Key Clauses to Look Out for in Commercial Contracts: A Guide for Entrepreneurs and Procurement Teams
Commercial contracts are the backbone of business relationships, especially for entrepreneurs, startups, and procurement professionals. Understanding what’s in your contract—and what’s missing—can mean the difference between growth and unexpected liability. This guide from The Landau Group, led by managing partner Kevin Landau, outlines the essential clauses that every business owner should know before signing on the dotted line.
1. Scope of Work or Deliverables
This clause defines exactly what each party is expected to deliver. Vague or overly broad scopes often lead to disputes, missed deadlines, or claims of breach. Ensure the scope is detailed, measurable, and includes timelines, specifications, and acceptance criteria.
2. Payment Terms
Clear payment terms help manage cash flow and avoid conflict. Look for specifics: payment schedule, method, penalties for late payment, and conditions for withholding payment. Startups in particular should avoid open-ended obligations that can disrupt budgeting or investor reporting.
3. Term and Termination
This clause governs the duration of the agreement and the exit strategies available to each party. Watch for auto-renewal language, and ensure you have a termination for convenience clause—not just for cause. Kevin Landau often advises businesses to negotiate mutual, reasonable termination rights to avoid becoming trapped in long-term commitments that no longer serve them.
4. Intellectual Property Rights
This is especially critical in technology, creative services, and SaaS agreements. Who owns the IP created during the engagement? Make sure your rights to use, license, or resell any resulting IP are clearly defined. Entrepreneurs often lose leverage by not reviewing IP clauses carefully, especially when collaborating with developers or contractors.
5. Indemnification
Indemnity clauses transfer risk from one party to another. Understand who is responsible if a third party sues, or if there's a loss due to misrepresentation or breach. Startups should resist one-sided indemnity provisions that expose them to unlimited liability—especially when dealing with larger corporate partners.
Before You Sign…
Before executing any commercial agreement, it’s essential to have a legal professional review the contract. Even well-drafted contracts can include nuances that carry significant implications for your business, especially as you scale or seek funding.
Protect Your Business
At The Landau Group, we help entrepreneurs, startups, and procurement teams safeguard their interests through clear, enforceable contracts. Contact us today to review your commercial agreements and avoid unnecessary risk.