5 Contract Clauses You Should Never Ignore Before Signing

This clause caps how much each party can recover if the other breaches the agreement. It is the single most consequential provision in most commercial contracts, and it is frequently one-sided: the supplier's exposure is capped at the fees paid in the preceding twelve months, while the customer's exposure is left uncapped.

Read the cap figure, then read what sits outside it. Exclusions for indirect, consequential and special loss can remove the very damage you would actually suffer — lost profit, lost data, the cost of a replacement supplier. A cap of twelve months' fees on a service that underpins your revenue is not commercially neutral; it is a decision about who absorbs failure.

What to ask: is the cap mutual, is it proportionate to the value at risk rather than the price paid, and are the carve-outs (fraud, death or personal injury, breach of confidentiality, data protection) explicit?

An indemnity is a promise to cover another party's losses, often including their legal costs, and it can survive the limits placed elsewhere in the contract. Indemnities are legitimate for specific, identifiable risks — third-party intellectual property claims, for instance — but they become dangerous when drafted broadly.

Watch for indemnities that cover 'any and all claims arising in connection with' the agreement. That phrasing can extend to losses caused partly by the indemnified party's own conduct, and it frequently sits outside the liability cap. An uncapped indemnity in a contract with a capped liability clause is a contradiction worth raising.

What to ask: which specific risks does the indemnity cover, is it subject to the liability cap, and does it require the indemnified party to mitigate loss and let you control the defence of a claim?

Auto-renewal clauses convert a fixed-term agreement into a rolling commitment unless notice is served inside a defined window. The window is often narrower than people expect — ninety days before the anniversary is common, and missing it by a week can commit you to another full term at a price you did not negotiate.

Pair the renewal clause with the price escalation clause. A contract that renews automatically and permits annual uplifts by reference to an index, or at the supplier's discretion, can drift well above market rate over three or four years without anyone revisiting it.

What to ask: when exactly does the notice window open and close, how must notice be delivered, and is renewal pricing fixed, capped or discretionary?

Termination clauses answer a practical question: how do you get out, and what does it cost? The asymmetry to look for is termination for convenience. If the other side can exit on thirty days' notice and you are locked in for the term, you carry the commercial risk of the relationship alone.

Also read the consequences of termination. Early termination charges, obligations to pay for the remainder of the term, and the fate of your data or deposit on exit are usually set out separately from the right to terminate itself — and they matter more.

What to ask: are termination rights mutual, what constitutes a material breach and is there a cure period, and what happens to data, deposits, licences and transition assistance after the agreement ends?

In employment and consultancy agreements this appears as a non-compete or non-solicitation clause; in commercial agreements it appears as exclusivity. Either way, it restricts who you can work with, in which market, and for how long after the relationship ends.

Enforceability varies significantly between jurisdictions, and an unenforceable clause can still be expensive — it can deter a future employer or trigger litigation you have to defend. The reasonable test is usually scope: duration, geography and the specific activity restricted.

What to ask: how long does the restriction last, what territory and activities does it actually cover, and is the scope defensible in the jurisdiction that governs the contract?