Contracts underpin all business relationships. Businesses frequently enter into agreements without fully grasping the legal consequences of specific terms. Most focus on price and timelines, often missing clauses that can create significant legal or financial risk in the event of disputes.

In 2026, businesses will increasingly adopt standardised templates, conclude agreements electronically, and negotiate commercial arrangements more quickly. Consequently, businesses conduct inadequate contract reviews, which has led to a growing source of litigation and commercial disputes.

A clear understanding of the legal effect of key contractual clauses becomes even more crucial as businesses often move quickly from one deal to the next. In this context, assessing the risks of overlooked clauses early can be the difference between smooth operations and unexpected challenges. 

Why Overlooked Clauses Create Legal Risk

Many contractual disputes do not arise because parties failed to conclude agreements, but rather because they failed to appreciate the effect of certain provisions.

Businesses frequently sign contracts containing clauses that:

• limit their rights; 
• increase their financial exposure; 
• impose strict obligations; or 
• restrict their legal remedies. 

In many instances, parties enforce these clauses even when they did not properly consider them before signing.

As a result, South African courts generally uphold agreements freely entered into by the parties. This reality makes it essential for businesses to understand that failing to read or understand contractual terms rarely justifies avoiding obligations.

Contract Clauses Businesses Commonly Overlook

1. Indemnity Clauses

Indemnity clauses are among the most significant yet misunderstood contractual provisions.

An indemnity may require one party to compensate another for losses, damages, or liabilities arising from specific events or conduct. Businesses often unknowingly assume extensive financial obligations through broadly drafted indemnity clauses.

These clauses may expose a business to:

• third-party claims; 
• legal costs; 
• damages suffered by another party; and 
• liabilities extending beyond the value of the agreement itself. 

Improperly drafted indemnities may create substantial commercial risk.

2. Limitation of Liability Clauses

Limitation clauses seek to restrict a party’s liability in the event of breach, negligence, or loss.

Many businesses overlook provisions that:

• cap damages; 
• exclude certain claims entirely; or 
• prevent recovery for indirect or consequential losses. 

As a result, a business may discover during litigation that its ability to recover damages is significantly restricted. 

These clauses are particularly important in supplier agreements, service contracts, and technology-related transactions.

3. Automatic Renewal Clauses

Businesses frequently encounter automatic renewal provisions in commercial agreements, subscriptions, and service contracts.

Businesses may unintentionally stay bound to agreements for extended periods by failing to provide proper notice of cancellation within the required timeframe.

This can result in:

• ongoing payment obligations; 
• unwanted contractual commitments; and 
• disputes regarding termination rights. 

Always pay careful attention to notice periods and renewal mechanisms.

4. Jurisdiction and Dispute Resolution Clauses

Jurisdiction clauses determine where disputes must be resolved, while dispute resolution clauses may require mediation or arbitration before litigation can proceed.

Businesses often overlook:

• the costs associated with arbitration; 
• foreign jurisdiction clauses; 
• mandatory mediation procedures; and 
• limitations on approaching court directly. 

These provisions can significantly affect the manner, cost, and complexity of resolving disputes.

5. Force Majeure Clauses

Recent global disruptions have highlighted the importance of force majeure provisions.

These clauses regulate circumstances where parties are unable to perform due to unforeseen events beyond their control, such as:

• natural disasters; 
• pandemics; 
• political unrest; 
• supply chain disruptions; or 
• infrastructure failures. 

Poorly drafted force majeure clauses can leave businesses uncertain about their contractual obligations during unexpected events

6. Personal Suretyship Provisions

Directors and business owners frequently overlook personal suretyship clauses in commercial agreements. Individuals often unknowingly bind themselves personally to a company's debts when they sign agreements on behalf of a business.

Directors or members may risk personal financial liability even when operating through a corporate entity. Always approach suretyship provisions with extreme caution

Poor contract review often results in significant legal and commercial consequences, including breach-of-contract disputes, financial losses, reputational harm, lengthy litigation, strained commercial relationships, and exposure to personal liability. 
In many commercial disputes, businesses become aware of problematic clauses only after litigation has commenced.

Preventive legal review is often substantially more cost-effective than resolving disputes after they arise.

Conclusion

In an increasingly complex commercial environment, businesses cannot afford to overlook the finer details contained in contractual agreements.

Clauses relating to indemnities, liability limitations, dispute resolution, renewals, and suretyships may carry serious legal and financial consequences if not properly understood.

Key takeaways: Always carefully review all contract clauses, seek legal advice before signing, and understand the consequences of indemnity, limitation of liability, renewal, dispute resolution, force majeure, and suretyship clauses to protect your business from avoidable risk.

Written by Anastacia Willemse, Candidate Attorney, SchoemanLaw Inc