What Small Business Owners Need To Know Before Signing Commercial Contracts
Running a business in Ohio often means entering into contracts: leases, vendor agreements, service contracts, employment arrangements, and more. These documents form the backbone of your company’s relationships. But too often, small business owners rush through signing without fully understanding the risks involved. A contract that looks harmless on its face can carry hidden obligations that cost thousands of dollars down the line. Here are key things every entrepreneur should keep in mind before signing a commercial contract.
Read the fine print
Contracts tend to be densely worded. This is by design. Headings like “Payment” or “Termination” may sound straightforward, but the fine print often contains critical details. For example, a payment clause may include late fees, automatic renewals, or price escalation terms tied to inflation. You should always read the full text, not just the bolded title. Missing a single sentence could change your financial obligations quite a bit.
Be on the lookout for vague or undefined terms
When it comes to contracts, ambiguity creates risk. Words such as “reasonable”, “timely”, or “industry standard” leave too much room for interpretation. What if your supplier, for instance, promises “reasonable delivery times” and your shipment is several weeks late? Courts will usually interpret vague language against the party who drafted the contract. But relying on the courts to bail you out is a gamble. Whenever possible, you should insist on precise definitions, specific timelines, and other measurable standards.
Understand indemnification and liability clauses
One of the most overlooked sections in a contract is the indemnification clause. This is where one party agrees to cover the other’s losses in certain situations. An indemnification provision that seems routine could expose your business to major liability if something goes wrong. Similarly, “limitation of liability” clauses often protect the other party but leave you fully exposed. Before signing, make sure you understand who bears the risk if disputes, accidents, or third-party claims arise.
Pay attention to renewal or termination terms
Commercial contracts generally include automatic renewal provisions. You might think you are signing a one-year deal. Then, you discover it renews indefinitely unless you give notice within a particular timeframe. Termination clauses can also be lopsided. They allow the other party to walk away at will while binding you to the terms of the contract. You should always check how long you’re committed, how you can exit, and what penalties you might face for ending the agreement early.
Know when to contact a lawyer
Small business owners are resourceful, but not all risks are obvious. Some contracts, especially commercial leases, franchise agreements, or high-value vendor contracts, are written to favor the drafter. An attorney experienced in business law can spot red flags, negotiate fairer terms, and protect your company from unnecessary exposure. In many cases, a brief review costs far less than a future dispute.
Talk to a Dayton, OH, General Counsel for Businesses Attorney
Kohl & Cook Law Firm, LLC, represents the interests of Ohio residents who are starting a business or need a general counsel attorney. Call our Dayton small business lawyers today to schedule an appointment, and we can begin discussing your next steps right away.
