Early-stage companies sign contracts under pressure — from investors, from early customers, from the sheer velocity of getting something off the ground. That pressure produces mistakes. Not the obvious ones, which any competent lawyer would catch, but the quieter ones: provisions that seem reasonable at the time and prove costly later.
Paste any UK contract clause and get a structured risk report — plain English, red flags, enforceability insight, and a suggested counter-proposal.
1. Granting exclusivity too early
An early customer or distribution partner asks for exclusivity — the right to be your only channel in a given market. It feels like validation. But exclusivity granted too early, on terms that are difficult to exit, can prevent you from pursuing better opportunities or responding to market shifts. Before granting exclusivity, insist on minimum purchase commitments or revenue thresholds the partner must meet to maintain exclusive status, and include a right to terminate exclusivity — with reasonable notice — if those thresholds are not met.
2. Gaps in intellectual property assignment
Investors conducting due diligence will want to confirm the company owns all its intellectual property — including anything created before incorporation. If founders or early employees were developing the product before their agreements were in place, or if those agreements contain gaps in IP assignment, it creates a problem that is expensive to fix in a funding round data room. Ensure every founder agreement and employment contract contains a comprehensive IP assignment clause covering pre-existing work contributed to the company.
3. Accepting uncapped liability in enterprise contracts
Early enterprise customers often present standard terms containing uncapped indemnity obligations. A startup eager to close its first significant contract frequently accepts these without negotiating. The result can be an indemnity that could, in a genuine loss scenario, exceed the annual contract value many times over. Always negotiate a liability cap tied to fees paid in the twelve months preceding the claim, and exclude consequential and indirect losses from your liability exposure.
4. Signing investor side letters without full consideration
Side letters granted to early investors — additional rights, information entitlements, veto provisions — accumulate and interact in ways that are difficult to anticipate at the time of signing. A veto right granted to a seed investor may create an unexpected blocker at Series A. Before granting any side letter, model its interaction with existing rights and with the rights you expect future investors to require.
5. Using template contracts for non-standard relationships
Template contracts are written for a generic relationship. When your actual relationship has features that fall outside the template's assumptions, the contract will contain gaps or provisions that do not apply. The cost of adapting a template for a specific relationship is modest. The cost of a dispute conducted under a contract that does not accurately reflect the parties' intentions is not. Use templates as a starting point, not a finishing point — particularly for contracts with customers, key suppliers, or co-founders.