Hidden clauses and unfavorable contract terms: what to watch for
Typical traps in contracts that can harm you
How to find hidden clauses in a contract before you sign
An extra charge is hidden in an annex that is not in the file: a fee of 2–5%, a charge on termination, “communication expenses” with no amount. Below are clauses like that, and what to do with them before you sign.
To find clauses like these in your document quickly, use an automatic check:
1. Hidden payments and fees
One of the most common ways to “hide” extra costs is to mention them in small print or in annexes to the contract.
What to watch for:
- “Payment processing fee” — can be 2–5% of the amount
- “Administrative charge” — often collected on termination
- “Cost of additional services” — no specific amount is stated
- “Communication and postage expenses” — can be disproportionately high
- References to tariffs that are not attached to the contract
How to protect yourself: Require every payment to be stated in the main text of the contract. If there are references to tariffs, require them to be attached. Do not sign a contract if you do not understand the full cost.
2. Unilateral changes to the terms
Some contracts contain clauses that give one party the right to change the contract terms unilaterally.
Typical wording:
- “The contractor may unilaterally change the cost of the services”
- “The customer agrees to changes published on the website”
- “The terms may be changed at any time without notice”
- “The contract applies in the version posted on the website”
How to protect yourself: Require that any change of terms needs your consent. If changes are possible, they should be only in your favor, or with your written consent.
3. Unfavorable termination terms
Many contracts contain terms that make termination unfavorable or impossible for one of the parties.
Dangerous terms:
- “If the contract is terminated, the prepayment is not refunded”
- “The penalty for termination is 100% of the contract amount”
- “Termination is possible only by agreement of the parties” (one party does not agree)
- “Termination is possible only through court” (a long and expensive process)
- “On termination, a fee of 50% of the remaining amount is charged”
How to protect yourself: Require fair termination terms. The prepayment should be refunded in proportion to obligations that were not performed. Penalties for termination should be reasonable (no more than 10–20% of the amount).
4. Limits on liability
Some contracts contain clauses that limit one party’s liability but not the other’s.
Examples of unfair terms:
- “The contractor is not liable for damage exceeding the contract price”
- “The contractor is not liable for indirect losses”
- “Liability is limited to the prepayment amount”
- “The contractor is not liable for the acts of third parties”
How to protect yourself: Require mutual liability. If one party limits its liability, the other should have the same right. Liability should be proportionate to the breach.
5. Automatic renewal of the contract
Many contracts renew automatically if they are not terminated in advance.
Dangerous wording:
- “The contract renews automatically for the same term”
- “To refuse renewal, you must give notice 30 days before the end”
- “On automatic renewal, the terms may be changed”
- “Automatic renewal takes place on the terms in effect at the time of renewal”
How to protect yourself: Require that the contract does not renew automatically. If automatic renewal is necessary, it should be on the same terms, with the right to refuse at any time.
6. Hidden obligations
Some contracts impose extra obligations that are not obvious on a first reading.
Examples of hidden obligations:
- “The customer undertakes to give third parties access to its data”
- “The customer agrees to the use of their personal data for marketing”
- “The customer may not use competitors’ services”
- “The customer undertakes to leave positive reviews”
- “The customer may not terminate the contract for a specified period”
How to protect yourself: Read every clause of the contract carefully, especially those in small print. Do not sign a contract if you do not agree with all of the terms.
7. Unfair venue
Some contracts contain venue terms that are unfavorable for one of the parties.
Unfavorable terms:
- “All disputes are heard at the contractor’s location” (far from you)
- “Disputes are heard in a state commercial (arbitrazh) court” (more expensive and slower)
- “The applicable law is the law of another country”
- “Disputes are resolved only through mediation” (can be expensive)
How to protect yourself: Require venue at your location, or at the place of performance of the contract. That saves time and money if a dispute arises.
8. References to documents that do not exist
Some contracts refer to documents that are not attached, or that do not exist.
Examples:
- “The terms are determined in accordance with the Regulation on…” (the document is not attached)
- “The details are set out in the Statement of Work” (the statement of work is not attached)
- “The tariffs are set out in Annex No. 2” (the annex is missing)
- “The terms are published on the website” (the website can change)
How to protect yourself: Require every document mentioned to be attached. If a document is not attached, the contract is invalid or the terms are unclear. Do not sign a contract without all of the annexes.
How to find hidden clauses: practical tips
Checklist for finding hidden clauses:
- Read the entire contract — do not skip the small print
- Check every annex — they are part of the contract
- Look for marker words: “may,” “undertakes,” “is not liable,” “automatically”
- Check the financial terms — look for hidden payments and fees
- Analyze the termination terms — they should be fair
- Check the venue — it should be convenient for you
- Look for one-sided rights — they should be mutual
- Check references to documents — all of them should be attached
Conclusion
Before you sign, check three places: annexes that are not in the package, payments with no amount, and a right of withdrawal held by only one party. If a clause refers to a tariff and the tariff is not in the file, you have not agreed the price.
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