AI Contract Review: A Practical Playbook for Indian Legal Teams

AI contract review is a first pass: the same questions, asked of every document, with the clause text behind each answer. It does not decide whether the risk is acceptable, and it does not negotiate. If a tool cannot point at the wording it used, the pass is not finished.

This playbook is for corporate lawyers and in-house counsel in India who review share purchase agreements, shareholders' agreements, NDAs, leases, supply contracts and facility agreements. It is the pillar for that work. Shorter checklists for each agreement are linked at the end. They are not all published yet. You can run the method here with a pen and the draft.

Key takeaways

• AI contract review extracts and lines clauses up. The lawyer decides what is acceptable and what gets marked.
• Use one checklist for the agreement type, and ask it the same way of every document in the set.
• An Indian review adds stamp, registration, foreign-exchange and competition questions that a generic clause list will skip.
• A redline is a set of tracked changes you accept or reject. It is not the firm's position until a lawyer has made it so.
• The built-in workflows in Scafffold match the checklists below. They cite the passage. They do not replace the judgement.

What should an AI contract review cover on an Indian deal?#

An AI contract review on an Indian deal covers the commercial clauses the agreement type always has, and the Indian overlays those clauses sit inside. The overlays are not optional extras. A cap that is clean in English still has to be read against the Indian Contract Act, 1872. A non-compete that looks familiar from another jurisdiction has to be read against Section 27 of that Act.

Section 27 says that every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind is to that extent void. The stated exception is a seller of goodwill who agrees not to carry on a similar business within local limits the court finds reasonable. That is the text on Indian Kanoon. [VERIFY: confirm Section 27 and the goodwill exception against the India Code text.] Employment and shareholder restraints have a case-law layer on top of that sentence. [VERIFY: the current case-law position under Section 27.] Do not mark a restraint enforceable because it looks familiar.

Section 74 is the other section that shows up on a cap or a delay payment: where the contract names a sum, the party complaining of breach is entitled to reasonable compensation not exceeding that sum, whether or not actual loss is proved. [VERIFY: how courts currently apply Section 74 to a cap or a liquidated damages figure.] Section 28 makes agreements that block the ordinary courts void to that extent. Exceptions 1 and 2 save arbitration agreements. Exception 3 deals with certain bank and financial-institution guarantees. [VERIFY: the minimum period in Exception 3.] Open Section 10 and Section 73 on India Code when the question is formation or ordinary damages. [VERIFY: a stable India Code deep link for the Indian Contract Act, 1872.]

This is the map of agreement types to the first questions. The workflow names are the ones built into Scafffold. The questions are the columns or the brief headings those workflows already ask. Later posts take each row apart.

One of the fourteen built-in workflows is E-Discovery Review. It is for litigation documents, not for this playbook.

Where does the first pass help, and where does the lawyer still decide?#

The first pass helps in four places.

Finding the clause. In an 80-page SPA the indemnity is not always under the heading you expect. A pass that returns the clause number and a short quote is the start of the read, not the end of it.

Asking the same question of many documents. A change-of-control review across customer contracts fails when each associate describes the trigger in different words. A grid with one question per column keeps the descriptions comparable. The export is a spreadsheet the partner can sort.

Showing what is missing. "Standard carve-outs: no" is a useful cell. It is useful only if the question named the carve-outs. A vague question ("is confidentiality ok?") produces a vague cell.

Starting the issues list. The pass can list clauses that need a human look: a cap that does not say if it is aggregate, a completion date that is "to be agreed", a governing-law clause that names two countries. The list is a queue. It is not a markup.

The first pass does not help with the judgement. These stay with the lawyer:

• Whether a ₹ cap is acceptable for this seller, this buyer and this indemnity.
• Whether a reserved matter should sit at unanimity or at a named shareholder's consent.
• Whether the client would rather have a lower price than a wider warranty.
• Whether a non-compete is worth arguing about given Section 27.
• What the client should sign. This playbook does not answer that.

Treat the pass as a junior who arrives with the clauses pulled and the quotes attached. The associate still reads, checks the Act, and decides the comment. A pass that hides the quote will be trusted for an adjective nobody has checked.

What do you fix before you read clause 1?#

Ten minutes of setup stops a review that answers the wrong question.

Write the legal name as it appears on the cover, then check the definition and the signature block. ABC Pvt Ltd in one place and ABC Private Limited in another is a cleanup item, and these names are an example. This playbook does not look the company up. Someone still compares the name with the public record. [VERIFY: the company-master source you use for that comparison.]

Which clauses belong on every Indian commercial checklist?#

Use this table on a commercial agreement that is not a specialised SPA, lease or facility. The column names track Commercial Agreement Review. The red-flag column is the lawyer's, not the software's. A cell that says "cap is 12 months of fees" is the extract. "That cap is too low" is the judgement, and it does not belong in the extract.

Liability and indemnity get their own post: [LINK: limitation-of-liability-indemnity].

A worked example: a liability cap#

Example only. This clause is invented so the checklist has something to bite on. It is not from a deal.

12.1 The aggregate liability of ABC Pvt Ltd to XYZ Industries Ltd under this agreement shall not exceed ₹1,20,00,000 (1.2 crore).

12.2 Neither party is liable to the other for indirect or consequential loss, or for loss of profit.

12.3 Nothing in this clause 12 limits liability for fraud.

14.2 ABC Pvt Ltd shall indemnify XYZ Industries Ltd against all losses arising out of any claim by a third party that the goods infringe that third party's intellectual property.

Read it in this order.

1. The number. ₹1,20,00,000 (1.2 crore) is the cap. Write it in the extract with the rupee figure, not as "a crore-odd". Check the figure in words if the draft has words. This example states both.
2. Aggregate or per claim. Clause 12.1 says aggregate. If it had been silent, the red flag would be the silence, not the amount.
3. What the cap covers. "Under this agreement" is wide. Then look at clause 14.2. The indemnity is not inside clause 12. A reader cannot tell whether the cap limits the indemnity. That is the red flag. The extract should say: "Cap in 12.1 is aggregate and is stated to apply under this agreement. Indemnity in 14.2 does not refer back to clause 12. Interaction not stated."
4. Carve-outs and loss of profit. Fraud sits outside the cap. Wilful misconduct, death and personal injury are not mentioned. Note the gaps. Do not fill them in. Loss of profit is excluded. On some deals that is the main loss. Flag it for the partner. Do not call it unenforceable.
5. Do not apply Section 74 by adjective. If another clause named ₹1,20,00,000 (1.2 crore) as liquidated damages, extract the figure and the trigger. Whether a court would award it is the Section 74 question above. Do not write that the clause "is a penalty, so it fails".

The markup, if there is one, is a tracked change that either pulls clause 14.2 under the cap or says it sits outside. Do not send that change until someone has chosen which.

How do SPA, shareholders' agreement and NDA reviews differ?#

These are the extra questions the built-in workflows already ask. They are not the whole Indian law of the deal.

Share purchase. SPA Review extracts parties, date, transaction, consideration, key conditions precedent, completion date, warranties, indemnities, limitation of liability, covenants, exclusivity, governing law and dispute resolution. On a private-company sale, read the articles and any shareholders' agreement before you treat the seller as free to sell. A right of first refusal outside the SPA can still block completion. In the consideration cell, say whether the price is fixed or adjusts at completion. There is no locked-box column, so the adjustment has to show up there. [VERIFY: stamp and registration for the share-transfer instrument in the relevant state.] If a party is a non-resident, use the foreign-exchange check in the setup table. [VERIFY: current combination thresholds under the Competition Act, 2002.] If someone asks whether the sale can be enforced, open the Specific Relief Act, 1963, including the 2018 amendment, on India Code. [VERIFY: the current text, and a direct India Code URL.]

Shareholders' agreement. Shareholder Agreement Review extracts parties, date, classes, holdings, board, reserved matters, pre-emption on new shares, transfer restrictions, right of first refusal, drag, tag, anti-dilution, dividend, exit, deadlock, non-compete, confidentiality, warranties, governing law and disputes. Write the threshold for each reserved matter. On drag and tag, write who can pull, what percentage trips the right, and whether the price matches. A buy-sell deadlock means one side names a price and the other must buy or sell at it. Use the grid to compare several agreements. Use Shareholder Agreement Summary when one agreement should come back as a Word brief. Read the articles beside the Companies Act, 2013. [VERIFY: India Code handle 123456789/2114, which search titles as that Act.]

NDA. NDA Review asks whether it is mutual or one-way, how confidential information is defined, the receiving party's duties, whether the four usual carve-outs are present (public, already known, independently developed, received from a third party), who may see the information, how long the duty lasts, return or destruction, remedies, and governing law. A one-year term with no survival, and oral information that counts only if confirmed in writing, are the gaps to write down. A sentence that damages are inadequate records the draft. It is not an order that an injunction will be granted.

Lease, employment, facility, supply, LPA. Use the row in the first table, then the dedicated post. Three limits, so the grid is not mistaken for the statute:

• Commercial Lease Review asks about security of tenure and, in that question, the Landlord and Tenant Act 1954. That is an English statute. It does not state Indian law. Read term, rent, rent review, break and deposit, and look for lock-in inside the term. Then check the Transfer of Property Act, 1882 and the state law. [VERIFY: any state rent statute for these premises.]
• Employment Agreement Review asks about notice, IP assignment, termination grounds and a contractor label. It has no non-compete column. Review a non-compete under Section 27 anyway. Provident fund, gratuity and state shops legislation sit outside the draft. [VERIFY: which labour statutes apply to this employer and state.]
• Limited Partnership Agreement Review reads an LPA: commitment, calls, fee, carry, hurdle, key person, LPAC. [VERIFY: most Indian alternative investment funds are trusts, so this is for counsel reading an offshore LPA or side letter.]

On any of these, record governing law, the arbitral seat, and any court words as three facts. Do not collapse venue, seat and exclusive jurisdiction. Open the Arbitration and Conciliation Act, 1996 on India Code. [VERIFY: a direct India Code URL, and how this draft's seat and court wording would be read.]

How do you ask the same questions of a whole set of contracts?#

A data room breaks a narrative review. Forty NDAs cannot be forty memos. They can be one table.

Write the columns before you upload. One question per column. Use yes or no when the question is closed, a real date when you will sort, and rupees with Indian grouping when the cell is money: ₹50,00,000 (50 lakh), not a bare 5000000. Quote the change-of-control trigger. Use the same words on every row, or the sheet will not filter. A cell without a clause reference and a short quote is a claim. Send it back.

When the set is conditions precedent in a facility, the work product is different. You want a list the team can tick: an index, the clause number, a one-line description, and a blank status. Generate CP Checklist is built to produce that list as a landscape Word file, with the status left empty for the lawyers. It is a tracker, not an opinion that the condition is satisfied.

Export the grid to Excel once the quotes are in. The spreadsheet is what goes into the due-diligence file. The chat is not the file. The longer note on grids is [LINK: data-room-review-table], and the due-diligence checklist that sits around them is [LINK: legal-due-diligence-checklist-india].

What do you do with the issues once they are extracted?#

Turn the queue into a markup only after someone has decided the points. The decision is a sentence from the partner or the client: "Cap the indemnity at the clause 12 amount, except for fraud" or "Leave the indemnity uncapped and say so in the issues list". The associate then edits the draft.

Edit the Word file with tracked changes. One change, one reason. Do not replace a whole clause to add five words. Keep a clean copy and a redline, and check the author name on the changes before the draft leaves the office. That etiquette is [LINK: track-changes-word-lawyers]. A new clause can start as a Word file with numbering (1, 1.1, (a), (i)). A person still checks every cross-reference, because inserting a clause moves the later numbers. Drafting practice is [LINK: ai-legal-drafting-india]. Accept or reject each edit. A rejected edit should not still be in the file you send.

Which red flags should stop the first pass?#

Stop and read when you see any of these. The pass can still extract the rest. It should not smooth them into a neutral summary.

• The deal triggers a change-of-control clause in a contract the target cannot afford to lose. Extract the trigger. Do not call it customary.
• A condition precedent that cannot be satisfied by completion, or that one party controls and the other needs. The CP list should show the owner. A blank owner is the flag.
• A liability cap and an indemnity that do not refer to each other. The worked example above is this flag.
• A non-compete, a non-solicit, or a lock-up with no note that Section 27 has been considered.
• Two dispute clauses. Court and arbitration both appear, or the seat is missing. Record both. Do not pick one.
• A price, a deposit or a cap with no currency, or a number that does not match the words. Use ₹ and the Indian grouping when the currency is rupees.
• Stamp and registration left as "the parties shall bear equally" on an instrument that may be unenforceable if it is insufficiently stamped. [VERIFY: the consequence under the applicable Stamp Act. Do not state a rate.]
• A party name that does not match across the draft, or a guarantor who is named and given no obligation.
• A completion date that is blank on an SPA that otherwise reads as agreed.
• An employment "contractor" label on a document that then sets hours, a reporting line and a notice period. The label is not the analysis. [VERIFY: the tests a court would apply to this engagement.]

A red flag is a reason to read, not a reason to delete the clause. Some of these are accepted on purpose. The note should show that a person accepted them.

Running this review in Scafffold#

Pick the built-in workflow that matches the document. The tabular ones ask the same questions of every file you select. Each cell cites the passage it uses, and you export the grid to Excel. They are NDA Review, SPA Review, Shareholder Agreement Review, Change of Control Review, Credit Agreement Review, Commercial Lease Review, Employment Agreement Review, Supply Agreement Review, Commercial Agreement Review and Limited Partnership Agreement Review.

Three workflows write prose. Credit Agreement Summary answers in the chat. Shareholder Agreement Summary and Generate CP Checklist produce a Word file. The CP checklist is landscape, with a blank status column.

For a markup, attach the .docx. Edits come back as tracked changes you accept or reject one at a time. You can save your own workflow and share it by email with a named colleague. Projects stay private until you share them the same way. None of this decides the risk.

Create an account to run a workflow on a draft. The checklist above stands on its own if you do not.

Which playbook to open for each agreement#

The first table in this post is the index of the cluster. Each linked playbook will carry its own clause table and the workflow named in that row.

For the research behind a contract question, use [LINK: ai-legal-research-india]. For the grid in a data room, use [LINK: data-room-review-table]. For tracked changes leaving the office, use [LINK: track-changes-word-lawyers].

Sources#

• The Indian Contract Act, 1872, on Indian Kanoon, for Sections 27, 28 and 74. [VERIFY: India Code text.]
• India Code, for the Indian Contract Act, 1872, the Companies Act, 2013, the Specific Relief Act, 1963, the Arbitration and Conciliation Act, 1996, and the Transfer of Property Act, 1882. Direct handles are marked [VERIFY] in the body.
• Companies Act, 2013. [VERIFY: confirm this handle opens the Act. Search titled it as such. It was slow to fetch while this draft was written.]
• Indian Kanoon, if you need the case law on Section 27. Do not cite a case from memory. The case-law position is marked [VERIFY].