5 Contract Red Flags Every Founder Should Know
Why Contract Review Matters
Signing contracts without proper review is one of the most common — and costly — mistakes founders make. Here are five red flags to watch for.
1. Unlimited Liability Clauses
Beware of clauses that expose you to unlimited liability. Always negotiate liability caps tied to contract value.
2. Unilateral Termination Rights
If only the other party can terminate without cause, you're at a significant disadvantage. Negotiate mutual termination rights.
3. Broad Indemnification
Overly broad indemnification clauses can make you liable for the other party's negligence. Scope indemnities carefully.
4. Automatic Renewal Traps
Contracts that auto-renew with short cancellation windows can lock you into unfavorable terms. Negotiate clear renewal and exit provisions.
5. Vague IP Ownership
Ambiguous IP clauses can result in losing ownership of work product. Ensure clear IP assignment or licensing terms.
Take Action
Before signing any significant contract, have it reviewed by qualified legal counsel. The cost of review is always less than the cost of dispute resolution.