Most business owners spend hours negotiating the purchase price of a business. Then, after all that effort, they’ll sign a contract without reading half of it. We see it all the time – the first few pages, which generally set out the basic business terms, get everyone’s attention. The remaining pages become legal stuff, fatigue sets in, and finally the signature page appears.
Unfortunately, many of a contract’s most important provisions are found near the end. In many cases, these provisions determine who wins, who loses and who writes the largest check when things go sideways.
Here are five of the most consequential and expensive contract clauses business owners routinely overlook.
Attorney fee provisions
Under Illinois law, the general rule is that each party pays its own attorney fees unless a statute or contract provides otherwise. Many business owners do not realize that a simple sentence tucked away in a contract can completely change that rule. Suppose you have a dispute involving a $25,000 contract. You may believe your worst-case scenario is losing $25,000. But if the contract contains an attorney fee provision requiring the losing party to pay the prevailing party’s legal fees, the exposure can increase dramatically. It’s not uncommon for attorney fees to equal or exceed the amount actually in dispute. Even more concerning, many contracts are drafted so only one side gets the benefit of the provision. The stronger party often reserves the right to recover fees while denying the same right to you. Before signing, determine whether an attorney fee clause exists, whether it is reciprocal and whether the potential liability makes sense in relation to the transaction.
Personal guarantees
Well-advised owners usually form corporations or LLCs, in part, to separate business liabilities from personal assets. Then they sign a personal guarantee. A personal guarantee essentially allows a creditor to bypass the business and proceed directly against the individual owner. If the business cannot pay, the guarantor becomes personally responsible. This is common in commercial leases, bank loans, equipment financing agreements, vendor contracts and franchise agreements.
Many owners spend years carefully building an LLC only to unknowingly give away much of the protection it provides by signing a guarantee without understanding its scope. Some guarantees apply only to a single transaction. Others are continuing guarantees covering future obligations. Some expire. Others do not.
Sometimes, it’s a non-negotiable item. But if you’re being asked to sign a guarantee, it’s worth understanding exactly what you’re guaranteeing and for how long.
Automatic renewals
This is one of my pet peeves. Owners constantly sign service contracts like software subscriptions, equipment leases, maintenance agreements, waste removal agreements and various consulting arrangements. They almost always include automatic renewal provisions. At first glance, they seem harmless. But the problem arises when a contract automatically renews for another one, three or even five years unless notice is given during a narrow cancellation window.
I have met with many business owners who believed a contract was about to expire only to discover they had missed a 60-day or 90-day notice requirement several months earlier. By the time they realized the issue, the agreement has already renewed for another lengthy term. The result is often an expensive buyout or years of paying for services they no longer need or want.
First, try to remove auto-renewal provisions. But if you can’t, put the termination deadline on your calendar immediately.
Liquidated damages
A liquidated damages provision attempts to establish in advance the amount one party must pay if a particular event occurs. Sometimes these clauses are reasonable. Sometimes they are breathtaking. I’ve seen contracts that impose large penalties for missing deadlines, terminating agreements early, failing to meet minimum purchase requirements or violating non-competition provisions. The danger is the stated damages rarely attract attention during negotiations. Everyone assumes the relationship will work out. Nobody expects a default, but then circumstances change. Suddenly the clause nobody discussed becomes the most important provision in the entire document.
Whenever you see a liquidated damages provision, ask yourself a simple question: If I had to write this check tomorrow, would the amount seem fair? If the answer is no, further discussion is warranted.
Forum selection/venue
This may be the most overlooked clause of all. Many contracts specify where disputes must be resolved. That location may be Illinois. But for many non-local parties, it’s often in places like California, Texas, New York or somewhere else entirely. Owners often dismiss these provisions as technical legal details. They are not.
Imagine you’ve signed a contract requiring all disputes be litigated in another state. Now a disagreement arises involving a relatively modest amount of money. The cost of hiring out-of-state counsel, traveling for court appearances and managing litigation in a distant jurisdiction may make defending or prosecuting the claim economically impractical.
A venue clause can influence the outcome of a dispute before the first argument is ever made. At a minimum, understand where the contract requires disputes be handled and whether that location is acceptable. Better yet, try to negotiate a local venue or, as a last-ditch effort, try to leave the matter silent and let common law ultimately dictate what location is appropriate.
This article appears in October SBJ 2026.