5 Contract Clauses That Cost Small Businesses Thousands

1. Auto-Renewal Clauses

Auto-renewal clauses automatically extend your contract unless you cancel within a narrow window. Look for phrases like "shall automatically renew." Negotiate for explicit renewal requiring both parties to sign.

2. Low Liability Caps

A liability cap limits damages. If capped at $5,000 on a $150,000 project, you are exposed. The cap should be at least equal to total contract fees.

3. One-Sided Indemnification

If only you indemnify the other party, it is one-sided. Make indemnification mutual — both parties cover losses from their own negligence.

4. IP Grabs

Watch for "all work product shall be sole property of Client." Specify you retain pre-existing IP and grant a license for deliverables.

5. Hidden Termination Costs

Check notice periods, kill fees, and post-termination restrictions. Negotiate 30-60 days notice and payment for work completed.

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