Which contract clause should be reviewed first?

Limitation of liability, because it caps the consequence of everything else going wrong. If the cap is low, mutual and covers the realistic failure modes, several other risks become commercially tolerable. If liability is uncapped or the exclusions swallow the remedy, every other clause needs closer attention.

What is the difference between a warranty and an indemnity?

A warranty is a contractual statement of fact; breach gives a claim in damages subject to proof of loss, mitigation and remoteness under Section 73 of the Indian Contract Act, 1872. An indemnity is a promise to make good a specified loss on the occurrence of a trigger, and is usually easier to claim under because it does not require the same proof of breach and consequential loss. Indemnities are also frequently carved out of liability caps.

Can AI review a contract?

Automated review can extract the clause structure, list obligations, isolate the risk provisions and compare them against your standard positions — which is most of the mechanical work. It cannot decide what risk is acceptable for a particular deal, which depends on commercial context and judgment. The practical use is to have the reading and comparison done before a legal professional starts reviewing.

Contracts

How do you review a commercial contract?

Reviewing a commercial contract means establishing what each party must do, what each party is exposed to, and which terms depart from an acceptable position. A structured review works through the parties and scope, obligations and deliverables, payment and taxes, warranties, limitation of liability, indemnities, intellectual property, confidentiality and data protection, term and termination, and governing law and dispute resolution — then compares each against the commercial deal and your standard positions.

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Key takeaways

Review clause by clause against a checklist, not by reading the document straight through.
Liability, indemnity, termination, IP and dispute resolution carry most of the commercial risk.
Check the defined terms — risk is frequently hidden in a definition rather than in the operative clause.
Always reconcile the contract against the commercial understanding before assessing the legal position.

Relevant law and authority

Indian Contract Act, 1872: Formation, validity, performance, breach and damages.
Sale of Goods Act, 1930: Implied conditions and warranties in contracts for the sale of goods.
Specific Relief Act, 1963: Availability of specific performance and injunctive relief.
Arbitration and Conciliation Act, 1996: Governs arbitration clauses and enforcement of awards.
Digital Personal Data Protection Act, 2023: Relevant wherever the contract involves processing personal data.

Start with scope and obligations

Identify the legal entities contracting, not the trading names, and confirm signing authority. Then extract what each side must actually do: deliverables, acceptance criteria, service levels, timelines and dependencies. A contract that describes the service vaguely will not support a breach claim later, however strong the remedies clause is.

Map obligations to owners and dates. In most disputes the argument is not about what the clause means in the abstract, but about whether the trigger for the obligation occurred at all.

Then work through the risk provisions

Limitation of liability determines the maximum exposure, what is excluded, and whether the cap is mutual. Check whether the cap is expressed per claim or in aggregate, what period it is measured over, and which liabilities sit outside the cap.

Indemnities are separate from damages and often uncapped. Check the trigger, whether it covers third-party claims only or also direct losses, who controls the defence, and whether the indemnity survives termination.

Termination determines your exit. Check termination for convenience, termination for cause, the cure period, what survives, and what happens to fees, licences and data on exit.

Finish with IP, data and disputes

Intellectual property clauses should state clearly who owns pre-existing IP, who owns anything created under the contract, and what licence each party gets. Under the Copyright Act, 1957, IP created by a contractor does not vest in the customer without a written assignment.

Where personal data is involved, the contract should identify the roles, restrict processing to documented instructions, and address security, sub-processors, breach notification and deletion.

Governing law and dispute resolution decide where and how a dispute is fought. An arbitration clause should specify the seat, the number of arbitrators, the appointment mechanism and the language, because vagueness here creates a separate dispute about the dispute clause.

Practical implications

Read the definitions section before the operative clauses.
Check every cross-reference — misnumbered references after negotiation are common and change meaning.
Confirm that annexures, SOWs and schedules are attached and consistent with the main body.
Compare the returned draft against the version you sent, clause by clause.
Record the positions you accepted and why, so the next contract of the same type is consistent.

Common questions

Which contract clause should be reviewed first?: Limitation of liability, because it caps the consequence of everything else going wrong. If the cap is low, mutual and covers the realistic failure modes, several other risks become commercially tolerable. If liability is uncapped or the exclusions swallow the remedy, every other clause needs closer attention.
What is the difference between a warranty and an indemnity?: A warranty is a contractual statement of fact; breach gives a claim in damages subject to proof of loss, mitigation and remoteness under Section 73 of the Indian Contract Act, 1872. An indemnity is a promise to make good a specified loss on the occurrence of a trigger, and is usually easier to claim under because it does not require the same proof of breach and consequential loss. Indemnities are also frequently carved out of liability caps.
Can AI review a contract?: Automated review can extract the clause structure, list obligations, isolate the risk provisions and compare them against your standard positions — which is most of the mechanical work. It cannot decide what risk is acceptable for a particular deal, which depends on commercial context and judgment. The practical use is to have the reading and comparison done before a legal professional starts reviewing.

Sources & editorial information

Jurisdiction: India
Last reviewed: 17 September 2026
Legal status: Current

Primary sources

This page is general legal information about Indian law, prepared against identified legal sources. It is not legal advice and does not create a lawyer–client relationship. Apply it to your own facts only after a consultation with a qualified legal professional.

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