3 Contract Red Flags to be Aware Of



When you work in a small business, you don’t often have the luxury of a lawyer on retainer to deal with all your contract needs. While it’s essential to carefully read through contracts before signing, it can be difficult to find the balance between spending hours laboring over legal jargon and trying to maintain a healthy personal life.

To make understanding contracts a little easier for you, here are X of the most common contract red flags to look out for.

1. Noncompete Clauses

Noncompete clauses are a common part of a business contract and are not inherently a red flag, and function as legally binding protection of the intellectual property and trade secrets of a company.

2. Ownership of Work

When signing a contract, it should be clear who the owner of the work produced is. If you are not careful, you could end up signing away the rights to a significant part of your intellectual business capital.

3. Liability and Indemnity

Liability clauses define who is responsible in case the contract doesn’t go according to plan. Indemnity clauses detail how much the responsible party is responsible for paying. It’s important to double and triple check the language used in these clauses. A lot of larger companies will try to take advantage of these clauses.

Contracts are difficult to understand for a reason, and it can be all too easy to miss provisions like the ones mentioned above when scanning through a business contract yourself. When reading contracts, it’s essential to take your time to carefully understand and fully agree upon each section before making the contract legally binding.

For a complete list of red flags to look out for when signing a business contract, see the infographic from JW Surety Bonds below.

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