Free tool · Due Diligence
How to Scan Contracts for Change of Control and Other Deal Clauses: A Clause Scanner
In a deal review, a keyword or pattern scan is the fast way to find which contracts contain the clauses that change when a company is sold: change of control, restrictions on assignment, exclusivity, non-compete, most-favoured-customer pricing, termination for convenience, minimum commitments, uncapped liability, automatic renewal and ownership of intellectual property. A scan orders your reading, because contracts with several hits are read first and those with none can be read lightly or sampled. It does not replace reading. A scan finds words, not meaning: it can flag ‘exclusive’ in ‘non-exclusive’ and miss a change-of-control clause worded as ‘ceases to be controlled by its present shareholders’. Which clauses bite also depends on the structure of the deal: a change-of-control clause matters most in a share purchase, and an assignment restriction matters most in an asset purchase.
Tool · Deal Clause Scanner
4 of 4 contracts have at least one flagged clause; the commonest is termination for convenience (2).
Orrin Stores supply agreement: 5 flags
- Change of control. “…without the prior written consent of the other. A change of control of the Supplier entitles the Customer to terminate.” The counterparty may terminate, renegotiate or demand consent when the company is sold.
- Assignment restriction. “…for successive one-year terms. Neither party may assign this Agreement without the prior written consent of the other. A change of control of the Supplier entitles…” In an asset deal the contract cannot move to the buyer without consent.
- Exclusivity. “The Supplier shall supply the Products on an exclusive basis to the Customer in the Territory. The Customer may te…” May bar the company, or the buyer’s group, from dealing with others.
- Termination for convenience. “…o the Customer in the Territory. The Customer may terminate this Agreement at any time on 30 days’ written notice. This Agreement shall automatically renew for successive on…” The revenue under the contract can end on short notice.
- Automatic renewal. “…on 30 days’ written notice. This Agreement shall automatically renew for successive one-year terms. Neither party may assign thi…” The term rolls on unless notice is given in time.
Halden Logistics services contract: 3 flags
- Most-favoured-customer pricing. “…all be unlimited. The Customer is entitled to the most favoured customer rate.” A promise that no other customer pays less; it can create a price liability across the book.
- Minimum commitments. “…en shall provide transport services. The Customer shall purchase at least 4,000 pallet movements a year (take-or-pay). The Supplier’s…” A fixed commitment that stays with the business whatever its sales.
- Unlimited or uncapped liability. “…et movements a year (take-or-pay). The Supplier’s liability under this Agreement shall be unlimited. The Customer is entitled to the most favoured customer rat…” An exposure that is not bounded by a cap.
Maris Components purchase order terms: 1 flag
- Termination for convenience. “…urchase. Payment within 60 days. Either party may terminate for convenience on 90 days’ notice. Governed by the law of England and Wale…” The revenue under the contract can end on short notice.
Kestrel Software licence: 2 flags
- Non-compete or restraint. “…y Kestrel shall be owned by Kestrel. The Licensee shall not compete with Kestrel in the field of route optimisation for three y…” May restrict the buyer’s other businesses after closing, and its validity needs checking.
- IP assignment or licence-back. “Kestrel grants a non-exclusive licence of the Software. All improvements and developments made by Kestrel shall be owned by Kestrel. The Licensee sha…” Decides who owns the IP made under the contract.
- The scanner matches wording. It misses clauses phrased in unusual words, may flag a clause that does not apply, and cannot tell what a clause means in context. Every flagged clause must be read, and a clean result from the scanner is not a clean contract.
- Use it to order your reading, not to replace it: start with the contracts that have the most flags and the largest revenue.
It looks for 10 kinds of clause.
Paste the text of contracts from an invented data room and see which contain the clauses that change a deal: change of control, assignment restrictions, exclusivity, non-competes, most-favoured-customer pricing, termination for convenience, minimum commitments, uncapped liability, automatic renewal and IP ownership. It matches wording, so it can miss a clause phrased differently and flag one that does not matter: it orders your reading and does not replace it. Runs in your browser; nothing is stored or sent.
How to use it
- Run the sample contracts, or paste the text of a contract.
- Read the counts for each clause and the excerpts that were flagged.
- Decide which hits are real and which are false alarms.
- Note any clause that the scan missed because it was worded in an unusual way, and think about the rule you would add.
Common questions
What is a change-of-control clause?
A term that lets the other party terminate, renegotiate or require consent if the company changes owner. A share purchase can trigger it, even though the contracting company stays the same.
What is the difference between a share deal and an asset deal for these clauses?
In a share deal the contracts stay with the company, so change-of-control clauses matter. In an asset deal the contracts must be transferred, so assignment restrictions matter.
Can a scan prove that a clause is absent?
No. It can only show that the rules did not find it. Say so in the report, and read or sample the contracts with no hits.
Learn the law behind the tool
This tool is part of our Due Diligence course, with lectures, concept maps, flashcards, interactive exercises and a capstone case. Due Diligence and Data Rooms: Reading the Contracts.
More free law tools
General information, simplified, mainly on American law, not legal advice. States and countries differ, and real cases turn on facts that a tool cannot capture.