10 Risk Clauses You Should Always Include in a Contract

Introduction

Many businesses run into legal trouble not because they acted recklessly, but because their contracts failed to anticipate common risks. From missed deadlines to data breaches, the financial and reputational damage of ignoring risk clauses in contracts can be devastating. These issues often arise from vague terms, missing protections, or poorly drafted agreements that overlook everyday threats.

In today’s fast-paced business environment, contract risk management for businesses isn’t optional—it’s a competitive necessity. Unfortunately, many entrepreneurs, consultants, and even established service providers still sign deals without fully understanding the legal safeguards they’re missing.

In this post, we break down 10 essential risk clauses in contracts that every business should include. Whether you’re a startup founder, corporate vendor, or legal advisor, these provisions are vital for legal protection for service providers, managing liability, preventing disputes, and building contracts that protect both your work and your reputation.

Who This Is For: Risk Clauses in Contracts, Contract Risk Management for Businesses, and Legal Protection for Service Providers

This list is designed for anyone responsible for drafting, reviewing, or negotiating business agreements. Whether you’re an entrepreneur, advisor, or legal professional, mastering these risk clauses in contracts is essential for protecting your interests and avoiding preventable legal pitfalls.

It’s especially useful for:

• Freelancers and consultants working with corporate clients who need stronger legal protection for service providers

• Founders and CEOs reviewing vendor, partnership, or investor agreements

• In-house legal teams updating contract templates for scalability and compliance

• Law students or new legal professionals learning the fundamentals of contractual risk allocation

If you’re operating in B2B, SaaS, real estate, or international markets, these provisions are your contract risk management toolkit. They help you anticipate problems, limit liability, and establish clear expectations—before a dispute ever arises.

1. Limitation of Liability

This is one of the most critical risk clauses in contracts. It defines and restricts the amount or type of damages one party can claim from the other in the event of a dispute, breach, or error.

Why it matters:
Without this clause, your business could be exposed to unlimited financial liability—even for minor mistakes. For example, a software bug or late deliverable could trigger massive damage claims if the agreement doesn’t cap recovery. This is especially dangerous in high-stakes B2B or SaaS contracts.

Including a Limitation of Liability clause is a cornerstone of contract risk management for businesses, as it sets boundaries around financial exposure and prevents disproportionate consequences.

What to do:

• Set a clear liability cap—commonly the total contract value or fees paid over a defined period.

• Exclude indirect, incidental, or consequential damages (e.g., lost profits, reputational harm).

• Ensure it’s mutual (or clearly justified if one-sided) for balanced legal protection for service providers.

This clause alone can be the difference between a manageable issue and a business-ending lawsuit.

2. Indemnity Clause

An indemnity clause is a foundational element among the most important risk clauses in contracts. It defines who is responsible for covering losses, damages, or legal costs if a third party files a lawsuit related to the contract.

Why it matters:
Without a properly defined indemnity clause, your business could be pulled into costly legal disputes over issues caused by the other party. For example, if your client misuses a licensed product and a third party sues, you could still be implicated—unless liability is clearly assigned.

This clause is especially vital for contract risk management for businesses that operate in complex ecosystems involving subcontractors, resellers, or joint ventures. It ensures accountability and limits unintended exposure.

What to do:

• Specify the scenarios where each party will indemnify the other (e.g., IP infringement, data breaches, third-party claims).

• Require prompt notice of any claims so that the indemnifying party can take action.

• Ensure the clause covers reasonable legal fees and defense costs.

• Tailor it for industry-specific risks to ensure comprehensive legal protection for service providers.

Indemnity clauses not only protect you from the consequences of someone else’s mistake—they also build trust and professionalism into your agreements.

3. Force Majeure

A force majeure clause excuses one or both parties from fulfilling contractual obligations when extraordinary, unforeseeable events—such as natural disasters, wars, pandemics, or government actions—make performance impossible or impractical.

Why it matters:
Without this clause, your business could be held liable for breach of contract even when the failure to perform was entirely outside your control. During COVID-19, for instance, many companies that lacked clear force majeure provisions faced penalties for missed deadlines, canceled events, or supply chain failures.

Including this clause is an essential part of risk clauses in contracts and a practical tool in contract risk management for businesses—especially those operating across borders or in industries with operational volatility.

What to do:

• Clearly define what qualifies as a force majeure event (e.g., earthquakes, cyberattacks, labor strikes).

• Specify notice requirements—how and when the affected party must inform the other.

• Address whether obligations are suspended or permanently excused, and outline any mitigation responsibilities.

• Tailor the clause to your region, industry, and client type for precise legal protection for service providers.

A properly crafted force majeure clause won’t prevent crises—but it will protect your business when they happen.

4. Confidentiality Obligations

Ensures sensitive business information isn’t shared improperly.

Why it matters: A leak could cost you clients, IP, or competitive advantage.

What to do: Define “confidential information,” duration of protection, and remedies for breach.

5. Termination for Cause

Gives either party the right to exit if specific breaches occur.

Why it matters: Being trapped in a non-performing contract can drain your business.

What to do: List grounds for termination (non-payment, breach, insolvency) and specify cure periods.

6. Dispute Resolution Clause

Outlines how conflicts will be resolved—e.g., arbitration, mediation, or court.

Why it matters: Without clear procedures, small issues can escalate into lawsuits.

What to do: Choose method, location, and governing law in advance.

7. Warranties and Disclaimers

Warranties promise that certain facts or conditions are true; disclaimers limit what’s not guaranteed.

Why it matters: They define responsibility and manage expectations.

What to do: Be clear about what is being warranted (e.g., performance, legality) and what is not (e.g., suitability).

8. Data Protection Clause

Covers handling of personal data in compliance with laws like GDPR or HIPAA.

Why it matters: Mishandling user data can lead to fines and lawsuits.

What to do: Outline data storage, access rights, security measures, and breach notifications.

9. Non-Solicitation Clause

Prevents one party from hiring the other’s employees or clients.

Why it matters: Protects your team and customer base from poaching.

What to do: Specify duration, scope, and whether it applies to employees, contractors, or clients.

10. Entire Agreement Clause

States that the written contract is the full and final agreement between the parties.

Why it matters: Prevents old emails or verbal promises from becoming legal issues.

What to do: Add language nullifying prior discussions unless they’re included in the signed document.
Understand more about this

Mini Case Example

A logistics startup entered into a tech licensing agreement to support its delivery operations. Unfortunately, the contract did not include a Limitation of Liability clause—one of the most critical risk clauses in contracts.

During a peak delivery period, the licensed software crashed, halting operations. As a result, the client sued the startup for over $500,000 in damages related to lost deliveries and downstream business disruptions. The court sided with the plaintiff, ruling that the startup was liable for the full amount.

Had a Limitation of Liability clause been included, the startup’s exposure could have been capped at the contract value—just $40,000. This omission turned a manageable issue into a near-catastrophic loss.

Lesson: When it comes to contract risk management for businesses, missing even a single clause can cost more than the value of the entire project. For startups, consultants, and vendors, ensuring legal protection for service providers starts with getting the basics right—especially when drafting contracts for tech, logistics, or high-volume operations.

Summary Checklist

• Limitation of Liability
• Indemnity
• Force Majeure
• Confidentiality
• Termination for Cause
• Dispute Resolution
• Warranties and Disclaimers
• Data Protection
• Non-Solicitation
• Entire Agreement

Closing Thoughts + Call-to-Action

Risk isn’t something you eliminate—it’s something you manage. These 10 clauses are your front line of defense. Every contract, no matter how small, deserves this level of protection.

Need help drafting or reviewing a contract? Book a call with our legal team to make sure your agreements are ready for the real world.