A business owner signs a vendor agreement for IT services. The scope section says "ongoing support," but does not define response times or service hours. Six months later, the vendor takes 72 hours to respond to a critical outage and points to the contract: nothing requires faster response. The business owner is stuck paying for a service that does not deliver what they assumed it would.
This scenario plays out constantly. Contracts fail not because of bad intent, but because of vague language and unchecked assumptions. After 30 years of reviewing business agreements, these are the seven items that matter most.
1. Parties and Authority
Every contract starts with identifying who is actually agreeing to what. This sounds obvious, but the details matter. Is the person signing authorized to bind the company? Is the contract with the LLC, the parent corporation, or an individual doing business under a trade name? A contract signed by someone without authority may be unenforceable entirely.
Example: A franchise operator signs a supply agreement on behalf of the franchisor. The franchisor later disputes the terms and argues the operator had no authority to bind them. The supplier is left with a contract that may not hold up. Always confirm the signer's authority and the correct legal entity name.
2. Scope of Work and Deliverables
The scope section defines what each party is actually required to do. Vague scope language is the single most common source of contract disputes. "Marketing services" means something very different to the person paying for it versus the person providing it.
A well-drafted scope section specifies deliverables, quantities, timelines, quality standards, and acceptance criteria. If the contract says "website development," it should clarify how many pages, what functionality, revision rounds, hosting responsibility, and the definition of "completion." The more specific the scope, the fewer arguments later.
3. Payment Terms
Payment terms go beyond the dollar amount. When is payment due? Is it milestone-based, monthly, or upon completion? What happens with late payments: is there a grace period, interest, or acceleration of the full balance? Are expenses included in the fee, or billed separately?
Example: A contractor agrees to a $50,000 project paid in installments tied to milestones. The contract does not define what constitutes milestone completion. The contractor claims milestone two is complete; the client disagrees. Payments stop, and the project stalls. Clear payment triggers tied to objectively verifiable milestones prevent this.
4. Liability and Indemnification
Liability provisions determine who bears the financial risk when something goes wrong. Indemnification clauses require one party to cover losses the other party suffers due to specific events (typically the indemnifying party's negligence or breach).
Watch for one-sided indemnification that puts all risk on you. Look for liability caps: many contracts limit damages to the total fees paid under the agreement. A $5,000 contract with a $5,000 liability cap means the vendor's maximum exposure is $5,000, even if their error causes $500,000 in damage to your business. Whether that cap is acceptable depends on the risk involved.
5. Termination Provisions
How do you get out of the contract if things are not working? Termination clauses specify the conditions under which either party can end the agreement: for cause (material breach), for convenience (with notice), or upon specific triggering events. They also address what happens after termination: final payments, return of materials, survival of confidentiality obligations.
A contract without a termination-for-convenience clause locks you in for the full term. If you sign a two-year service agreement with no exit option and the vendor underperforms (without technically breaching), you are paying for two years regardless. Always negotiate a reasonable termination provision with a defined notice period.
6. Intellectual Property
Who owns the work product? This is critical in any contract involving creative work, software development, content creation, or design. Under copyright law, the creator generally owns the work unless the contract assigns ownership to the hiring party or the work qualifies as "work made for hire."
Example: A company pays $30,000 for custom software development. The contract does not address IP ownership. The developer retains copyright and later licenses the same code to the company's competitor. Absent an assignment clause, the company paid for development but does not own what was built. IP assignment (or at minimum, an exclusive license) should be explicit in every contract involving deliverable work product.
7. Dispute Resolution
When a dispute arises, the dispute resolution clause determines where and how it gets resolved. Options include negotiation, mediation, arbitration, or litigation in a specific court. Each has different costs, timelines, and strategic implications.
Pay attention to venue and governing law. A Florida business signing a contract governed by California law with mandatory arbitration in San Francisco faces significant costs just to show up. Negotiate for a forum that is practical for your business. If arbitration is specified, know that it typically eliminates your right to a jury trial and may limit discovery.
The Cost of Skipping Review
Contract disputes are expensive. A straightforward breach-of-contract case in Florida can cost $15,000 to $50,000 in legal fees to litigate. A professional contract review before signing costs a fraction of that and catches the issues that lead to disputes in the first place.
Not every contract needs a lawyer. A $20/month SaaS subscription probably does not warrant legal review. But any agreement involving significant money, long-term commitments, intellectual property, or liability exposure deserves professional eyes before you sign.