When reviewing contracts for our clients, we encounter the same problems repeatedly. Most arise not from ignorance of the law, but from insufficient attention to detail.
¶ 1. Vague definition of the subject matter
The most common mistake. The contract says "the supplier shall perform work according to specification" but the specification either doesn't exist or is so vague that each party imagines something different.
¶ 2. Missing or non-functional contractual penalties
A contractual penalty must be proportionate. Too high and the court may reduce it; too low and it motivates no one.
¶ 3. Unclear termination rules
Who can terminate? With what notice period? Under what conditions can either party withdraw? These questions must be answered clearly.
¶ 4. Forgotten personal data processing
If the contract involves processing personal data, it must include a data processing agreement under GDPR. Often completely missing.
¶ 5. Governing law and dispute resolution
For international contracts, it's critical to specify the governing law and dispute resolution mechanism. Arbitration, court, mediation — the choice fundamentally impacts costs and speed. I've covered when to go to court and when to mediate in a separate piece.
For more contract pitfalls, see Five contract clauses nobody reads — and if you are dealing with a shareholders' agreement, Articles of association are not a formality.
Want a contract reviewed before you sign? In our risk prevention practice we go through the contract sentence by sentence and find exactly what could end up in court a year from now. Get in touch.
¶ Frequently asked questions
How high should a contractual penalty be?
Proportionate. If it is too high, the court may reduce it, and if it is too low, it motivates no one.
What should a contract say about termination?
It must state clearly who can terminate, with what notice period and under what conditions either party can withdraw.
What should I not forget in an international contract?
The governing law and the dispute resolution mechanism. The choice between arbitration, court and mediation fundamentally affects both costs and speed.
Why do mistakes end up in contracts?
Mostly through insufficient attention to detail rather than ignorance of the law.