When you negotiate a major business agreement, price, performance and deadlines may get most of your attention, but other terms can become just as important if a dispute arises.
For Dallas companies doing business in Texas or nationwide, clauses can shift legal costs, limit recovery or put your company at greater risk.
Before signing, pay attention to these 10 provisions:
1. Indemnity provisions
Indemnity determines when you must pay another party’s losses or legal costs. In Texas, a contract generally must clearly state when you must pay for another party’s own negligence, while certain construction contracts face additional restrictions.
2. Limitation of liability clauses
A liability cap may restrict how much you can recover after a breach. Check what sets the cap and whether it excludes claims involving indemnity or confidentiality.
3. Venue and forum-selection clauses
These provisions determine where a lawsuit must be filed, so consider the cost of litigating in that location. Texas law may give effect to written venue agreements in certain business transactions.
4. Arbitration provisions
Arbitration may require you to resolve disputes outside court and give up a jury trial. Review the location, rules, number of arbitrators and allocation of fees.
5. Attorney fee provisions
These terms can affect whether either side may recover legal costs, so check whether the clause applies to both sides and which disputes it covers.
6. Notice requirements
A contract may set deadlines and procedures for reporting a breach or claim, including when notice is due, how you must deliver it and who must receive it.
7. Automatic renewal terms
Some agreements renew unless you provide timely notice, so check the renewal period, cancellation deadline and required notice method.
8. Noncompete restrictions
Noncompete terms may limit your activities after a business relationship ends. Consider the activities, location and duration covered.
9. No-damages-for-delay provisions
Common in construction agreements, these provisions may limit compensation for delays. Check which delays are covered and who bears the financial risk.
10. Liquidated damages provisions
These clauses set in advance how much one side must pay for certain breaches, so check how the amount is calculated and what triggers it. An unreasonable amount may be treated as a penalty and may not be enforceable.
Understand the risks before signing
Contract terms can affect how much you may lose and what options you have if a dispute develops. Reviewing how these clauses work together can reveal risks while you can still negotiate the terms. For high-value agreements, legal guidance can clarify how each clause may work under Texas law and affect your company in a lawsuit.
