Business Contract Red Flags

If the scope statement is open-ended, the contract is open-ended. Scope should describe the deliverable, the acceptance criteria, and the process for changes, including pricing for out-of-scope work.

Watch for net 60 with a right of set-off, holdbacks that release only on acceptance by a subjective standard, automatic renewals at increased rates, and currency risk in cross-border agreements.

Termination for convenience is a powerful clause for whichever side holds it. Look at both sides' rights, the notice period, payment on termination, and what happens to work in progress.

Standard language assigns everything to the client. More careful language distinguishes background IP, foreground IP, residuals, and templates. The wrong default can strand a business with no ability to reuse its own tools.

A cap at fees paid is common. Carve-outs — uncapped liability for breach of confidentiality, indemnity claims, and IP infringement — are where the real exposure sits.

Forum, governing law, and dispute resolution provisions quietly determine what happens if the contract is breached. Mandatory arbitration in a distant jurisdiction can be decisive.