The clauses that decide who pays, who’s bound, and who can walk away - defined without the jargon. Run into one of these in your own document? Scan it and Hidden Catch will flag it for you.
- Indemnification
- A promise by one party to cover the other party’s losses, damages, or legal costs arising from certain events.
- What it means for you: If you agree to indemnify someone, you may have to pay their legal bills and damages if a claim comes up. Watch for one-sided indemnities where only you take on that risk.
- Arbitration clause
- A clause requiring disputes to be resolved by a private arbitrator instead of in court.
- What it means for you: You typically give up your right to sue in court and to a jury trial. Combined with a class-action waiver, it can make small claims impractical to pursue.
- Liquidated damages
- A fixed amount agreed in advance that one party must pay if they breach the contract.
- What it means for you: The number is set before anything goes wrong, so you may owe it even if the actual harm is small. Check that the amount is reasonable, not a penalty.
- Force majeure
- A clause excusing a party from performing when extraordinary events beyond their control (natural disasters, war, pandemics) make it impossible.
- What it means for you: It decides who bears the risk when something drastic happens. Look at which events are covered and whether it lets the other side walk away from obligations to you.
- Severability
- A provision stating that if one part of the contract is found invalid, the rest still applies.
- What it means for you: One unenforceable clause won’t void the whole agreement. Usually neutral, but it can keep an otherwise lopsided contract alive.
- Assignment
- The transfer of a party’s rights or obligations under the contract to someone else.
- What it means for you: A broad assignment clause can let the other side hand your contract to a company you never chose to deal with. Check whether your consent is required.
- Non-compete clause
- A restriction preventing you from working for competitors or starting a competing business for a set time and area after the relationship ends.
- What it means for you: It can limit your next job. Scrutinize the duration, geography, and scope - and note that enforceability varies widely by jurisdiction.
- Limitation of liability
- A clause capping the amount, or the types, of damages a party can be responsible for.
- What it means for you: It can shrink what you’re able to recover if the other side fails you - sometimes down to a token sum. Check whether the cap is mutual.
- Automatic renewal (evergreen clause)
- A term that renews the contract for a new period unless you cancel by a specific deadline.
- What it means for you: Miss the notice window and you’re locked in for another term. Note the cancellation deadline and how notice must be given.
- Governing law and jurisdiction
- The clause choosing which state or country’s laws apply and where disputes must be filed.
- What it means for you: It can force you to litigate far from home under unfamiliar law, which raises the cost of enforcing your rights.
- Confidential information
- The defined category of information an NDA or contract requires you to keep secret.
- What it means for you: The broader the definition, the more you’re bound to protect. Look for carve-outs for public or independently known information.
- Warranty disclaimer ("as is")
- A statement that a product or service is provided without guarantees of quality or fitness.
- What it means for you: If something is sold or provided “as is,” you generally can’t rely on it working as expected or seek a remedy if it doesn’t.
Not sure which clauses are in your document?