Contract Red Flags: What Most Businesses Overlook (Until It’s Too Late)
Contracts are the backbone of every business transaction. But too often, they’re rushed, recycled from online templates, or signed without a thorough legal review.
The result? Hidden liabilities, unclear obligations, and disputes that cost far more than proper legal diligence would have.
At UNUC Legal LLP, we’ve reviewed hundreds of commercial contracts, and here are the most common red flags we see — and what you should do about them.
1. Vague Termination Clauses
“This agreement may be terminated by either party with reasonable notice.”
What is “reasonable”? 7 days? 60? Vague termination rights can leave you legally exposed or force you into drawn-out negotiations.
Fix: Clearly define notice periods, trigger events (like breach or insolvency), and termination consequences.
2. Ambiguous Payment Terms
Late payments or unclear billing cycles strain cash flow and client relationships.
Watch for:
- Undefined due dates (“upon invoice” vs. “within 15 days”)
- Missing late fee clauses
- No clarity on currency, tax, or mode of payment
Fix: Be specific about payment schedules, interest on late payments, and what happens if a party defaults.
3. One-Sided Liability Clauses
Clauses that limit the other party’s liability — but not yours — are common in vendor and SaaS agreements.
Fix: Ensure liability caps are mutual and proportionate. Avoid indemnity clauses that make you liable for things beyond your control.
4. Missing Dispute Resolution Mechanisms
If your contract doesn’t specify how disputes will be handled, you could end up in a lengthy and expensive court battle.
Fix: Include an alternate dispute resolution (ADR) clause — like mediation or arbitration — and specify the jurisdiction and governing law.
5. No Exit Strategy or IP Ownership Clause
Especially in service agreements and collaborations, unclear clauses around ownership of deliverables and exit rightscreate future conflict.
Fix: Define who owns what, both during and after the relationship. Don’t rely on verbal understandings — courts won’t either.
How UNUC Legal LLP Can Help
Our legal team specializes in reviewing, drafting, and negotiating contracts that protect your business — not just for today, but in the long run.
Whether you’re dealing with vendors, clients, partners, or employees, we ensure your agreements are watertight, balanced, and enforceable.
