Every year, businesses lose significant sums of money, not because of bad deals, but because of badly drafted contracts. A missing clause, a vague sentence, or an overlooked definition can turn a routine agreement into a costly legal dispute.
As a firm specializing in corporate law, commercial contracts, intellectual property, and commercial litigation, we regularly see the same mistakes surface in disputes that could have been avoided entirely with careful drafting. Below are seven of the most common, and most expensive, contract drafting mistakes we encounter, along with practical guidance on how to avoid them.
1. Vague or Ambiguous Language
Contracts are only as strong as the clarity of their wording. Phrases like “reasonable efforts,” “in a timely manner,” or “acceptable quality” sound harmless but are a frequent source of disputes, because each party can interpret them differently.
How to avoid it: Replace subjective language with objective, measurable standards. Instead of “reasonable time,” specify “within 15 business days.” Instead of “acceptable quality,” reference a defined technical specification or industry standard.
2. Poorly Drafted Force Majeure Clauses
The COVID-19 pandemic exposed how many force majeure clauses were either too narrow, outdated, or copied from generic templates without adaptation to the actual business relationship. Some clauses failed to address pandemics, government-imposed lockdowns, or supply chain disruptions at all.
How to avoid it: Draft force majeure clauses to reflect real, foreseeable risks to your specific industry and supply chain, not generic boilerplate. Clearly define what qualifies as a force majeure event, the required notice period, and the consequences (suspension vs. termination of obligations).
3. Weak or Missing Dispute Resolution Clauses
Many contracts either omit a dispute resolution mechanism entirely or include one that is inconsistent with the rest of the agreement, for example, naming a court in one clause and an arbitration institution in another. This creates uncertainty about where and how a dispute will actually be resolved, often delaying resolution and increasing legal costs.
How to avoid it: Clearly specify:
- The governing law
- The competent jurisdiction or arbitration institution (e.g., ICC, LCIA, or a regional arbitration center)
- The seat and language of arbitration, if applicable
- Whether mediation is a mandatory first step before litigation or arbitration
For cross-border commercial agreements, arbitration is often preferred because arbitral awards are enforceable in over 170 countries under the 1958 New York Convention, unlike many court judgments.
4. Unclear Intellectual Property Ownership Clauses
This is one of the most litigated issues in commercial and technology contracts. When a company hires a contractor, agency, or freelance developer to create a logo, software, or marketing content, ownership of the resulting IP does not automatically transfer to the paying party, unless the contract says so explicitly.
How to avoid it: Every services agreement involving creative, technical, or intellectual work should include a clear IP assignment clause specifying:
- Who owns the final work product
- Whether pre-existing IP used by the contractor remains theirs
- Licensing terms if ownership isn’t fully transferred
- Moral rights waivers, where legally permitted
5. Inadequate Indemnification and Limitation of Liability Clauses
Many contracts either impose unlimited liability on one party or fail to clarify what losses are recoverable in the event of a breach. This exposes businesses to disproportionate financial risk, especially in service agreements, supply contracts, and licensing deals.
How to avoid it: Define liability caps (e.g., limited to the contract value or a fixed amount), exclude indirect and consequential damages where appropriate, and clearly state which party indemnifies the other for third-party claims, IP infringement, or regulatory violations.
6. Poorly Structured Termination Clauses
Termination clauses are often an afterthought, yet they determine how, and how painfully, a business relationship ends. Common issues include failing to distinguish between termination for cause and termination for convenience, unclear notice periods, and no provision for post-termination obligations (such as data return, confidentiality survival, or transition assistance).
How to avoid it: Clearly separate the grounds for termination, required notice periods, cure periods for breaches, and what obligations survive termination (confidentiality, IP ownership, non-compete, and payment obligations).
7. Failure to Update Contracts as the Relationship Evolves
Businesses frequently continue operating under outdated contracts long after the original terms of the deal have changed, new pricing, expanded scope, different deliverables, without formal amendment. When a dispute arises, courts and arbitrators rely on the written contract, not on informal understandings or email exchanges, which weakens a party’s position considerably.
How to avoid it: Any material change to scope, pricing, timelines, or responsibilities should be documented through a signed amendment or addendum, not left to informal correspondence.
Contracts are not just paperwork, they are risk management tools. A well-drafted contract anticipates disputes before they happen and gives your business a clear, enforceable position if things go wrong. An unclear or poorly structured one does the opposite: it becomes the very source of the dispute it was meant to prevent.
At Al Majidi, our corporate and commercial team regularly advises businesses on drafting, reviewing, and negotiating contracts that protect their commercial interests, from supply agreements and shareholder agreements to licensing and technology contracts.
If you’d like a professional review of your commercial contracts before signing your next deal, our team is here to help.
📩 info@almajidilaw.com | 🌐 www.almajidilaw.com