5 Contract Clauses That Can Destroy Your Business (And How to Spot Them)

Most business owners sign contracts without reading the small print. In the rush to close a deal, get a client onboarded, or start a project, the details get skimmed — or ignored entirely. That's exactly what the other side is counting on. Here are five contract clauses that regularly appear in UK commercial agreements and that can cause serious financial damage if you don't spot them.

1. Unlimited Liability Clauses

Some contracts include no limitation of liability clause at all — meaning if something goes wrong, your exposure is unlimited. In a commercial context, a single large claim could exceed your entire annual turnover, your insurance limits, or even the value of your business.

What to look for: absence of a "limitation of liability" section. What to do: insist on a cap, typically set at the value of the contract or your professional indemnity insurance limit. Under the Unfair Contract Terms Act 1977, unreasonable attempts to exclude or restrict liability in B2B contracts can be challenged — but unlimited liability exposure for the weaker party is rarely caught by this.

2. Evergreen Auto-Renewal Clauses

Contracts that automatically renew — often for a full 12-month term — unless you give notice within a specific window (sometimes as short as 30 or 60 days before the renewal date) are known as evergreen clauses. Miss the notice window by a single day and you're locked in for another year.

These clauses are common in software licences, facilities management contracts, and marketing retainers. The Consumer Rights Act 2015 provides some protection for consumers, but in B2B contracts it is largely caveat emptor. Always diarise your renewal notice deadlines immediately after signing.

3. Intellectual Property Assignment Clauses

Be very careful about IP assignment clauses — particularly in freelance, agency, and development contracts. Some contracts include a broad assignment of all IP created "in connection with" the services, which could include methodologies, tools, or background IP that you had developed before the contract even started.

Under the Copyright, Designs and Patents Act 1988, IP assignment must be in writing to be effective — so these clauses are deliberate. Read them carefully. The difference between an IP licence (where you retain ownership and grant the client a right to use) and an IP assignment (where you permanently transfer ownership) can be commercially significant.

4. Unilateral Variation Clauses

Some contracts — particularly in subscription services, software, and agency relationships — include a clause allowing one party to change the terms of the contract by giving notice (or sometimes without any notice at all). This means the other party can increase prices, change service levels, or add new obligations without your agreement.

For consumer contracts, the Consumer Rights Act 2015 renders terms that allow a trader to change the contract unilaterally (without giving the consumer the right to exit) potentially unfair and therefore unenforceable. For B2B contracts, there is no equivalent statutory protection — you must negotiate these clauses out.

5. Broad Indemnity Clauses

Indemnity clauses require one party to compensate the other for losses arising from specified events — even if those losses exceed the value of the contract and even if no negligence is involved. A badly drafted indemnity can expose you to third-party claims, regulatory fines, and consequential losses that go far beyond what you could reasonably have anticipated when you signed.

Unlike limitation of liability clauses, indemnities are not automatically subject to a reasonableness test. Under English law, clear and unambiguous indemnity language will generally be enforced. Pay close attention to the trigger events, the scope of losses covered (is "consequential loss" included?), and whether the indemnity is mutual or one-sided.

The Bottom Line

Reading a contract properly takes time — but it takes far less time than dealing with the consequences of missing one of these clauses. For longer or more complex agreements, consider getting a quick AI-powered risk breakdown before you sign. You don't need a solicitor for every contract, but you do need to understand what you're agreeing to.