The Most Overlooked Clauses That Can Make or Break Your Business Contract

Most business owners sign contracts focused on price, deliverables, and timelines without considering the hidden clauses that could spell disaster. Overlooked provisions like governing law and jurisdiction, limitation of liability, indemnity, and early termination can put your business at risk for lawsuits, unexpected losses, and expensive disputes.

Movies often portray contract signing as a very quick and effortless process; characters glance over a document and sign without hesitation. Unfortunately, this cinematic habit mirrors the reality of how many people sign contracts without reading or understanding the fine print.
Every clause and term contained in a contract serves a specific and intentional legal purpose. This is why a single overlooked clause can expose a business or individual to serious legal consequences and financial risks.

In this article, you’ll discover the most commonly overlooked clauses in business contracts, why they matter, and the practical steps you should take before you sign any agreement—whether you’re operating in Nigeria, the UK, or the US.

UNDERSTANDING THE STRUCTURE OF A CONTRACT

A contract is  an agreement between two or  more  parties  that defines  the terms  of an exchange, but if you want that agreement to hold up in court, there’s more to it than simply putting it in writing.¹ The Black’s law dictionary, 2nd edition defines a contract as “An agreement, upon sufficient consideration, to do or not to do a particular thing.”²

Having  a contract  in  place  is important  because  it  sets out  the  terms of  the  agreement between  the  parties  involved.  This  clarity  is  essential  in  ensuring  that  all  parties  know  what  is expected of them and can help to avoid any misunderstandings down the line.³ Depending on your situation, a contract can be straightforward and include the bare essentials or highly complex withntricate terms and clauses. So, there is no one-size-fits-all approach to structuring a contract because it comes down to the particular agreement.⁴

Even though contracts are infinitely varied in length, terms, and complexity, for a contract to be valid and recognized by the common law, it must include certain elements: offer, acceptance, consideration, intention to  create legal relations,  authority and capacity,  and certainty.  Without these elements, a contract is not legally binding and may not be enforced by the courts.

For a contract to be legally enforceable, the fundamental elements stated above must be present and logically sequenced. First, there must be an offer, which is a clear proposal made by

one party with the intention that it becomes binding upon acceptance. This must be followed by acceptance, which is the unqualified agreement to the terms of the offer. Consideration refers to something of value exchanged between the parties, such as money, services, or a promise, which supports the  agreement. There  must  also  be  an intention  to  create  legal relations,  meaning  both parties must intend the agreement to have legal consequences. In addition, each party must have the capacity and  authority  to  enter  into  the  contract; this  excludes  minors,  persons  of  unsound mind, or agents acting without proper authority. Finally, the terms of the contract must have certainty, meaning the rights and obligations of each party are unambiguous. If any of these elements are missing, the contract may be invalid or unenforceable.

However, it is essential to note that not all legal contracts require a written form to be valid. For example, an oral contract between two parties is still legally binding as long as all of the required  elements are present. ⁵. An  oral contract occurs when  spoken  words are  rendered valid and legally enforceable in a court of law. Essentially, oral contracts are verbal agreements between two parties. However, an oral contract is not legally enforceable unless it is provable in court, and it must meet various requirements of contract formation. Enforcing an oral contract requires substantial evidence to prove its existence and terms. Courts typically evaluate:

Besides the fundamental elements that constitute the validity of a contract, a contract also contains clauses. Therefore, contract clauses can be defined as specific sections within an agreement that define rights, responsibilities, and obligations. They form the structure of a legally binding document, serving as the rulebook that governs the relationship between parties.⁷

Behind every successful business partnership lies a well-structured contract, and beneath every well-structured contract lie key clauses that shape these agreements. Clauses are the most important elements of a contract. From confidentiality commitments to payment terms, they define how businesses collaborate, and protect both parties when challenges arise.

Clauses define the rights, responsibilities, and limitations of the parties involved in the agreement. Each clause addresses a distinct aspect of the contract, ensuring that key areas of the business relationship are articulated and enforceable. Some examples of common contract clauses include: confidentiality clause, intellectual property clause, indemnity clause, limitation of liability clause, termination clause, force majeure clause, etc.⁸

According  to Thomson  Reuters Legal,  indemnification  provisions  appear  in  nearly  all commercial agreements and are “among the most commonly and heavily negotiated provisions in a contract.”⁹ This  highlights  the critical role  that  well-crafted clauses  play in modern business dealings. Additionally, according to Cornell Law School’s Legal Information Institute, clear

contract clauses help prevent disputes by explicitly defining terms and conditions. They act as your insurance policy against misunderstandings and potential legal issues.10 For example, a properly written force majeure clause can protect businesses from liability when unforeseen circumstances prevent the fulfilment of obligations. Investopedia explains that force majeure “is a clause included in contracts to remove liability for unforeseeable and unavoidable catastrophes that prevent participants from fulfilling obligations.”

THE MOST OVERLOOKED CLAUSE: THE GOVERNING LAW AND JURISDICTION CLAUSE

When drafting a contract, it is crucial to consider the legal framework that will govern the agreement and the courts or tribunals that will have the authority to resolve disputes arising from the contract. Governing law and jurisdiction are two distinct yet related concepts that play a crucial role in defining the contractual relationship between the parties.11 The Governing Law and Jurisdiction clause is often overlooked in contracts, yet it can have serious legal and financial consequences.

As their names suggest, the governing law clause in a contract specifies the laws that will govern the relevant contract, while a jurisdiction clause specifies the courts or arbitration tribunal that will have exclusive or non-exclusive jurisdiction to hear any disputes that may arise out of the contract. These clauses can sometimes be overlooked during drafting as they tend to be included in the “boilerplate”12 language towards the end of the contract. Some examples of clauses added in the boilerplate language include; assignment clause, confidentiality clause, force majeure clause, indemnity clause, partnership and agency clause, etc.

Governing law, also known as the choice of law, is a provision in a contract that specifies the legal system or body of law that will apply to the interpretation, validity, and enforcement of the agreement. The governing law provision allows the parties to agree in advance on the set of rules and principles that will govern their contractual relationship, providing predictability and consistency. The chosen governing law may be based on the location of the parties, the subject matter of the contract, or the parties’ preference for a particular legal system. In essence, the governing law clause specifies which country’s laws will be used to interpret and enforce the terms
of a contract.

Jurisdiction, on the other hand, refers to the authority of a court or tribunal to hear and decide disputes arising from a contract. A jurisdiction clause in a contract identifies the courts or tribunals that the parties agree to submit any disputes arising out of or in connection with the contract. Jurisdiction may be exclusive, meaning that only the specified court or tribunal has authority over disputes, or non-exclusive, meaning that the parties may bring a dispute before other courts or tribunals with jurisdiction over the matter. In essence, the jurisdiction clause determines which country’s courts will have the authority to hear and decide any disputes arising from the agreement.

The primary difference between governing law and jurisdiction lies in their functions within a contract. Governing law determines the legal system and rules that apply to the interpretation of contracts, validity, and enforcement. Jurisdiction, on the other hand, pertains to the authority of courts or tribunals to hear and decide disputes arising from the contract. While both concepts are interrelated, they serve different purposes in a contractual relationship. For example, in the United Kingdom, if the parties in a contract agree to submit to the jurisdiction of English courts, the governing law of the contract doesn’t automatically become English law, unless it is specified.

In GDE LLC v Anglia Autoflow Ltd [2020] 13, the parties agreed to submit to the jurisdiction of English courts, but did not specify that English law would govern the contract. The court held that the governing law was the jurisdiction with the closest connection; in this case, Ontario law, despite the jurisdiction clause would govern the contract. This illustrates that jurisdiction does not automatically imply governing law, and the absence of a clear governing law clause can lead to unexpected legal frameworks.14

Similarly, in the case of Home Insurance Co v Dick (1930)15, here, a contract contained a clause requiring a one-year limitation period for suing, but there was no clear governing law clause. The Texas courts applied a two-year statute of limitations under Texas law, despite the contract being issued under New York jurisdictions. The U.S. Supreme Court ruled that Texas cannot independently apply its laws to invalidate contract terms made outside its jurisdiction. This case highlights the constitutional limits around applying local law in the absence of a clear governing law clause.

In commercial contracts, parties often focus on commercial terms like price, timelines, and deliverables; they tend to ignore this clause, either out of haste, lack of legal advice, or the mistaken belief that disputes are unlikely and all legal systems are more or less the same. However, an ambiguous or non-existent governing law and jurisdiction clause can lead to a range of problems, including: delays in resolving disputes relating to the contract, increased legal costs, unfavourable outcomes and even damaged business relationships. Ignoring or failing to negotiate this clause is not a minor procedural oversight; it is a significant legal vulnerability.

This clause becomes critically important in situations where parties operate in different states or countries. For instance, a Nigerian business entering a partnership with a foreign company may unknowingly agree to have disputes resolved under a foreign legal system, one that is expensive, unfamiliar, or even unfavourable. Similarly, within Nigeria, parties may be bound to litigate in a jurisdiction that is geographically inconvenient or procedurally burdensome. For example, in Total (Nig.) Plc v Ajayi (2019),16 the Nigerian Court of Appeal held that parties are bound by the jurisdiction they expressly chose in their contract, even if the court is in a different region or less convenient.

Understanding the distinction between governing law and jurisdiction is critical when drafting a contract, as these provisions establish the legal framework and authority for resolving disputes. By including well-drafted governing law and jurisdiction clauses in commercial contracts, parties can ensure predictability and consistency in their contractual relationships and effectively manage potential disputes.17

OTHER CLAUSES THAT ARE OFTEN OVERLOOKED BUT CRITICALLY IMPORTANT
Although the governing law and jurisdiction clause is often overlooked, it is not the only clause that warrants closer attention. Several additional clauses, commonly regarded as ‘boilerplate’, are routinely neglected or glossed over during contract drafting and negotiation. However, these provisions may carry substantial legal consequences and financial implications if disputes arise or circumstances change and should not be dismissed as mere formalities.

Examples of such clauses include: termination clause, force majeure clause, limitation of liability clause, etc.
A termination clause is a written provision in an agreement that defines the circumstances under which said agreement can be terminated. Termination clauses outline how and when either party can end the contract. They cover everything from standard notice periods to situations warranting immediate contract termination. A good termination clause balances flexibility with stability, letting businesses exit when necessary while preventing contracts from ending due to arbitrary or unfair reasons.18

Force majeure is a clause included in contracts to remove liability for unforeseen and unavoidable catastrophes interrupting the expected timeline and preventing participants from fulfilling obligations. French for “superior force,” this clause addresses what happens when unexpected events make it impossible to fulfil contractual obligations. From natural disasters to global pandemics, force majeure clauses provide a framework for handling the unexpected and discharging a contract.19

A limitation of liability clause is a legal provision that limits the liability of one party in the event of damages, losses, or injuries caused to the other party. This clause sets boundaries around financial responsibility if something goes wrong. It might limit how much money can be claimed in damages or exclude certain types of losses altogether. While nobody enters a contract expecting problems, limitation of liability clauses provides crucial protection for both parties.20

MITIGATING CONTRACTUAL RISK: HOW TO NEGOTIATE RISKY CLAUSES AND PROTECT YOURSELF LEGALLY
Negotiating risky contract clauses requires a strategic and informed approach, particularly because many of these provisions appear deceptively simple but can significantly shift legal or financial burdens. Clauses such as limitation of liability, indemnity, termination, and governing law must not be accepted at face value. Instead, they should be carefully analyzed within the context of the overall agreement. When reviewing such clauses, parties should look out for ambiguous terms, one-sided obligations, or hidden penalties, and seek to amend or clarify them. For instance, if a limitation of liability clause seeks to cap damages at an unreasonably low amount
or excludes liability for negligence, this should be openly challenged or renegotiated.21

The goal during negotiation should be to ensure that the contract reflects a fair allocation of risk and responsibility. One effective way to do this is by proposing alternate language or inserting qualifiers, such as “subject to applicable law” or “to the extent reasonably practicable.”22

Involving legal counsel early in the negotiation process is also essential, especially for high-value or cross-border transactions. Lawyers can help identify red flags, ensure consistency across clauses, and confirm that the terms align with statutory or regulatory requirements.23

Rather than relying on precedent or templates alone, parties should adopt a mindset of active engagement, questioning standard clauses and tailoring them to the specific business arrangement. Protecting yourself legally in future contracts begins with developing a proactive contract review habit. Always read every part of a contract, including the fine print and boilerplate provisions. Parties should keep a checklist of key clauses to review in every agreement, including governing law, jurisdiction, dispute resolution, force majeure, and indemnity.24 Documenting negotiations and proposed revisions, whether accepted or rejected, also helps establish good faith in the event of a future dispute. If any terms remain unclear, seek clarification or insist that the language be rewritten in plain, enforceable terms.

Finally, businesses and individuals alike should invest in contract literacy. Understanding the purpose and consequences of each clause helps reduce reliance on assumptions or informal agreements. Templates should be used cautiously, and contract management processes such as maintaining signed copies, tracking key dates, and monitoring compliance should be institutionalized.25 Ultimately, legal protection in contracts comes not just from the words on paper but from the vigilance, awareness, and preparation of those signing it.

CONCLUSION
In conclusion, while business contracts often receive close attention for their commercial terms, it is the governing and jurisdiction clause, frequently buried in the boilerplate, that can ultimately determine the outcome of legal disputes. Overlooking or failing to negotiate this clause exposes parties to increased legal costs, delays, and the risk of having disputes resolved in an unfamiliar or unfavourable legal system. As such, contracting parties must approach this clause with the same diligence as they would pricing or deliverables, ensuring it reflects mutual agreement on which legal system will apply and where disputes will be resolved. Understanding and negotiating this clause proactively is not merely a procedural formality; it is a critical step in safeguarding one’s legal and commercial interests. Protect your business and peace of mind by reviewing contracts carefully and seeking legal advice.

Every day you delay legal clarity, your business is exposed to costly mistakes, contract traps, and regulatory pitfalls that could set you back months or even years.

Most entrepreneurs don’t realize the real risk until it’s too late—when an avoidable error costs them money, market trust, or the chance to scale.

But it doesn’t have to be this way.

Book a consultation with BLT Enterprise and put your legal worries to rest.
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• A clear understanding of your specific risks (no more hidden dangers)
• Step-by-step guidance for protecting your business the right way
• Practical solutions, delivered in plain English—so you can make confident decisions, not guesswork

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REFERENCES

1. PandaDoc, ‘What Makes a Contract Valid?’ https://www.pandadoc.com/blog/what-makes-a-contract-valid/Accessed 15 July 2025.
2. The Law Dictionary, ‘Contract’ https://thelawdictionary.org/contract/ accessed 15 July 2025.
3. LegalSiter, ‘Elements of a Contract’ https://www.legalsiter.com/blog/elements-of-acontract#:~:text=For%20a%20contract%20to%20be,authority%20and%20capacity%2C%20and%20certainty  Accessed 15 July 2025.
4. Gerrish Legal, ‘How Do You Structure a Contract?’ https://www.gerrishlegal.com/blog/how-do-you-structure-a-contract  Accessed 15 July 2025.
5. LegalSiter, ‘Elements of a Contract’ https://www.legalsiter.com/blog/elements-of-a-contract  Accessed 15 July 2025.

6. UpCounsel, ‘Oral Contracts’ (UpCounsel) https://www.upcounsel.com/oral-contracts. Accessed 28 July 2025.
7. Concord, ‘What are Contract Clauses? Definition and 24 Examples’ https://www.concord.app/blog/contract-clauses-definition-and-examples. Accessed 15 July 2025.
8. Juro, ‘10 common contract clauses explained’ https://juro.com/learn/contract-clauses# Accessed 15 July 2025.
9. Thomson Reuters, ‘Indemnificaion Clauses in Commercial Contracts’
   https://legal.thomsonreuters.com/en/insights/articles/indemnificaion-clauses-in-commercial-contracts Accessed 15 July 2025.

10.  Cornell Law School Legal Informaion Insitute, ‘Contract’ https://www.law.cornell.edu/wex/contract Accessed 15 July 2025.
11. Tamimi & Co, ‘Choice‑of‑Law and Jurisdicion Provisions in the UAE’ https://www.tamimi.com/law-update-articles/choice-of-law-and-jurisdicion-provisions-in theuae/#:~:text=What%20is%20the%20governing%20law,Governing%20law%20clause  Accessed 16 July 2025.
12. Boilerplate clauses refer to standardized, non-negotiated provisions typically placed at the end of contracts. See Richard Christou, Boilerplate: Practical Clauses (10th edn, Sweet & Maxwell 2020) 1; Bryan A Garner (ed), Black’s Law Dictionary (11th edn, Thomson Reuters 2019) 213.)

13. GDE LLC v Anglia Autolow Ltd [2020] EWHC 105 (Comm).
14. RPC, ‘Beware: English Jurisdicion Clauses Do Not Mean Choice of English Law’ (RPC, 1 February 2022) https://www.rpclegal.com/thinking/commercial-disputes/beware-english-jurisdicion-clauses-do-not-mean-choice-of-english-law/  Accessed 28 July 2025.

15. Home Insurance Co v Dick 281 US 397 (1930).
16. Total (Nig.) Plc v Ajayi (2019) LPELR-46895(CA).
17. ContractKen, ‘Governing Law Clause’ https://www.contractken.com/glossary/governing-law-clause. Accessed
18. Contractbook, ‘Terminaion Clause’ https://contractbook.com/dictionary/terminaion-clause  Accessed 17 July
19. Investopedia, ‘Force Majeure Clause’ https://www.investopedia.com/terms/f/forcemajeure.asp  Accessed 17 July
20. Iubenda, ‘What is a Limitaion of Liability Clause’ https://www.iubenda.com/en/help/123625-what-is-a-
    • limitaion-of-liability-clause-heres-everything-you-need-to-know accessed 17 July 2025.
21. Richard Lawson, Exclusion Clauses and Unfair Contract Terms (2nd edn, Sweet & Maxwell 2021) 45–47.
22. Ewan McKendrick, Contract Law: Text, Cases, and Materials (9th edn, OUP 2020) 379
23. Neil Andrews, Contract Law (2nd edn, CUP 2015) 215; See also Ogunyade v Oshunkeye [2007] 15 NWLR (Pt 1057) 218 (SC), where clarity and legal enforceability were central to the dispute.
24. Ayo Akinseye-George, Legal Drating and Conveyancing in Nigeria (MIJ Professional Publishers 2009) 165–168
25. Tina Stark, Drating Contracts: How and Why Lawyers Do What They Do (2nd edn, Aspen Publishers 2013) 12–14