Red Flags in Commercial Contracts

You don't need a law degree to spot the terms that most often cause regret. Below are common red flags in business agreements. Finding one doesn't mean the deal is bad - it means the clause deserves a question, a negotiation, or a lawyer's eyes before you sign.

Terms that quietly cost you

• Auto-renewal with a short cancellation window - contracts that renew automatically unless you cancel weeks in advance can trap you for another full term
• One-sided indemnity - you agree to cover the other party's losses, but they don't do the same for you
• Unlimited liability - no cap on what you could owe if something goes wrong
• Vague scope of work - if "what's included" isn't clearly defined, disputes and extra charges follow

Terms that limit your options

• Exclusivity you didn't intend - a clause that stops you working with others or in certain markets
• Broad IP assignment - language handing over ownership of work or ideas beyond the actual project
• Unfavourable governing law or venue - a requirement to resolve disputes in a distant or inconvenient jurisdiction
• Hard-to-exit termination terms - long notice periods, penalties, or no way out even for non-performance

A simple habit before signing

Before you sign anything, run a quick pass:

• Can I clearly explain what each side must do, by when, for how much?
• What happens if either side wants out - and how much notice does it take?
• What's the worst case if things go wrong, and is my exposure capped?
• Is anything one-sided that I'd want made mutual?

If a clause is genuinely important and you're unsure, a short review is cheap insurance - far cheaper than the dispute a bad clause can cause.