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5 Contract Red Flags Every Founder Should Know

Adv. Pankhuri JainOctober 28, 20256 min read
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.

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Table of Contents

Why Contract Review Matters1. Unlimited Liability Clauses2. Unilateral Termination Rights3. Broad Indemnification4. Automatic Renewal Traps5. Vague IP OwnershipTake Action
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