The Contract Risk Checklist

Phase 0 is where we stop the collapse before it starts. This checklist is a pre-sign / pre-renewal filter for any service contract where you’re carrying labor, quality, and liability risk. Use it to spot the trapdoors before you step on them.

Note: This is an operational risk checklist, not legal advice. If a clause looks dangerous, bring it to a qualified professional.

---

How to Use This (2 minutes)

1. Read each item and mark it Green, Amber, or Red.
2. Write one sentence of evidence (what clause or practice makes it true).
3. If you mark anything Red, choose a guardrail: negotiate, price it, reserve for it, or walk away.

Legend

• Green = clear, fair, survivable. (2 points)
• Amber = workable but needs a guardrail. (1 point)
• Red = one bad week can become a crater. (0 points)

Quick scoring: Total possible points = (number of items × 2). If you’re below 70%, treat it as a high-risk contract unless you can add guardrails that shrink the blast radius.

---

Phase 0 Contract Risk Checklist (Copy/Paste)

A) Termination & Control (collapse triggers)

• ☐ Termination without cause: Can the other party end the agreement without stating a reason?
• ☐ Probation / discretionary termination: Is there an early period where termination is purely at their discretion?
• ☐ Third-party trigger: Can a complaint or request from a third party end your contract immediately?
• ☐ Upstream loss trigger: If they lose their upstream agreement, do you automatically lose yours?
• ☐ Subjective default: Are “breach” or “unsatisfactory” definitions vague or opinion-based?
• ☐ Short cure window: Are you required to remedy issues within 24 hours (or similarly tight timelines)?

B) Money Flow & Deductions (slow-bleed triggers)

• ☐ Payment lag: Is payment delayed beyond a normal net-15/net-30 cycle?
• ☐ Mandatory deductions: Can they deduct supplies, admin fees, equipment, or chargebacks from your invoice?
• ☐ Conditional payment: Is payment tied to paperwork, approvals, or third-party signoffs that you don’t fully control?
• ☐ Extras approval gate: Are extra services unpaid unless you have a signed worksheet/ticket?
• ☐ Final invoice holdback: Can final payment be delayed after termination?

C) Tail Risk (the “bad week becomes a crater” test)

• ☐ Remediation without notice: Can they “fix” issues and bill you without giving you a chance to respond?
• ☐ Post-exit clawback window: Can they claim costs months after you leave?
• ☐ Formula penalties: Are you on the hook for fixed sums tied to recent invoices (e.g., “X months of billing”)?
• ☐ Replacement cost exposure: Can you be charged for replacement contractor costs (including travel/major recovery work)?

D) Operations & Staffing (tripwires)

• ☐ No-show penalties: Are there explicit penalties per missed shift plus additional costs?
• ☐ Repeat-failure default: Does “X misses in a month” trigger default/termination?
• ☐ Attendance tracking requirement: Must you use a real-time system approved by someone else?
• ☐ Supervision/training burden: Are there required onboarding/training rules you must fund?
• ☐ 24-hour recovery expectation: If staff or equipment fail, can you realistically recover within their required timeline?

E) Supplies, Products, Equipment (hidden cost + liability)

• ☐ Approved supplier requirement: Must you buy through an approved channel (possibly at non-negotiable pricing)?
• ☐ Seasonal/variable budgets: Do supply requirements swing by season with minimums?
• ☐ Product approval gate: Are substitutions forbidden without written approval?
• ☐ Unauthorized product liability: Are you liable for damages/claims if you use the “wrong” product?
• ☐ Equipment uptime rule: Must equipment be functional within 24 hours or be replaced at your expense?
• ☐ Key/control responsibilities: Are you responsible for lost keys, rekeying, or access-control costs?

F) Insurance, Compliance, Audit (admin burden)

• ☐ High insurance minimums: Are coverage requirements high enough to materially impact margin?
• ☐ Additional insured requirement: Must you name others on your policy?
• ☐ Audit rights: Can they inspect compliance records (training, payroll, staffing, etc.) on demand?
• ☐ Indemnity scope: Do you indemnify broadly (including their negligence or third-party claims)?
• ☐ Liability imbalance: Is their liability capped while yours is uncapped?

G) Post-Exit Constraints (can you recover?)

• ☐ Non-solicit / non-compete: Are you blocked from working with the end customer after termination?
• ☐ Confidentiality + return duties: Are the obligations broad and long-lasting?
• ☐ Cross-default: Can a breach on one site/contract trigger default across others?
• ☐ Unilateral amendment: Can they change terms midstream with limited notice?

---

Scorecard (fill-in)

Section	Green (2)	Amber (1)	Red (0)	One-sentence evidence (what makes this true?)	Guardrail (negotiate / price / reserve / walk)
A) Termination & Control	__	__	__	________________________________________	________________________________________
B) Money Flow & Deductions	__	__	__	________________________________________	________________________________________
C) Tail Risk	__	__	__	________________________________________	________________________________________
D) Operations & Staffing	__	__	__	________________________________________	________________________________________
E) Supplies/Products/Equipment	__	__	__	________________________________________	________________________________________
F) Insurance/Compliance/Audit	__	__	__	________________________________________	________________________________________
G) Post-Exit Constraints	__	__	__	________________________________________	________________________________________

---

Phase 0 Guardrails (the defaults)

• 1) Concentration cap: No single site/client exceeds ___% of total revenue.
• 2) Termination exposure reserve: Maintain a reserve equal to ___ weeks of payroll + critical overhead.
• 3) Attendance redundancy: Maintain an on-call roster and a coverage protocol so “no-show” is a rare event.
• 4) 24-hour cure playbook: A written rapid-response SOP (who acts, what proof is captured, how resolution is confirmed).
• 5) Compliance pricing model: Price in insurance, supply constraints, admin burden, equipment redundancy, and approval gates—up front.

Phase 0 Red-Line Rule

If any of these are Red and you cannot negotiate or fund a guardrail, treat it as a “walk-away” flag:

• Open-ended post-exit clawbacks
• Penalty formulas tied to “months of invoices”
• Final payment held for extended periods after termination
• Subjective default definitions plus 24-hour cure expectations
• Non-solicit/non-compete that blocks recovery while termination is at-will

Use this like a smoke alarm. It’s not here to make you paranoid—it’s here to make sure one bad week doesn’t become a life-changing event.