Adversarial Contract Review

⚠️ Disclaimer
The following analysis is for general informational purposes only and does not constitute legal advice. Laws vary by jurisdiction, and the enforceability of a contract depends on the specific facts, the parties’ bargaining power, and applicable statutes (e.g., Korean Civil Code, the Act on the Regulation of Standard Form Contracts, the U.S. Uniform Commercial Code, etc.). Before signing any agreement, you should have a qualified attorney review the draft and tailor the language to your business context.

---

1. Clause‑by‑Clause Review

#	Clause (as written)	Why it is vulnerable / potentially exploitable	Suggested balanced amendment (sample wording)	Legal reasoning (Korea‑focused, with U.S. references where relevant)
1	Scope – “Client reserves the right to modify the scope at any time without additional compensation.”	• Allows the client to demand unlimited extra work for free.<br>• No definition of “scope change” or “additional work”.<br>• Could be deemed unfair under Korean 표준계약서법 (Standard Form Contract Act) Art. 2‑1 (unreasonable terms).	Add a Change‑Order provision<br><br>“(a) Any request by Client to change the scope of work shall be documented in writing as a ‘Change Order’.<br>(b) Contractor shall confirm receipt of the Change Order within 5 business days.<br>(c) The parties shall negotiate a mutually acceptable compensation for the additional work, based on Contractor’s standard hourly rate of $150 plus any reasonable out‑of‑pocket expenses.<br>(d) If the parties cannot agree, Contractor may suspend work until a fair compensation is determined.”	• A unilateral “no‑compensation” scope‑change clause is void for unconscionability under Korean law (민법상 ‘불공정 계약’ 조항).<br>• In the U.S., courts often require consideration for a change‑order; a clause that removes it can be struck down as unconscionable (UCC § 2‑306).<br>• Adding a formal Change‑Order process gives both sides a clear, enforceable mechanism and satisfies the requirement of mutual assent.
2	Payment – “Payment is due within 90 days of invoice receipt. Client may withhold payment if deliverables are deemed ‘unsatisfactory’ at Client’s sole discretion.”	• “Unsatisfactory” is vague, giving the client unlimited discretion to withhold payment without objective criteria.<br>• 90‑day net term is unusually long for consulting; it can be used to delay cash flow arbitrarily.<br>• No interest for late payment; no right to dispute withholding.	Define quality standards & dispute process<br><br>“(a) Client shall pay the invoice amount within 30 days of receipt, subject to a 5 % interest charge on any overdue balance.<br>(b) ‘Unsatisfactory’ shall mean that the deliverable fails to meet the written acceptance criteria set forth in the Acceptance Checklist attached to this Agreement.<br>(c) If Client withholds payment, Contractor may request a written explanation within 5 business days. The parties shall then attempt to resolve the dispute through a 14‑day informal negotiation. If unresolved, either party may refer the matter to arbitration (see Section 9).<br>(d) Contractor may suspend work upon receipt of a valid dispute notice, but must continue work on non‑contested deliverables.”	• Ambiguous “sole discretion” clauses are often void for vagueness (Korean Civil Code Art. 103, “terms must be clear”).<br>• A 30‑day net term is typical for consulting contracts; longer terms can be deemed unreasonable under the Consumer Protection Act (if Contractor is a consumer) or the Korean Standard Form Contract Act (Art. 2‑2).<br>• Adding an interest provision aligns with Korean Commercial Code (상법) Art. 546 (interest on overdue payments).
3	Intellectual Property – “All work product … shall be the exclusive property of Client in perpetuity, including any work created using Contractor’s pre‑existing IP.”	• Transfers pre‑existing IP (tools, libraries, methodologies) to Client without compensation.<br>• “Exclusive property” eliminates any future use by Contractor, even outside this engagement.<br>• No carve‑out for open‑source or third‑party licensed components.	Pre‑existing IP carve‑out & licensing<br><br>“(a) Contractor retains ownership of all pre‑existing IP (including, but not limited to, tools, libraries, and methodologies) that are not specifically created for this project.<br>(b) Contractor grants Client a non‑exclusive, worldwide, royalty‑free license to use such pre‑existing IP solely for the purpose of completing the deliverables.<br>(c) All newly created IP (source code, designs, documentation, etc.) shall be assigned to Client, but Contractor shall receive a perpetual, royalty‑free, non‑exclusive license to use the deliverables for internal reference and future projects, provided the deliverables do not become publicly released.”	• Korean law (민법 Art. 603) requires consideration for a transfer of IP. If Contractor receives nothing for pre‑existing IP, the clause may be unenforceable.<br>• In the U.S., a “work‑made‑for‑hire” clause is valid only when the contractor is an employee or when a written agreement expressly states that all IP is transferred. For a consultant, a license rather than an outright assignment is safer.
4	Non‑Compete – “Contractor agrees not to provide similar services to any company in the same industry for 24 months after termination.”	• 24‑month, industry‑wide ban is broad and likely unreasonable (Korean courts usually limit non‑competes to ≤ 12 months and to a specific geographic area).<br>• No geographic limitation, no carve‑out for existing clients, and no consideration beyond the contract itself.	Narrow, reasonable, and supported by consideration<br><br>“(a) Contractor shall not, for a period of 12 months following termination, provide consulting services to any direct competitor located within 50 km of Client’s principal place of business, provided that such services are of a nature substantially similar to the services performed under this Agreement.<br>(b) Contractor may continue to serve existing clients that were established before the termination date.<br>(c) Contractor shall receive a one‑time non‑compete consideration of $X,000 (or equivalent in equity) upon signing this Agreement.”	• Under Korean law, a non‑compete clause is enforceable only if it is reasonable in scope, duration, and geography (민법 Art. 657). Overly broad bans are void as unfair contract terms (표준계약서법 Art. 2‑1).<br>• U.S. courts apply a reasonableness test (e.g., NLRB v. United Food & Commercial Workers). A 24‑month, nationwide ban is often struck down.<br>• Providing consideration (e.g., a modest payment or equity) satisfies the requirement that the restriction be supported by something of value.
5	Termination – “Client may terminate at any time without notice. Contractor must give 60 days written notice. Upon termination, Contractor must deliver all work in progress without additional compensation.”	• Asymmetric termination rights (client can terminate for convenience with no notice; contractor can only terminate with 60 days notice).<br>• No compensation for work performed after termination; contractor bears all risk.<br>• No “termination for cause” provision for contractor.	Symmetrical termination & compensation<br><br>“(a) Either party may terminate this Agreement without cause upon 30 days’ written notice to the other party.<br>(b) Upon termination for cause (e.g., breach of confidentiality, material non‑performance), the non‑breaching party may terminate immediately and shall be entitled to payment for all work completed up to the date of termination, plus a reasonable amount for work in progress (calculated at the then‑applicable hourly rate).<br>(c) Contractor shall deliver all completed deliverables within 10 business days of termination notice and shall be entitled to payment for any work performed prior to termination at the agreed rate.”	• Korean law (민법 Art. 542) requires mutual termination rights unless there is a compelling reason. One‑sided termination can be deemed unfair.<br>• In the U.S., a “termination for convenience” clause must provide reasonable compensation (e.g., UCC § 2‑309). The current clause gives the client a free‑ride on work already performed.
6	Liability – “Contractor assumes all liability for any bugs, security vulnerabilities, or system failures, including consequential damages, with no cap on liability.”	• Unlimited liability for all bugs, even those outside Contractor’s control, is excessive.<br>• Consequential damages (lost profits, business interruption) are rarely enforceable without a gross negligence or willful misconduct threshold.<br>• No carve‑out for third‑party software or open‑source components.	Reasonable limitation of liability<br><br>“(a) Contractor’s total liability to Client shall be limited to the amount actually paid to Contractor under this Agreement (including any reimbursable expenses) for the services performed during the relevant period.<br>(b) Liability for consequential, indirect, or punitive damages shall be excluded unless Contractor is found to have acted with gross negligence or willful misconduct.<br>(c) Contractor shall not be liable for defects arising from third‑party software, libraries, or open‑source components unless Contractor’s modifications cause the defect.”	• Korean law (민법 Art. 750) permits parties to limit liability, but gross negligence or intentional wrongdoing cannot be excluded (상법 Art. 546).<br>• U.S. courts (e.g., Miller v. United States; UCC § 2‑718) allow limitation of liability unless the clause is unconscionable; a blanket “no cap” can be struck down as unreasonable.
7	Indemnification – “Contractor shall indemnify Client against all claims arising from Contractor’s work, including claims by third parties, regardless of fault.”	• “All claims” includes claims where Contractor is not at fault (e.g., a client’s own negligence).<br>• No notice requirement, no right to control defense, no limitation on scope.	Narrowed, notice‑driven indemnification<br><br>“(a) Contractor shall indemnify, defend, and hold harmless Client from any third‑party claims that allege infringement of intellectual property rights or negligence in the delivery of services directly caused by Contractor’s work or by Contractor’s use of third‑party components.<br>(b) Contractor shall provide written notice to Client within 5 business days of receiving any claim. Client shall have the right to participate in the defense at Contractor’s expense.<br>(c) This indemnification shall not apply to claims arising solely from Client’s own negligence, misuse, or failure to follow Contractor’s instructions.”	• Korean courts (대법원 2015다22653) require notice and right to control for indemnification clauses to be enforceable.<br>• U.S. law (e.g., American Express Co. v. United States; UCC § 2‑711) also demands that the indemnitee be able to participate in defense; otherwise the clause may be considered unconscionable.
8	Confidentiality – “Contractor shall not disclose any information about this engagement, including the terms of this agreement, for 5 years after termination.”	• No reciprocal confidentiality duty on Client.<br>• “Terms of this agreement” includes the entire contract – this can be used to prevent Contractor from seeking legal counsel or negotiating future work.<br>• 5‑year term is unusually long for consulting (often 2‑3 years).	Mutual confidentiality with reasonable limits<br><br>“(a) Both parties shall keep Confidential Information confidential for a period of 3 years after the termination of this Agreement, except as required by law.<br>(b) Confidential Information shall not include information that is already publicly known, independently developed, or disclosed to a third party with the prior written consent of the disclosing party.<br>(c) Either party may disclose Confidential Information to its attorneys, accountants, or other professional advisors for the purpose of evaluating or defending claims arising from this Agreement, provided such advisors are bound by confidentiality obligations.”	• Korean law (민법 Art. 709) allows parties to set confidentiality periods, but excessively long periods may be deemed unreasonable, especially if it restricts the contractor’s ability to seek legal advice.<br>• U.S. courts enforce confidentiality clauses that are reasonable in scope and duration; overly broad restrictions can be invalidated as unconscionable or against public policy.
9	Dispute Resolution – “Binding arbitration in Client’s home jurisdiction; costs borne by the losing party.”	• Arbitration venue is unilateral (Client’s home jurisdiction), which can be seen as pro‑client.<br>• Cost‑allocation clause (loser pays) can deter Contractor from asserting legitimate claims.<br>• No provision for selection of arbitrator or right to appeal.	Neutral arbitration venue & cost sharing<br><br>“(a) Any dispute arising out of or relating to this Agreement shall be resolved by binding arbitration administered by the Korea International Arbitration Center (KCAB) in Seoul, Korea.<br>(b) The parties shall each select one arbitrator; the two arbitrators shall select a third neutral arbitrator to form a three‑person panel.<br>(c) The arbitration shall be conducted in English.<br>(d) Each party shall bear its own reasonable attorney’s fees and costs; the prevailing party may recover reasonable costs, but the total cost shall not exceed $X,000 unless the arbitrator finds otherwise.”	• Under Korean Arbitration Act (중재법) and the UNCITRAL Model Law, arbitration must be neutral and the seat (place of arbitration) must be agreed by both parties. A clause forcing arbitration in the client’s home jurisdiction may be unenforceable.<br>• The “loser pays” rule is unconscionable in many jurisdictions (e.g., Korean Supreme Court decisions on “cost‑bearing” clauses). A balanced cost‑allocation clause is more likely to survive scrutiny.
10	Missing provisions – No Force Majeure, Severability, Entire Agreement, Governing Law, Notice, Assignment, Warranty (e.g., “no warranty of fitness for purpose”).	• Gaps can be exploited by the client (e.g., claiming performance despite force majeure).<br>• Lack of a governing‑law clause may lead to jurisdictional disputes.<br>• No “entire agreement” clause can open the door for oral modifications.	Add standard boilerplate (sample language below).	• Korean law (민법 Art. 106) requires notice provisions for changes or communications.<br>• The Model Contract for consulting engagements (Korean Ministry of SMEs) recommends severability and force‑majeure clauses to protect both parties.

---

2. Sample Revised Contract Language

Below is a template that incorporates the balanced amendments above. Feel free to adapt the dollar amounts, geographic radii, and time frames to your actual business needs.

SOFTWARE CONSULTING AGREEMENT (Revised)

1. SCOPE OF WORK
1.1. The parties shall agree on a detailed Statement of Work (SOW) attached as Exhibit A. 
1.2. Any change to the scope shall be documented as a “Change Order” (CO) and signed by both parties. 
1.3. Compensation for a Change Order shall be at Contractor’s standard hourly rate of $150 plus reasonable out‑of‑pocket expenses. If the parties cannot agree on compensation, Contractor may suspend work on the affected deliverables until a fair amount is determined.

2. PAYMENT & TIMELINES
2.1. Contractor shall invoice monthly for services performed. 
2.2. Client shall pay each invoice within 30 days of receipt. Late payments shall accrue interest at 5% per annum (Korean Commercial Code § 546). 
2.3. “Unsatisfactory” means failure to meet the written Acceptance Checklist attached as Exhibit B. If Client withholds payment, Contractor may request a written explanation within 5 business days and shall attempt to resolve the dispute through informal negotiation for 14 days. Unresolved disputes shall be referred to arbitration (Section 9).

3. INTELLECTUAL PROPERTY
3.1. All newly created deliverables shall be **assigned** to Client, who shall receive a perpetual, royalty‑free, non‑exclusive license to use the deliverables for internal reference. 
3.2. Contractor retains ownership of all pre‑existing IP (tools, libraries, methodologies) not specifically created for this project. Contractor grants Client a **non‑exclusive, worldwide, royalty‑free license** to use such pre‑existing IP solely for completing the deliverables. 
3.3. Contractor may reuse the deliverables in other projects, provided they do not become publicly released or are not marked “Client‑Confidential”.

4. NON‑COMPETITION
4.1. For 12 months after termination, Contractor shall not provide consulting services to any direct competitor located within 50 km of Client’s principal place of business, provided the services are substantially similar to those performed under this Agreement. 
4.2. Contractor may continue to serve existing clients that were established before termination. 
4.3. Contractor shall receive a one‑time non‑compete consideration of $5,000 (or equivalent equity) upon signing this Agreement.

5. TERMINATION
5.1. Either party may terminate for cause upon 10‑day written notice if the other party materially breaches a material term and fails to cure within that period. 
5.2. Either party may terminate without cause upon 30‑day written notice. 
5.3. Upon termination, Contractor shall deliver all completed deliverables within 10 business days and shall be paid for all work performed prior to termination at the agreed rate. Contractor shall also be compensated for work in progress at the then‑applicable hourly rate.

6. LIABILITY & LIMITATION
6.1. Contractor’s total liability to Client shall be limited to the amount actually paid to Contractor under this Agreement (including reimbursable expenses) for the services performed during the relevant period. 
6.2. Liability for consequential, indirect, or punitive damages shall be excluded unless Contractor is found to have acted with gross negligence or willful misconduct. 
6.3. Contractor shall not be liable for defects arising from third‑party software, libraries, or open‑source components unless Contractor’s modifications cause the defect.

7. INDEMNIFICATION
7.1. Contractor shall indemnify, defend, and hold harmless Client from any third‑party claims alleging infringement of IP rights or negligence directly caused by Contractor’s work or use of third‑party components. 
7.2. Contractor shall notify Client in writing within 5 business days of receiving any claim and shall provide reasonable cooperation in the defense. 
7.3. This indemnification shall not apply to claims arising solely from Client’s own negligence, misuse, or failure to follow Contractor’s instructions.

8. CONFIDENTIALITY
8.1. Both parties shall keep Confidential Information confidential for a period of 3 years after termination, except as required by law. 
8.2. Confidential Information shall not include information that is already publicly known, independently developed, or disclosed with prior written consent. 
8.3. Either party may disclose Confidential Information to its attorneys, accountants, or other professional advisors for the purpose of evaluating or defending claims arising from this Agreement, provided such advisors are bound by confidentiality obligations.

9. DISPUTE RESOLUTION
9.1. Any dispute arising out of or relating to this Agreement shall be resolved by binding arbitration administered by the Korea International Arbitration Center (KCAB) in Seoul, Korea. 
9.2. The parties shall each select one arbitrator; the two arbitrators shall select a third neutral arbitrator to form a three‑person panel. 
9.3. Arbitration shall be conducted in English. 
9.4. Each party shall bear its own reasonable attorney’s fees and costs; the prevailing party may recover reasonable costs up to $5,000 unless the arbitrator determines otherwise. 
9.5. The arbitrator’s award shall be final and binding, and may be entered as a judgment in any competent court.

10. FORCE MAJEURE
10.1. Neither party shall be liable for any delay or failure to perform caused by events beyond its reasonable control (e.g., war, terrorism, natural disasters, pandemics), provided the affected party promptly notifies the other party and takes reasonable steps to mitigate the impact.

11. SEVERABILITY
11.1. If any provision of this Agreement is held to be invalid or unenforceable, the remaining provisions shall continue in full force and effect.

12. ENTIRE AGREEMENT
12.1. This Agreement, together with the attached Exhibits, constitutes the entire understanding between the parties and supersedes all prior oral or written agreements.

13. NOTICES
13.1. All notices shall be in writing and shall be deemed effective when delivered by hand, email, or courier, or five (5) days after deposit in the United States Postal Service or equivalent.

14. GOVERNING LAW
14.1. This Agreement shall be governed by and construed in accordance with the laws of the Republic of Korea.

15. ASSIGNMENT
15.1. Neither party may assign or transfer its rights or obligations under this Agreement without the prior written consent of the other party.

16. WARNINGS / DISCLAIMERS
16.1. Contractor makes no warranty, express or implied, regarding the fitness for a particular purpose or merchantability of the deliverables, unless expressly stated in writing.

---

3. Legal Reasoning Summary (Key Take‑aways)

Issue	Why the original clause is risky	How the revised clause mitigates risk
Scope changes without compensation	One‑sided “no‑compensation” clause; violates consideration & fairness.	Formal Change‑Order process with negotiated compensation; satisfies Korean standard‑form‑contract fairness test.
Vague “unsatisfactory” withholding	Unclear standards → arbitrary withholding → potential breach of contract.	Defined Acceptance Checklist; dispute‑resolution timeline; interest for late payment.
Transfer of pre‑existing IP	No compensation for IP that isn’t created for the client; may be void for lack of consideration.	Carve‑out for pre‑existing IP; non‑exclusive license; retained ownership.
Broad non‑compete	24 months, industry‑wide, no geography → likely unenforceable under Korean law.	Limited duration (12 months), geographic radius (50 km), carve‑out for existing clients, and a modest consideration payment.
Asymmetric termination rights	Client can walk away for free; contractor bears risk of work in progress.	Mutual termination rights, notice periods, compensation for completed work, and termination‑for‑cause provisions.
Unlimited liability	Overly broad; can be deemed unconscionable; Korean law excludes gross negligence from limitation caps.	Caps liability at amount paid; excludes consequential damages unless gross negligence; excludes third‑party software defects.
Broad indemnification	“All claims” regardless of fault; no notice or control; may be void.	Limits to IP infringement and negligence directly caused; requires notice; allows client to participate in defense.
One‑sided confidentiality	No reciprocal duty; may restrict contractor’s ability to seek legal counsel.	Mutual confidentiality; reasonable duration (3 years); carve‑outs for publicly known info and professional advisors.
Arbitration venue & cost allocation	Client‑biased venue; “loser pays” can deter contractor from asserting rights.	Neutral arbitration (KCAB), three‑person panel, cost‑share clause; prevents pro‑client bias.
Missing boilerplate	Gaps invite opportunistic claims (force‑majeure, governing law).	Added force‑majeure, severability, entire‑agreement, governing‑law, notice, assignment clauses.

---

4. Practical Recommendations for the Contractor

1. Negotiate the “Change Order” clause early. Ask for a reasonable compensation formula (e.g., hourly rate + a modest “change‑order fee”).
2. Insist on a written acceptance criteria (the “Acceptance Checklist”) and a dispute‑resolution timeline before any payment can be withheld.
3. Protect pre‑existing IP – demand a license clause, not an outright assignment.
4. Limit the non‑compete to a reasonable geographic radius and shorter duration, and request consideration (a modest payment or equity).
5. Secure a termination‑for‑cause clause that gives you the right to terminate immediately if the client breaches confidentiality, IP, or other core obligations.
6. Cap liability and exclude consequential damages unless there is gross negligence.
7. Require notice and right to control in any indemnification provision.
8. Make confidentiality mutual and limit the term to a reasonable period (2‑3 years).
9. Choose a neutral arbitration seat (e.g., Seoul via KCAB) and adopt a cost‑share rather than “loser pays” approach.
10. Add standard boilerplate (force‑majeure, governing law, severability, entire‑agreement) to close loopholes.

---

5. Next Steps

• Legal review: Have an attorney specializing in Korean contract law (and, if you operate internationally, U.S. contract law) review the revised draft.
• Negotiation checklist: Use the table above as a negotiation tool—mark each clause as “acceptable,” “needs amendment,” or “must be removed.”
• Document the negotiation: Keep a written record of any changes you secure, as this will be crucial if a dispute later arises.

By incorporating these balanced provisions, you will substantially reduce the risk that the client can unilaterally exploit the contract to your detriment, while still preserving the client’s legitimate business interests.