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A worn legal contract on a desk, illuminated by a small lamp, features a set of sharp, menacing teeth at its center. Other papers are visible in the background.

30 January, 2025

Ignoring contract clauses can bite your business

We enter into contracts constantly. They can range from an innocuous minor purchase to complex, long-term multimillion-dollar business deals that require extensive negotiation.

Some never require a second thought, but others can come back and bite if shoved in a drawer and ignored.

Contracts are made for many reasons. They set out the business deal, allocate risk, and define the parties’ obligations. The negotiating process forces the parties to agree on key issues, rather than making assumptions. In other words, they provide commercial certainty around the relationship.

What leads to contract disputes

So how can they come back to bite you?

Badly negotiating the details can of course hurt later, but let’s assume that’s not the case.

It happens mostly when terms of the contract are forgotten or ignored. That could happen for a number of reasons. Those responsible for the ongoing contract may change over time or may be different than those who entered into it. Or the contract may contain provisions that are not typical.

Ignoring key provisions could unknowingly put one in default of the contract and result in termination or other remedies from the other party.

Details that might matter and need to be tracked include:

  • When the term ends, and whether it must be actively renewed, or it automatically renews and must be terminated.
  • Price increases – whether automatic or at the whim of the seller.
  • Expiry of discounts over time.
  • Pricing can increase based on certain metrics, such as numbers of users or accounts.
  • Obligations to report certain details to the other party.
  • Methods for sending formal notices.

Another thing that can bite is when the other party seems friendly and cooperative, but out of nowhere insists on strict compliance after a deadline has passed.

Protect your business

The best practice to reduce the chances of getting bit is to summarize important details of a contract at the outset, including anything unusual. Keep that with the contract and make it available to those responsible for it. For any obligations with a date attached, put those dates in a tickler system to bring it to the attention of the right people far enough ahead of time to make decisions and take action.

Missing something or not getting something right might result only in a friendly reminder or don’t worry about it from the other party. But you never know when they might insist on strict compliance or take the position that an action or inaction is not effective or is a default.

David Canton is a business lawyer and trademark agent at Harrison Pensa with a practice focusing on technology, privacy law, technology companies and intellectual property. Connect with David on LinkedIn, Bluesky, and Twitter.

Image credit: AI-generated using DALL-E

A headshot of David Canton.
About the author

David Canton

Consultant
  • Business Law & Financial Services,
  • Data Protection,
  • e-Commerce,
  • Information Technology,
  • Intellectual Property,
  • SaaS,
  • Software Licenses,
  • Technology and Privacy Law
Meet David

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