5 Sections to Look Out for in a Contract

Before you sign a contract, look closely at its duration, termination rights, exclusivity, intellectual-property ownership, and how changes can be made. These terms can shape your business relationship, opportunities, and ability to exit an agreement.

What does “perpetuity” or “perpetual” mean in a contract?

These terms mean forever. There are very few instances where a business relationship should continue forever. The rights and obligations in an agreement should have an end date.

Does the contract give you termination rights?

You should be able to get out of an agreement. If there is no section giving you the ability to terminate, ask that one be added. There may be penalties or other triggers, but you do not want to be locked into an agreement or relationship without an exit.

Is the agreement exclusive?

Giving someone the exclusive right to your work or image is not always a hard stop. But it should be appropriate for the relationship and properly compensated. If exclusivity means missing other opportunities, do a careful analysis before agreeing.

Does the contract include a work-for-hire section?

A contract is key to protecting intellectual-property rights. If you are providing services and an agreement contains a work-for-hire section, it can mean that the work you create is made for the other party and that they will own the intellectual-property rights.

This section also matters when you hire someone to create something, such as a logo, because you may want to own what you are paying for.

Do both parties have to agree to changes?

You should be able to approve changes. Language about changing terms, editing language, or drafting future amendments should be followed by language stating that changes can happen only after both parties agree.

Contracts are more intricate and powerful than many business owners realize. If you have questions about an agreement, seeking an attorney’s help is always recommended.

This article is provided for general informational purposes and is not legal advice. It should not be relied on as legal advice.