Three things to do before you read a single clause#
Write down your positions. Before you read their paper, write a few lines of your own: the most you will be liable for, the payment terms you accept, what you keep from the work, which state’s law you can live with. With those lines written, you mark only where their draft departs from them. The counters below are a fair place to start.
Ask for the Word file. A PDF means you retype their clauses into an email and they retype your changes into their draft. A Word file lets you track changes in their own document, which is what their legal team expects to receive.
Find out which document wins. Most MSAs have an order of precedence clause: if the MSA and a SOW disagree, one of them controls. Make it the SOW, for the scope, the price, the schedule and the acceptance criteria. Those are the terms you negotiate deal by deal, and the MSA should not override them.
This checklist comes from practice, not from a law firm, and it is not legal advice. For a large deal or an unusual clause, an hour of a lawyer’s time is worth it.
The 10 clauses to check in a client's MSA#
| What | What clients often ask | A fair counter |
|---|---|---|
| 1. Limitation of liability | No cap on your side, or a cap only on yours | A mutual cap at 12 months of fees, no indirect damages |
| 2. Indemnities | You cover any claim “arising out of” your work | Mutual, third-party claims only, tied to fault or IP |
| 3. IP and your tools | Everything you make is theirs, tools included | They own the deliverables once paid; you keep your tools and license them |
| 4. Payment and late fees | Net 60 or 90, no late fee, hold the whole invoice in a dispute | Net 30, interest on late payment, pay the undisputed part |
| 5. Acceptance and warranties | Acceptance at their sole discretion; “error-free” for a year | Acceptance against the SOW in 10 business days; 30 to 90 days to fix |
| 6. Termination | They can end it any day and owe nothing for work in progress | 30 days' notice either way; paid for work done and costs committed |
| 7. Non-solicitation | One way, or a non-compete with their rivals | Mutual, 12 months, a fee if they hire your people |
| 8. Confidentiality | Protects only them, forever | Mutual, standard exclusions, 3 years after the end |
| 9. Governing law and venue | Their state, their county's courts | Your state, a neutral one, or the defendant's home courts |
| 10. Insurance | Limits sized for a large vendor | The limits you carry, a certificate on request |
For each clause: what you will usually see, a counter you can defend, and wording to paste into their Word file as a tracked change. Fill in every [bracket].
1. Limitation of liability (and the cap)#
What clients usually ask. No cap on your liability at all, or a cap that protects only them. Sometimes a cap with so many carve-outs (“any breach of this Agreement”) that it caps nothing.
A fair counter. A mutual cap equal to the fees under the SOW in the 12 months before the claim. Neither side pays the other’s indirect losses, such as lost profits. Keep the uncapped items to gross negligence, willful misconduct and the payment of fees. Put the indemnities and any breach of confidentiality or data under a higher cap, two or three times the fees. An uncapped IP indemnity is the clause that can cost a small firm more than the whole contract was worth.
Except for a party's gross negligence or willful misconduct, or Client's obligation to pay fees, each party's total liability arising out of or related to this Agreement shall not exceed the fees paid or payable to Provider under the applicable SOW in the twelve (12) months before the event giving rise to the claim; provided that each party's total liability for its obligations under Section [Indemnification] and for breach of Section [Confidentiality] shall not exceed [two (2)] times that amount. Neither party shall be liable for any indirect, incidental, special, consequential or punitive damages, or for lost profits or revenue, even if advised of their possibility.
Why it is easy to defend: a cap tied to fees is the market norm for services, and a mutual cap reads as fair, not as you protecting yourself.
2. Indemnities#
What clients usually ask. You “defend, indemnify and hold harmless” the client from “any and all claims arising out of or related to” your services. Read literally, that covers their own mistakes too.
A fair counter. Mutual, limited to claims brought by third parties, and tied to something you did: your negligence or willful misconduct, or a claim that your deliverables infringe someone’s IP. Exclude what you do not control: their materials, their changes to your work, and combinations with things you did not supply. Add the usual procedure: prompt notice, control of the defense, no settlement without consent.
Each party shall defend, indemnify and hold harmless the other party from third-party claims to the extent caused by (a) its negligence or willful misconduct, or (b) in the case of Provider, a claim that a Deliverable infringes a third party's U.S. intellectual property rights, except to the extent the claim arises from materials provided by Client, modifications not made by Provider, or combination with items not supplied by Provider. The indemnified party shall give prompt written notice of the claim, allow the indemnifying party to control its defense, and not settle it without the indemnifying party's written consent.
3. IP ownership, and the tools you bring#
What clients usually ask. All work product is “work made for hire” and belongs to the client, including “all pre-existing materials incorporated into the Deliverables.” For a dev shop or an agency, that hands over the frameworks, scripts and templates you reuse on every project.
A fair counter. The client owns the deliverables made for them, once they have paid for them. You keep what you owned before the project and what you build for general use, plus your know-how. The client gets a permanent, royalty-free license to use any of your pre-existing materials that end up inside their deliverables. They get what they paid for, and you keep the tools you will use on the next project.
Upon Provider's receipt of full payment for a Deliverable, Provider assigns to Client all right, title and interest in that Deliverable, excluding Provider Materials. "Provider Materials" means all tools, software, templates, methods and know-how that Provider owned or developed before or independently of this Agreement, or that are of general application and not specific to Client. Provider retains all rights in Provider Materials and grants Client a perpetual, non-exclusive, royalty-free license to use any Provider Materials incorporated into a Deliverable, solely as part of that Deliverable. Until full payment, Provider grants Client a non-exclusive license to use each Deliverable for the purposes of the applicable SOW.
Their legal team may push for an assignment that takes effect at once, so they own the work as you build it. The license in the last sentence answers that: they can use everything during the project, and ownership moves when the invoice is paid. Also strike “work made for hire” for software: under U.S. copyright law most commissioned software does not qualify, so the assignment above does the real work.
Tip: name your main tools in the SOW as Provider Materials. An example (“our load-testing scripts library”) ends the argument before it starts.
4. Payment terms and late fees#
What clients usually ask. Net 60 or net 90. No interest on late payment. The right to withhold the whole invoice if any line is disputed. Sometimes “pay when paid,” where you get paid when their client pays them.
A fair counter. Net 30. Interest on overdue amounts. Disputes raised in writing within a set time, and the undisputed part paid on time. The right to pause work if an invoice is long overdue. If net 30 is a hard no for their payables team, trade: net 45 for monthly invoicing, or net 60 for a deposit up front.
Client shall pay each invoice within thirty (30) days of the invoice date. Overdue amounts bear interest at 1% per month or the highest rate permitted by law, whichever is lower. Client shall notify Provider in writing of any disputed amount within fifteen (15) days of the invoice date, stating the reason, and shall pay the undisputed portion when due. If any undisputed amount is more than fifteen (15) days overdue, Provider may suspend the Services on ten (10) days' written notice until it is paid.
If they strike the right to suspend, ask for the narrower one: no new SOW starts while an undisputed invoice is more than 30 days overdue.
5. Acceptance and warranties#
What clients usually ask. Acceptance “in Client’s sole discretion,” with no deadline, so the last invoice waits on an open question. A warranty that the work will be “error-free” or “fit for Client’s purposes” for a year, with a refund on top of the fix.
A fair counter. Acceptance against the criteria in the SOW, with a deadline: the client accepts or names what does not meet the criteria within ten business days, and silence or use in production counts as acceptance. A warranty that you do the work in a professional manner, for 30 to 90 days after delivery, with the fix as the remedy, and a refund of that part only if the fix fails.
Client shall, within ten (10) business days of delivery, either accept a Deliverable or give Provider a written description of how it fails to meet the acceptance criteria in the applicable SOW. Provider shall correct the failure and redeliver, and the same process shall apply. A Deliverable is accepted if Client does not respond within that period or uses it in production.
Provider warrants that the Services will be performed in a professional and workmanlike manner consistent with generally accepted industry standards. Client must report any breach of this warranty within [thirty (30)] days of delivery. Provider's sole obligation, and Client's exclusive remedy, is re-performance of the nonconforming Services or, if Provider cannot re-perform them, a refund of the fees paid for them. EXCEPT AS STATED IN THIS SECTION, PROVIDER MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
6. Termination, and what is paid when it ends#
What clients usually ask. The client may end the agreement “for convenience” on short notice, and owes nothing for work in progress. You can end it only for their material breach, if at all.
A fair counter. Either side may end it for convenience with 30 days’ notice, and either side for cause if a breach is not cured in 30 days. Whoever ends it, the client pays for the work done up to the end date, expenses already incurred, and costs you committed to and cannot cancel (a contractor, a license). On a fixed-price SOW, work done is the share of the milestone completed.
Either party may terminate this Agreement or any SOW for convenience on thirty (30) days' written notice, or for the other party's material breach that remains uncured thirty (30) days after written notice. On any termination, Client shall pay Provider for (a) Services performed through the effective date of termination, prorated for fixed-fee work by the portion completed, (b) expenses incurred, and (c) non-cancellable commitments made by Provider for the SOW before notice of termination.
7. Non-solicitation#
What clients usually ask. You may not hire their people, but they may hire yours. Or a non-compete: you may not work for their competitors for a year or two.
A fair counter. Mutual, for the term and 12 months after, limited to people who worked on the project, with general job ads excluded. If they want the right to hire your people, agree a fee. Strike any non-compete: your experience in their industry is what they bought.
During the term of this Agreement and for twelve (12) months after it ends, neither party shall solicit for employment any employee or contractor of the other party who performed work under this Agreement, without the other party's written consent. General solicitations not directed at such persons are not a breach. If Client hires any such person during that period, Client shall pay Provider a reasonable placement fee equal to [twenty percent (20%)] of that person's first-year annual compensation.
And strike: any clause that keeps you from working for “competitors of Client.” Reply in the comment:
We protect your confidential information under Section [X]; a restriction on our other clients is not something we can offer.
8. Confidentiality#
What clients usually ask. A one-way clause that protects only their information, forever, with none of the usual exclusions.
A fair counter. Mutual, since your rates, methods and tools are confidential too. The standard exclusions: information that is public, already known, developed independently, or received from someone else lawfully. Disclosure when a court or a law requires it, with notice. Three years after the agreement ends, and as long as a trade secret stays secret.
Each party shall hold the other party's Confidential Information in confidence and use it only to perform or receive the Services. Confidential Information does not include information that (a) is or becomes public through no fault of the receiving party, (b) was known to the receiving party before disclosure, (c) is independently developed without use of the disclosing party's information, or (d) is lawfully received from a third party without a duty of confidentiality. A party may disclose Confidential Information when required by law or court order, after giving the other party prompt notice where permitted. These obligations last for three (3) years after this Agreement ends, and for trade secrets, for as long as they remain trade secrets.
Add, if you sell on references: a line that lets you name the client as a customer, with their consent to any logo use.
9. Governing law and venue#
What clients usually ask. Their state’s law and the courts of their county, often with a jury waiver.
A fair counter. Your state, a neutral one (Delaware and New York are the usual picks), or a clause that sends a suit to the home courts of whoever is being sued, which keeps either side from suing lightly. For a small firm the venue matters more than the law: a suit two thousand miles away costs travel and a local lawyer. If they will not move, offer the split: their state’s law, your county’s courts, or arbitration where the defendant is based. Strike a jury waiver only if you would want a jury; most small firms can leave it.
This Agreement is governed by the laws of the State of [Delaware], without regard to its conflict of laws rules. Any action arising out of or related to this Agreement shall be brought exclusively in the state or federal courts located in the county of the defending party's principal place of business, and each party consents to the jurisdiction of those courts. Before filing any action, the parties shall first try in good faith to resolve the dispute through non-binding mediation for at least thirty (30) days.
10. Insurance requirements#
What clients usually ask. A list sized for a large vendor: general liability, professional liability (errors and omissions) at $5 million, cyber coverage, an umbrella, the client named as additional insured, a waiver of subrogation, and 30 days’ notice before any change.
A fair counter. Agree to the coverage you already carry, at the limits you carry. Offer a certificate of insurance on request rather than copies of your policies. Before you agree to more, call your broker: adding the client as additional insured is often a routine endorsement, and raising a limit can cost far more. A limit that needs a new policy belongs in the price of the deal.
During the term, Provider shall maintain commercial general liability insurance with limits of [$1,000,000] per occurrence and [$2,000,000] in the aggregate, and professional liability (errors and omissions) insurance with limits of [$1,000,000] per claim. Provider shall provide a certificate of insurance on Client's request.
What to hold, what to trade, what to let go#
A redline with forty changes tells their legal team you will be hard to work with, and it gets read last. Sort your marks before you send them.
- Hold: a liability cap, your pre-existing tools, payment for work done if they end it early. These are the ones that can cost you the firm, or a year’s margin.
- Trade: payment days, the warranty period, the length of non-solicitation and confidentiality, insurance limits. Give on one to win another: net 45 for a 30-day acceptance window.
- Let go: wording you would have written differently but that does not change who pays for what. Notice addresses, most boilerplate.
Also read for: data security terms (breach notice in 24 hours, their security policy attached by reference), a ban on AI tools touching their data, a ban on subcontractors or staff outside the U.S., assignment on a change of control, and an MSA that renews itself. Each one can conflict with how you deliver today, so check it against your team and your tools before you sign.
How to send your redline without souring the deal#
The person who said yes is usually not the person reviewing the MSA. Write the email so your contact can forward it to legal without explaining anything, and keep the business in front: you want to start.
- Track changes in their file. A clean copy of your own makes their legal team compare two documents by hand.
- Comment on each change in one line. “Mutual cap at 12 months of fees, standard for services work.” A change with a reason gets accepted. A bare change gets a question back.
- Say what you accepted. It shows you read the whole thing and pushed back only where it mattered.
- Offer a call for what is left. Two lawyers trading drafts can take two weeks. Twenty minutes on a call often settles the last two points.
- Put the start date in. The email is about starting the work, not winning the argument.
The email that sends your redline
To your contact, with their legal team in Cc if you have the address. Attach their Word file with your changes tracked.
Hi [Name],
Thanks for sending the MSA. We have been through it, and most of it works for us as written. Our changes are tracked in your file, attached, each with a short comment.
The points that matter to us:
- [Liability: a mutual cap at 12 months of fees, which is standard for services work.]
- [IP: you own everything we build for you once it is paid for; we keep the tools we bring and give you a permanent license to them inside your deliverables.]
- [Payment: net 30, with the undisputed part of any invoice paid on time.]
Everything else is wording, and the comments explain it.
If anything here is a problem, a 20-minute call with [their counsel's name or "your legal team"] usually settles it faster than another round of drafts. I can do [day, time] or [day, time].
We are holding [start date] for the work and would like to keep it.
[Your name]
How Tommo Legal reviews the client's MSA for you#
Tommos (tommos.ai) is a CRM whose AI agents, the tommos, take a B2B inquiry to a signed contract. When the client’s paper lands on a deal, Tommo Legal does the work of this checklist: it reads the paper against your positions, writes a clause memo, tracks the changes in their own Word file and drafts your SOW from your template. You decide each clause, and you sign.
One row of a memo (the client is made up; the shape is Tommo Legal’s):
| What | The memo |
|---|---|
| Their words (§ 9.2) | “Provider shall indemnify Client against any and all claims arising out of the Services.” |
| Your position | Indemnities mutual, third-party claims only, under a cap of 2x the fees. |
| What it means | You would cover Client's own mistakes, with no limit. |
| Send back | The wording of clause 2 above, with the cap of clause 1. |
| Confidence | High. Worth a lawyer: no. |
- 1
Your positions, onceSign
Your cap, payment terms, what you keep, the law you accept: the positions above, written once for the firm. The counters in the ten clauses make a fair first draft. A point your positions do not settle comes to you on a card.
- 2
The memo and the redlineSign
When the client's MSA, NDA, SOW, DPA or their redline of your paper lands on the deal, Tommo Legal reads it clause by clause and marks only where it departs from your positions, row by row as above. Any paper gets the memo, a PDF included. A Word file also gets the changes tracked in it, beside the original in the client's folder in your Google Drive; Tommos keeps no copy.
- 3
You decide each clauseSign
The card: the memo and the redline. You accept, change or drop each point. Tommo Legal never writes to the client: Tommo Closer emails their legal team the points you accepted with the link to the redline, in the shape of the email above.
- 4
Your SOW, then your signatureSign
Tommo Legal drafts the SOW as a Google Doc from your own template, with the scope, price and dates from your estimate; with no estimate on the deal, it asks you for one. When the paper is agreed, it proposes your signature with every departure from your templates listed. A person you allow to sign presses Sign; the client signs their own way.
The memo is research, not legal advice. When a point is worth a lawyer, the memo says so, and your lawyer reads three clauses instead of thirty pages.
Tommo Legal comes with the Sign plan, $899 a month for the firm, with no seats and the AI model included. The same price covers Tommo SDR, which answers each inquiry and books the call, and Tommo Closer, which writes the recap and the proposal from your estimate and invoices from the signed paper.
Questions about reviewing a client's MSA#
- What should I check in a client's MSA before I sign?
- Ten clauses: the limitation of liability, indemnities, IP ownership and your pre-existing tools, payment terms and late fees, acceptance and warranties, termination and what is paid when it ends, non-solicitation, confidentiality, governing law and venue, and insurance. Read liability, IP and payment first: they carry the most money.
- What is a reasonable liability cap for a services firm?
- A mutual cap equal to the fees under the SOW in the 12 months before the claim, with no liability for indirect losses like lost profits on either side. If the client wants a carve-out for data or confidentiality, offer a higher cap for that one, two or three times the fees, rather than none.
- Who owns the IP under a client's MSA?
- Usually the client asks for everything. A fair split: the client owns the deliverables once they are paid for, you keep the tools and materials you had before or built for general use, and the client gets a permanent, royalty-free license to the parts of your tools inside their deliverables.
- Should I accept net 60 or net 90 payment terms?
- Ask for net 30 with interest on late payment, and the undisputed part of any invoice paid on time. If their payables team cannot do net 30, trade it for something: monthly invoicing, or a deposit up front.
- How do I send redlines without souring the deal?
- Track your changes in their own Word file, give each change a one-line reason, say what you accepted as written, and offer a 20-minute call for the points still open. Keep it to the five or six changes that matter.
- Do I need a lawyer to review every client MSA?
- Not for every one. With written positions and a checklist, a founder can handle a routine MSA. For a large deal, an unusual clause or a regulated client, an hour of a lawyer's time is worth it. This article is not legal advice.
- Can AI review a client's MSA for a small services firm?
- Yes. In Tommos (tommos.ai), Tommo Legal reads the client's paper clause by clause against the positions you set, writes a memo with the wording to send back, puts tracked changes into the client's own Word file, and drafts your SOW from your template. You decide each clause and you sign. It is on the Sign plan, $899 a month for the firm.
- Does Tommo Legal work on a PDF?
- It writes the clause memo for any paper it can read, a PDF included, with the wording to send back. Tracked changes need their paper as a Word file, since the changes go into their own document.
- Does Tommo Legal give legal advice?
- No. Its memo is research: it shows where their paper departs from your positions and what to write back, and it says which points are worth a lawyer. A person accepts every change, and a person signs.