A well-drafted contract does not prevent disputes—it resolves them quickly and cheaply when they occur. The five clauses below are the ones most commonly missing from small business agreements and most commonly wished for when a dispute arises.
Scope of Work and Change Order Process
The most common source of contract disputes is ambiguous scope. Define exactly what is and is not included in the engagement. Then specify the process for adding scope: how changes are requested, how they are priced, and what form constitutes an approved change order. Without this language, "scope creep" becomes a dispute.
Payment Terms and Late Payment Consequences
Specify the invoice amount (or calculation method), the due date, what triggers the payment obligation, the late payment interest rate (typically 1.5% per month, or the maximum allowed by state law), and your right to suspend work for non-payment after a grace period.
Limitation of Liability
Uncapped liability in a small business contract is a business risk. A limitation of liability clause caps your total exposure—typically to the amount paid under the contract, or to a multiple of fees paid. Clients may push back; many will accept it, especially if you carry professional liability insurance.
Key Takeaways
- Scope definition and change order process prevent the most common commercial disputes.
- Payment terms should specify amount, due date, trigger, late interest rate, and right to suspend work.
- Limitation of liability, IP ownership, and dispute resolution clauses are the three most commonly missing and most valuable protective provisions.
