Business Contracts
What Should You Look For Before You Sign a Contract?
Written and reviewed by Andrew R. Schneidman, Esq. · Last reviewed
Before you sign a business contract, check five things: what each side is actually obligated to do, how and when money moves, how either party can exit, who carries the risk when something goes wrong, and what happens when the term ends.
Most contract problems are visible on the page before signing. This checklist walks through each of the five areas in plain English, so you know what you are agreeing to before your signature makes it permanent.
What is each side actually obligated to do?
Read the scope and deliverables language first. The contract should state specifically what is being provided, by when, and to what standard. Vague scope is the single most common source of disagreement between businesses after the deal is signed.
If a capitalized term like 'Services' or 'Deliverables' appears, find its definition and read it. That definition, not the sales conversation, controls what you get. When the definition is thin, ask for specifics in writing: quantities, deadlines, formats, and acceptance criteria.
Check your own obligations too. Contracts written by the other side often bury duties on you: cooperation requirements, exclusivity, minimum purchase commitments, or approval deadlines that shift blame to your team when missed.
What should you check in the payment terms?
Check four numbers: the price, the payment schedule, the late payment consequences, and any price escalators. Net 30 and net 60 terms, deposits, milestone payments, and annual increase clauses all change what the deal actually costs.
Price escalators deserve special attention. A 12-month agreement with an automatic annual increase of 3 to 5 percent is a different deal than the one quoted in the proposal, and it compounds across a multi-year term.
Confirm what triggers payment. Payment tied to delivery or acceptance protects you. Payment tied to the calendar means you pay whether or not the work arrives.
How can each side get out of the contract?
Look for the termination clause. It tells you whether you can exit for convenience, what counts as a breach, how much notice is required, and whether the other side gets time to fix problems before you can leave. Typical notice periods run 30 to 90 days.
Termination for convenience means either side can exit without a reason after giving notice. Termination for cause requires a breach, and usually a cure period of 15 to 30 days for the breaching party to fix it. A contract you can only exit for cause is a contract you are stuck in while the relationship slowly sours.
Also read what survives termination. Confidentiality obligations, payment for work already performed, and indemnification typically continue after the contract ends, and they should.
What is indemnification and why does it matter?
Indemnification is a promise that one party will cover the other party's losses in defined situations. It matters because a broad indemnity clause can make your business financially responsible for problems you did not cause and cannot control.
Check whether the indemnity runs one way or both ways. A mutual clause, where each side covers losses caused by its own conduct, is fair. A one-way clause where you cover them and they cover nothing is a term to push back on.
Pair the indemnity with the limitation of liability clause. A limitation of liability clause caps how much either side can owe the other. Check whether the cap protects both parties or only one, and whether your indemnity obligations sit outside the cap, which would make the cap meaningless for you.
What renewal and notice traps should you watch for?
Watch for auto-renewal clauses. Many agreements renew automatically for another 12-month term unless you send written notice 30 to 90 days before expiration. Miss the window and you are committed for another full year.
Calendar the notice deadline the day you sign, not the month the contract expires. This trap shows up constantly in vendor agreements, where the renewal window passes unnoticed until the next invoice arrives.
Check how notice must be delivered. Some contracts require written notice to a specific address or portal, and an email to your sales rep does not count.
Should a lawyer review every contract before you sign?
Every contract with real money, real duration, or real risk attached deserves review before signature. The review takes far less time than owners expect, and signing is the only moment where you hold leverage to change the terms.
Once you sign, the negotiation is over. Before you sign, everything on the page is a draft. That asymmetry is why review before signature is the highest-value legal work a business buys.
The reason owners skip review is the assumption that it is slow and costs too much. Under a flat-fee counsel model, review becomes a habit rather than a purchasing decision: send the contract, get it back marked up, and sign with clear eyes.
Andrew’s take
Clients sometimes ask if a quick read is worth it for a small deal. My answer is always yes. The contracts that cause the most damage are rarely the big, obvious ones. They are the small, routine agreements nobody thought to read closely.
Frequently asked questions
How long should contract review take?+
For most standard business agreements, a focused review takes days, not weeks. The delays owners fear usually come from hourly-billing firms juggling priorities. A firm structured around flat-fee counsel work turns contracts around quickly because review is the core service, not a side project.
What if the other side says the contract is non-negotiable?+
Almost every business contract is negotiable, especially the risk terms: indemnification, liability caps, and termination rights. Even when a large counterparty holds firm on price, they routinely accept changes to one-sided legal terms. Asking costs nothing, and a marked-up counter is standard business practice.
What is the biggest red flag in a business contract?+
Uncapped, one-way indemnification is the biggest red flag: you promise to cover the other side's losses with no ceiling, while they promise nothing in return. Second is an auto-renewal clause with a short notice window, which quietly converts a one-year decision into a multi-year commitment.
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