5 Common Contract Mistakes Small Businesses Make (and How to Avoid Them)

Contracts are the backbone of every business relationship — from vendors and clients to employees and partners. But small businesses often fall into avoidable traps that cost time, money, or worse: legal trouble. Let’s break down the five most common contract mistakes and how to prevent them.

1. Not Putting It in Writing

Handshakes and verbal agreements might feel sufficient, but they hold little weight in a dispute. Every business agreement — no matter how simple — should be in writing, signed, and dated. A written contract protects both parties and eliminates confusion down the road.

2. Using Generic Templates Without Customization

Downloading a free online template can be tempting, but most templates are too vague or irrelevant for your specific needs. Failing to tailor the language to your business, services, or state laws can leave you exposed. Always review and adjust templates with your actual operations in mind.

3. Overlooking Payment Terms

Clearly outline how and when you get paid. Missing details like late fees, refund policies, or payment schedules can lead to delayed payments or disputes. Make sure your contract includes exact payment expectations, due dates, and consequences for non-payment.

4. Failing to Define Scope of Work

Scope creep — when a client expects more than what was agreed — usually happens because the original agreement wasn’t specific enough. Spell out exactly what you’re delivering, the timelines, responsibilities, and what’s not included.

5. Not Including a Termination Clause

Every contract should explain how either party can end the agreement. Without a termination clause, you could be stuck in an unproductive or costly relationship. Include details like notice period, cancellation fees (if any), and valid termination reasons.