diff --git a/AUDIT.md b/AUDIT.md
index e6b67df..d95741a 100644
--- a/AUDIT.md
+++ b/AUDIT.md
@@ -1,6 +1,7 @@
 # Cycles Protocol v0.1.25 — Client (Python) Audit
 
-**Date:** 2026-07-03 (integration-test-only, no version bump — `test_health_check` now probes the public `/actuator/health/readiness` endpoint instead of aggregate `/actuator/health`, which requires `X-Admin-API-Key` since cycles-server v0.1.25.45 and fails closed with 500 when the server has no admin key configured. The old assertion had failed the org nightly Full-Stack Integration every night since 2026-06-28. No library code change.),
+**Date:** 2026-07-09 (README + docstring transport-error documentation fix, no version bump — see the dated entry at the end of this file. `CyclesTransportError` is exported but never raised by the SDK; README and its docstring now describe the actual `status == -1` surfacing.),
+2026-07-03 (integration-test-only, no version bump — `test_health_check` now probes the public `/actuator/health/readiness` endpoint instead of aggregate `/actuator/health`, which requires `X-Admin-API-Key` since cycles-server v0.1.25.45 and fails closed with 500 when the server has no admin key configured. The old assertion had failed the org nightly Full-Stack Integration every night since 2026-06-28. No library code change.),
 2026-05-22 (v0.4.3 — `expires_from`/`expires_to` and `finalized_from`/`finalized_to` ISO-8601 window-filter passthrough on `list_reservations` per `cycles-protocol-v0.yaml` revision 2026-05-22; closes the Python-client side of runcycles/cycles-server#162. No code change — `**query_params` already forwards arbitrary kwargs. Added sync + async regression tests; unlike `from`/`to` the new param names are plain kwargs (no Python-reserved-word workaround needed). 393 tests pass at 100% coverage.),
 2026-05-21 (v0.4.2 — `from` / `to` ISO-8601 window-filter passthrough on `list_reservations` per `cycles-protocol-v0.yaml` revision 2026-05-21; closes the client side of runcycles/cycles-server#159. No code change — the existing `**query_params` signature already forwards arbitrary kwargs to the URL query string. Added sync + async regression tests that lock the passthrough in (using the `**{"from": ..., "to": ...}` dict-unpack form because `from` is a Python reserved keyword). 391 tests pass at 100% coverage.),
 2026-03-14
@@ -271,3 +272,17 @@ Cross-cutting hardening landed in response to org-wide tracking issues filed in
 Not included in this change: bumping the reusable-workflow ref `runcycles/.github/.github/workflows/ci-python.yml@main` to `@v1` (`runcycles/.github#60`). That bump is intentionally split into a separate follow-up PR — it depends on the `v1` tag existing in `runcycles/.github`, which is being cut after the canonical-script PR (`runcycles/.github#64`) merges.
 
 Protocol conformance: No protocol or wire-format changes. No SDK source touched. Test suite unaffected.
+
+## README Transport-Error Documentation Fix (added 2026-07-09)
+
+**Files:** `README.md`
+**Version:** unreleased (docs-only, no version bump, no CHANGELOG entry per repo convention)
+
+Documentation-only correction. The README's exception-hierarchy table described `CyclesTransportError` as "Network-level failure (connection, DNS, timeout)", implying the SDK raises it — but nothing in the package ever raises it. Actual behavior:
+
+- **`@cycles` decorator / HOF paths:** a transport failure at reserve time raises `CyclesProtocolError` with `status == -1` and `error_code=None` (via `_build_protocol_exception` in `lifecycle.py`); commit-time transport failures are retried in the background by the commit retry engine, not raised.
+- **Programmatic client:** never raises for transport failures — returns `CyclesResponse` with `is_transport_error == True` and `status == -1` (`CyclesResponse.transport_error` constructor in `response.py`).
+
+The table row now states the class is exported for user code but never raised by the SDK, and a new "Transport errors" subsection documents the `status == -1` behavior for both API surfaces with a detection example. Wording matches the docs site (`cycles-docs/how-to/error-handling-patterns-in-python.md`). `CyclesTransportError` remains exported from `runcycles/__init__.py` for use in user code — no API change.
+
+Protocol conformance: No protocol or wire-format changes. No SDK source touched. Test suite unaffected.
diff --git a/README.md b/README.md
index 2c290ec..63ce081 100644
--- a/README.md
+++ b/README.md
@@ -298,13 +298,32 @@ Exception hierarchy:
 | Exception | When |
 |---|---|
 | `CyclesError` | Base for all Cycles errors |
-| `CyclesProtocolError` | Server returned a protocol-level error |
+| `CyclesProtocolError` | Server returned a protocol-level error; also raised with `status == -1` when the SDK wraps a reserve-time transport failure |
 | `BudgetExceededError` | Budget insufficient for the reservation |
 | `OverdraftLimitExceededError` | Debt exceeds the overdraft limit |
 | `DebtOutstandingError` | Outstanding debt blocks new reservations |
 | `ReservationExpiredError` | Operating on an expired reservation |
 | `ReservationFinalizedError` | Operating on an already-committed/released reservation |
-| `CyclesTransportError` | Network-level failure (connection, DNS, timeout) |
+| `CyclesTransportError` | Exported for use in your own code; never raised by the SDK — transport failures surface as `status == -1` (see below) |
+
+### Transport errors
+
+When the HTTP request itself fails (DNS resolution, connection refused, timeout), the SDK never raises `CyclesTransportError` — the class is exported for use in your own code (e.g. wrapping transport-level failures in higher-level integrations). Instead:
+
+- **Lifecycle-managed surfaces (`@cycles` and `stream_reservation()`):** a transport failure at reserve time raises `CyclesProtocolError` with `status == -1` and `error_code=None`. Transport failures at commit time are retried in the background by the commit retry engine, not raised.
+- **Programmatic client:** calls never raise for transport failures — they return a `CyclesResponse` with `is_transport_error == True` and `status == -1` (shown above).
+
+```python
+from runcycles import CyclesProtocolError
+
+try:
+    guarded_func()
+except CyclesProtocolError as e:
+    if e.status == -1:
+        print(f"Network error reaching Cycles: {e}")  # retry or degrade
+    else:
+        raise
+```
 
 ## Preflight checks (decide)
 
diff --git a/runcycles/exceptions.py b/runcycles/exceptions.py
index 6d372e1..d434ed6 100644
--- a/runcycles/exceptions.py
+++ b/runcycles/exceptions.py
@@ -77,7 +77,13 @@ class ReservationFinalizedError(CyclesProtocolError):
 
 
 class CyclesTransportError(CyclesError):
-    """Raised when a transport-level error occurs (connection timeout, DNS failure, etc.)."""
+    """Transport-level error (connection timeout, DNS failure, etc.).
+
+    Exported for use in application code; the SDK itself surfaces transport
+    failures as ``CyclesProtocolError`` with ``status == -1`` (decorator and
+    ``stream_reservation`` paths) or ``CyclesResponse.transport_error``
+    (programmatic client) rather than raising this class.
+    """
 
     def __init__(self, message: str, *, cause: Exception | None = None) -> None:
         super().__init__(message)