How to review a vendor contract in Word: a checklist for the customer side

Vendor contracts arrive on the vendor's paper, and the business wants them signed this week. The fastest way through is a fixed checklist and a first-pass review that finds the clauses worth negotiating. LexDraft runs in Word with built-in Services, SaaS MSA and DPA playbooks, so the same checks run on every vendor agreement.

1. Scope and deliverables

• A clear statement of work: what is delivered, by when, and how acceptance works.
• Change orders: who can approve them and how they are priced.
• Key personnel and the right to ask for a replacement.

2. Price and payment

• Fixed fee, time and materials or subscription; expenses; price increases during the term.
• Payment terms, late fees, and the right to withhold disputed amounts in good faith.
• Most-favored-customer or benchmarking clauses if the spend justifies them.

3. Performance and remedies

• Service levels, service credits and whether credits are the only remedy.
• Warranties: services performed in a professional manner, deliverables conform to the specifications, no malicious code.
• A termination right for repeated or material failures.

4. Data protection and security

• A DPA wherever the vendor processes personal data. The CCPA regulations set out required service provider terms (Cal. Code Regs. tit. 11, section 7051), and the GDPR (Article 28) does the same for processors of EU personal data.
• If the vendor handles protected health information for a covered entity, a business associate agreement meeting 45 CFR 164.504(e).
• Financial institutions covered by the FTC Safeguards Rule must oversee service providers and require safeguards by contract (16 CFR 314.4(f)).
• Breach notice timing, cooperation and who pays for notification.

5. Subcontractors and flow-downs

• Whether the vendor may subcontract, notice of new subprocessors and an objection right.
• Flow-down of confidentiality, data protection and, on government work, the required contract clauses.
• The vendor stays responsible for its subcontractors.

6. Insurance, liability and indemnity

• Insurance types and limits: commercial general liability, professional (errors and omissions), cyber.
• The liability cap, carve-outs for confidentiality, data breach and indemnities, and the exclusion of consequential damages.
• Indemnities for IP infringement, data breach and personal injury or property damage.

7. Term, termination and exit

• Auto-renewal and the cancellation window (some states, such as New York under General Obligations Law 5-903, add notice rules for service contracts).
• Termination for convenience, transition assistance and the return or deletion of your data.

A workflow in Word with LexDraft

1. Open the agreement in Word and open LexDraft in the side panel.
2. Pick the Services (or SaaS MSA) playbook and the governing-law state, then run the review. Findings come back graded Critical, High, Medium or Low, with missing standard terms flagged.
3. Run the defined-term and cross-reference quick checks. They are rule-based and finish almost instantly.
4. Accept the word-level redlines you agree with as native Word tracked changes, reject the rest and add your own.
5. Read the liability, indemnity and data sections together before you send the turn.

What LexDraft does not do

LexDraft does not assess the vendor, check insurance certificates or audit reports, or give legal advice. AI review can miss issues or be wrong, so read the marked-up document yourself before it goes out.

Using AI ethically

ABA Formal Opinion 512 (July 2024) and many state bars say the same four things: understand the tool, protect client confidences, check every output, and bill fairly for AI-assisted work. Our state-by-state guide to AI ethics for lawyers summarises the guidance in 20 states and D.C.

Plans

Start on the Free plan: 5,000 generated words a month, no time limit and no credit card. Professional is $99 a month or $990 a year for 100,000 words a month. Business is $199 a month or $1,990 a year with unlimited words. LexDraft runs in Word 365 (Windows and Mac), Word 2021 and Word on the web, and it does not use customer documents to train models.

This guide is general information, not legal advice. LexDraft does not give legal advice; qualified counsel must review every draft. Spotted something out of date? Email support@lexdraft.ai and we will fix it.