of the deal, whether consequential damages are excluded or preserved, whether indemnities are mutual or one-sided, and whether the indemnification carve-outs leave one party exposed to risks that should belong with the other.

Termination rights and exit mechanics. Contract review examines how the contract can be terminated — including for convenience, for cause, on notice, on insolvency, on breach — and what happens on termination. Issues include the length of any notice period, whether termination requires a cure period, whether each party retains rights to use deliverables or data after termination, and whether obligations such as confidentiality and non-solicitation survive termination.

Intellectual property ownership and licensing. Contract review identifies who owns the intellectual property created or used under the contract, whether ownership is assigned or licensed, the scope of any licence granted, whether moral rights are waived, and how confidential information and data are protected. Vague or unfavourable IP provisions are a common issue across services, technology, content, and creator-economy contracts.

Payment terms, fees, and price adjustments. Contract review examines the price or fee structure, the timing and method of payment, late payment provisions, indexation or escalation mechanisms, and any rights to suspend service or accelerate amounts owing. Payment disputes are one of the most common types of contract dispute, and contract review tightens these provisions before they become contested.

Restrictive covenants and exclusivity. Contract review identifies non-competition, non-solicitation, exclusivity, and most-favoured-nations provisions, and assesses whether they are reasonable in scope, geography, and duration. Overly broad restrictive covenants can be unenforceable, and contract review balances commercial interests against the risk of unenforceability.

Governing law, dispute resolution, and venue. Contract review confirms which jurisdiction’s law governs the contract, where disputes will be resolved, and whether the dispute resolution procedure is litigation, arbitration, or mediation. These provisions can have significant strategic and cost implications and are often given less attention than they deserve at the drafting stage.

Boilerplate provisions that are not boilerplate. Contract review pays close attention to provisions that are often described as “boilerplate” but that can have significant consequences — including assignment, change-of-control, force majeure, severability, entire agreement, amendment, notice, and counterparts clauses. These provisions are commonly overlooked but frequently determinative in disputes.

Frequently asked questions

When should a contract be reviewed? Contract review is generally most useful before signing, when there is still the option to negotiate or walk away. Review of a contract that has already been signed can still be valuable — for example, to assess obligations, prepare for renewal, or evaluate enforcement options — but the leverage to change terms is generally much lower after signing.

Does every contract need a legal review? Not every contract requires a legal review, but contract review is generally advisable for any contract with significant financial value, long-term commitments, complex obligations, intellectual property components, restrictive covenants, or unusual terms. A short-form agreement with low risk may not justify the cost of formal contract review, while a more consequential contract generally does.

What is the difference between contract review and contract drafting? Contract review is the analysis of an existing contract — typically one prepared by another party — while contract drafting is the preparation of a new contract from scratch or from a template. The two services overlap, and contract review often leads to redlining and negotiation that effectively becomes drafting.

What happens after contract review? After contract review, the result is typically a memo, comments, or a marked-up version of the contract identifying issues and proposed revisions. From there, the next step is generally a decision whether to sign as drafted, negotiate the issues identified, walk away from the deal, or instruct further drafting.