Lawyer Reveals The Biggest Loopholes To Look For When Dealing With Contracts

1. Look for unclear payment terms

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A loophole in contracts that is super important to look out for is unclear payment terms! This can lead to confusion, but also disputes between the two parties involved if the payments have not been set out properly it means that the payment you were expecting may not be fulfilled. And so to ensure that you are legally entitled to the payment you wanted this has to be resolved in the contract.

2. Look for hidden penalties about late 'deliveries'

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Hidden penalties in contracts are a loophole that the business use to make money from you if you do not manage to fulfill the terms of your contract. However, these penalties may be unfair, and if you do not look out for them in the contract you may find yourself subject to paying fines that you had never anticipated. This is why it's super important to check up on before signing anything!

3. Unclear ownership or intellectual rights

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When a contract includes loopholes one of these may be unclear ownership or intellectual property rights. This means that assets, inventions, designs, trademarks, and copyrights may not be set out clearly. This can lead to disputes, huge financial losses, and damage to you or your business's reputation all because it wasn't clearly marked out and you may have been unaware.

4. If it doesn't guarantee the confidentiality of sensitive information

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If a contract does not properly guarantee the confidentiality of sensitive information it may mean that the person signing the contract is exposed to risks such as data breaches, trade secrets being exposed as well as damage to their reputation, and possible legal repercussions. It is important that these are guaranteed by the contract so that you are protected going forward.

5. Lack of dispute provisions

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This basically refers to if you have a problem, are there ways that you can resolve it? Are there steps that you can take in reference to the contract where you can come to some kind of agreement for both parties? If this isn't here, then it may mean that you cannot insist your dispute is solved in a way that suits you. It should set out a route you can take to resolve it for both parties.

6. When the termination of the contract is unclear

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The termination of the contract is what outlines the steps in which the agreement can be brought to an end. When the termination of a contract is not clear, it can mean that the person signing the contract does not know how or can not legally end the contract which may subject them to fines. This loophole can make it difficult for people to get out of contracts which can be beneficial to the company setting out the terms.

7. Quality standards aren't specified

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Quality standards define and outline the level of performance or products that you provide. So when these are laid out in the contract it means that legal issues could be raised with the standards, no matter how high they are as they have not been defined by the contract. The contract gives the security to be able to prove that the standards have been met correctly.

8. Responsibilities are not clearly defined

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A common loophole in a contract is when the responsibilities of the person are not clearly defined, so it is not clearly laid out what this job role entails and the specific tasks they have to undergo to fulfill the role. This means that the company can take advantage, and ask for jobs and responsibilities to be performed which should not be part of your role because they haven't been defined.

9. Excessive liability to one party

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Sometimes you may find a loophole in a contract that lays excessive liability to one party, meaning that there is a disproportionate amount of blame and risk on one party when this may be unreasonable and unfair. So, it means that the signer is then at risk if something goes wrong even outside of their control it may be legally defined as their responsibility or 'fault'.

10. No 'force majeure' which deals with emergencies

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A force majeure clause means that when an emergency or natural disaster occurs, the contract does not apply because it is impossible for the person to fulfill their full terms. And so every contract needs this because without it, it leaves you unprotected when something arises out of your control you may still be deemed responsible if these terms haven't been made clear.

11. Penalties for contract breaches are not stated clearly

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A contract is there for legal reasons, and it should always include what happens when the contract is breached in very clear terms. This way, the person knows exactly what they are liable for. If not, the company or business could sue for breach of contract with unknown penalties or consequences due to these not being clearly stated in the contract. This can then lead to a legal battle.

12. Conflicting clauses

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When there are conflicting clauses in a contract it means that some of the sections of the contract conflict with one another or undermine one another. This means that it leaves the person signing the contract in a difficult situation as they do not know which clause to oblige and they could face penalties for both, despite the contract being unclear. This is one thing to be aware of when reading it!

13. Anything that leads to interpretation

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If there is anything in a contract that is up to interpretation or is not clear enough that you have to make guesses or assumptions, this needs to be changed. Interpretations could work in favor of the bosses or the business issuing the contract, rather than your own interpretation which may be very different. Your contract should be crystal clear.

14. No set-out procedure for modifying the contract

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Usually, there's some back and forth when it comes to a contract as it can be modified on both sides to make both parties happy with the arrangement. But some contracts set out no procedures for being able to modify a contract which could mean that when you wish to make changes from the original contract you then face legal repercussions or a legal fight to be able to!

15. Absence of termination for convenience

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Termination for convenience means that somebody can end the contract without having to declare or prove a specific reason or a legal reason that allows them to withdraw. So this clause allows somebody to end it without anybody having to be at fault for breaching it. This is important in a contract to make sure that you can finish it when it is no longer convenient to continue.

16. Unreasonable expectations

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Unreasonable expectations in a contract mean that you will not feasibly be able to meet the demands that have been set out in black and white in legal form. So if this is something you do not check before you sign and agree to a contract, you will not be able to hold up your end of the contract and then you could face consequences of this as a result, so be careful!

17. Unclear growth opportunity and payment opportunities

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When you begin a job or a new role you will undoubtedly be thinking about the potential ahead, the opportunities for growth, and the pay brackets that you can reach to keep striving for more. But if it's not in your contract this could mean that they do not have to offer these to you, so ensure that it is written down so that you can guarantee future opportunities.

18. Indemnity cases that favor one person

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To put this in layman's terms an indemnity clause is what gives the responsibility for things such as losses, damage ect to a person. So an indemnity case that favors one person means that it is outweighed heavily so that one person is protected and has much more benefits than the other person which of course is not fair. It's a loophole that lawyers commonly find and warn us against when scoping through the fine print.

19. Undefined performance benchmarks

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A performance benchmark is what lays out the targets to hit. So that when you achieve this target you have hit your performance benchmark and this will be acknowledged in some way. If the benchmarks are not clear this means that they could be shifted continually so that you cannot hit them and perhaps the company doesn't have to pay out any rewards.

20. Unsuitable automatic renewal clauses

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By the end of a contract instead of having an automatic renewal (which means you have then stuck in the same contract again automatically), it is better to take the old contract and amend and renew it according to any changes you want to make. If you're stuck in an unsuitable renewable contract you may not be able to escape it easily, even when you want it to end!

21. Blank spaces

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There should never be any blank spaces left on your contract. This means that certain details are missing and oversights have been made. It may be that the company is taking advantage of a loophole that will at some point down the line affect you negatively. So a lawyer advises that we should scan for any blanks as they should never be apparent in any contract!

22. Dates and deadlines that don't match

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If the dates and deadlines in your contract don't match it could lead to a lot of confusion down the line! It can become difficult to be able to determine the correct time frame which could lead to disputes between the two parties. You also will not be fully aware of your obligations as they are not set out. And this is why lawyers urge us to check that the dates in our contracts make sense!

23. Default terms that haven't been set out

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Default terms refer to what happens by default when certain things aren't met within the contract. So these legal obligations as defined by the contract are not met by one party. If they've not been et out then you do not know where you stand in terms of what your rights are where the contract is concerned. This is why it's super important to always read the small print!

24. Vague information on fees for resolution costs

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If the information on fees is ever vague this could be because they are making the most of a loophole. When it comes to charging the person signing the contract, if the terms laid out aren't clear it could mean that they may be hit by huge costs and there are no terms in the contract which definitively argue against it! According to lawyers, this is a huge problem in contracts.

25. Overly complex pricing structures

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This is a similar kind of occurrence. Whereas some contracts are super vague about pricing, it's also just as bad and important to look just for when the pricing has been overcomplicated. This could be on purpose so that the person signing does not try and amend the terms because the over-complicated appearance puts them off doing so. But it can have consequences down the line.

26. Unknown third parties in the contract

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If there's anybody referred to in your contract, such as unknown third parties, who you were unaware of, or who you do not think should be mentioned in your contract then it's hugely important to flag this up and have it changed. Having third parties in your contract could entitle them to things and could alter your own obligations or financial situation.

27. Unfair penalty clauses for non-performance

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This basically means that if you do not meet the terms of your contract you could face disproportionate penalties or damages. These penalty clauses are important to pay particular attention to as you should not be facing huge or unfair penalties as it could put you in a precarious situation in the future. Flag these loopholes up to have them amended immediately!

28. Missing provisions for changes in laws

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Laws are constantly changing and sometimes loopholes in contracts make the most of not identifying how the terms will change according to laws so that they can try and undermine them which may allow them to get around these new laws. So new laws should be something that is highlighted as a part of your contract to change according to the laws which can keep you protected.

29. Lack of guidelines on handling delays caused by external factors

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External factors are out of your control and delays that may cause you to meet the contract terms late or miss them entirely are not your fault. Yet if this isn't stated in the contract, you could still face penalties for this which is super unfair. This should be something agreed in the contract that things out of your control can not be used against you!

30. Unenforceable non-compete clauses

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Non-compete clauses are common because they ensure that trade secrets, information, and client relationships are protected so that if you change your role or company you cannot legally share this information. It can also mean that you cannot get a job at certain companies where this would be inevitable to enforce. But sometimes these non-compete clauses mean that you cannot get a job in the same sector which is unfair.