Avoid These 7 Contract Mistakes That Cost Small Businesses Thousands

Even the most well-meaning business owners make costly contract mistakes, often without realizing it. Whether you are using templates from the internet, reusing old agreements, or rushing to close a deal, small legal oversights can quickly turn into expensive disputes.

Here are seven common contract mistakes that cost Ontario small businesses thousands of dollars and practical ways to avoid them.

1. Vague or Missing Scope of Work

Your contract should clearly define what services or deliverables are included—and just as importantly, what is not. Without this clarity, you leave yourself open to scope creep, endless revisions, and client misunderstandings.

A proper scope of work should include:

• Specific tasks and deliverables.

• Timelines or milestones.

• Client responsibilities and approval steps.

Without this level of detail, disputes can arise even if both parties entered the agreement in good faith.

2. No Termination Clause

Every business relationship should have a clear exit strategy. Contracts that lack termination clauses can trap you in unwanted arrangements or leave you financially exposed if a client or vendor walks away.

Every agreement should state:

• How either party can terminate the contract (such as with written notice or for cause).

• What happens to outstanding fees, deliverables, or deposits.

• Whether any termination fees or refunds apply.

Without these terms, you risk uncertainty, loss of revenue, and possible legal action.

3. Missing or Unenforceable Payment Terms

One of the most common and damaging mistakes is failing to define payment terms clearly. Your contract should outline:

• How much is being charged and for what.

• When payment is due (for example, net 15 or net 30).

• What happens if payment is delayed.

• Whether interest or late penalties apply.

Ambiguity in payment terms can delay cash flow, cause missed payroll, and even lead to non-payment. For small businesses, this can be financially devastating.

4. Verbal Agreements or Handshake Deals

Trust is essential in business, but documentation protects both parties. Verbal agreements are difficult to prove and frequently lead to conflicting memories about what was promised.

Always get agreements in writing, even for one-time or short-term projects. A signed document creates a clear record of obligations and helps prevent misunderstandings later on.

5. Outdated Legal Language

Many small business owners reuse old contract templates or borrow forms from U.S.-based sources. These documents often include language that is inconsistent with current Ontario law or unenforceable in Canadian courts.

Keeping your contracts current ensures that:

• Your terms comply with updated legislation.

• Your clauses are enforceable and fair.

• You avoid outdated language that may no longer apply.

A contract lawyer in Ontario can review your agreements to ensure they reflect current business and regulatory realities.

6. Ignoring Jurisdiction and Governing Law

If your contract does not specify Ontario as the governing law and jurisdiction, you could end up facing disputes in other provinces or even other countries. This can increase costs and make enforcement far more complicated.

This risk is particularly high for businesses that work with national or international clients. Always include a governing law clause that specifies Ontario law and confirms that any disputes will be resolved in Ontario courts.

7. Skipping Legal Review

This is the most common and expensive mistake. Even well-drafted contracts can contain hidden risks specific to your industry or business model.

A lawyer does more than make your contract sound professional. They:

• Identify gaps that increase your exposure to liability.

• Ensure your contract is enforceable under Ontario law.

• Tailor terms to reflect your business strategy, risk level, and client relationships.

A brief legal review can save you thousands of dollars in future disputes or unpaid invoices.

How Delta Law Helps Small Businesses

At Delta Law, we work with small business owners across Ontario to ensure that their contracts are clear, enforceable, and aligned with their goals. We help entrepreneurs, consultants, and professional service providers protect their businesses through:

• Flat-fee contract reviews and drafting services.

• Practical advice in plain English.

• Quick turnaround times so your deals are never delayed.

You have worked hard to build your business. Do not wait for a dispute to find out your contract is not working. A proactive review ensures your agreements protect you, not expose you.

Book a Consultation to have your contracts reviewed by an experienced small business lawyer in Ontario.