Most business owners sign contracts regularly but very few read them carefully — and even fewer understand what they're actually agreeing to.
Most business owners sign contracts regularly — with suppliers, clients, landlords, contractors, and staff. But very few read them carefully, and even fewer understand what they're actually agreeing to. Here are five clauses that commonly cause problems — and what to look out for.
1. Limitation of liability
This clause caps how much one party can be held responsible for if something goes wrong. Sounds reasonable — but check whether the cap is realistic. A $10,000 liability cap in a contract worth $500,000 leaves you significantly exposed if the other party fails to deliver.
2. Termination for convenience
This allows one party to end the contract without cause, often with just 30 days notice. If you've invested time, money or resources into a project based on that contract, losing it with one month's notice can be devastating. Look for minimum terms or compensation provisions.
3. Intellectual property ownership
If you're engaging a designer, developer, or consultant, who owns what they create? Without a clear IP clause, the person you paid may retain ownership of work you commissioned. Always ensure IP created under the contract vests in you.
4. Dispute resolution
How disputes are handled matters enormously. Some contracts require expensive arbitration; others specify a jurisdiction that's inconvenient or costly to access. Know the process before you sign.
5. Automatic renewal
Many commercial contracts — particularly software subscriptions and leases — automatically renew unless you give notice to exit within a specific window. Missing that window can lock you in for another year or more.
A contract review by a lawyer before you sign is almost always cheaper than fixing a problem after the fact. At Beckett Lawyers, we review commercial contracts and flag the issues that matter — in plain English, without the jargon. Contact us at mike@beckettlawyers.au or book a consultation at beckettlawyers.au.