Clauses people sign without noticing

The list

• Personal guarantee. Often a single line near the signature block. It makes you personally liable for a company debt and it survives the company.
• Indemnity. Broader than a damages claim. An indemnity can cover loss that is not caused by your breach, is not reasonably foreseeable, and would never be recoverable at common law. Check whether it is capped and whether it is mutual.
• Liability cap. Often set at the fees paid in the last 12 months, which on a small contract can be far less than your exposure. Check whether the cap is one-way.
• Unilateral variation. A clause allowing one party to change the terms or the price on notice. Under the unfair contract terms regime this is a strong candidate for invalidity in a standard form small business contract.
• Automatic renewal. A rolling term with a narrow window to give notice. The window is short and is commonly missed.
• Restraint of trade. Enforceable in New South Wales to the extent it is reasonable, and s 4 of the Restraints of Trade Act 1976 (NSW) allows a court to read it down rather than strike it out. Do not assume it is unenforceable.
• Intellectual property assignment. Check whether it assigns everything you create or only the deliverables, and whether it captures your pre-existing tools.
• Entire agreement clause. Excludes what was said in the sales conversation. Put any promise you are relying on in the contract.
• Governing law and jurisdiction. A dispute clause pointing to Singapore or to arbitration in another state can make a $40,000 claim uneconomic to run.
• Set-off. Allowing the other party to withhold payment against unrelated claims.
• Termination for convenience. One party can walk on 30 days' notice while you have committed to capital expenditure. Check whether there is any compensation on exit.