📄 5 Contract Clauses Every Arizona Business Owner Should Understand
Contracts are the backbone of every business relationship—from vendor agreements and leases to client terms and employment deals. But if you’re a business owner in Arizona, not understanding what’s buried in the fine print could cost you thousands—or even your company.
Here are five key contract clauses every Arizona business owner should understand before signing on the dotted line.
1. Automatic Renewal (Evergreen) Clauses
These clauses allow a contract to automatically renew at the end of the term unless you give advance notice.
Why It Matters:
You could be locked into services or pricing you no longer want
You may miss the deadline to cancel or renegotiate
Tip: Look for language like “automatically renews for successive one-year terms unless terminated in writing 60 days before expiration.”
What to Do: Request advance written notice requirements or opt-out options to avoid being trapped.
2. Indemnification Clauses
This clause outlines who is financially responsible if someone sues due to problems with the contract.
Example:
You hire a contractor. If they injure someone or violate IP rights, indemnification determines who pays the legal bills.
Why It Matters:
You could be on the hook for costs you didn’t cause
Broad indemnity clauses can create disproportionate liability
What to Do: Narrow the clause to apply only to your own acts or negligence, and watch for “duty to defend” language.
3. Confidentiality & Non-Disclosure Provisions
These clauses protect sensitive business information like:
Customer lists
Pricing strategies
Trade secrets
Why It Matters: If vague or missing, your IP could walk out the door with an employee, vendor, or collaborator
What to Do: Ensure the clause clearly defines what is confidential, how long the obligation lasts, and penalties for breach.
4. Dispute Resolution & Governing Law
Every contract should state:
How disputes will be resolved (mediation, arbitration, court)
Where disputes will be resolved (venue)
Which state’s law applies (governing law)
Why It Matters:
You could be forced to defend a lawsuit in another state or costly arbitration forum
Arizona law may offer better protections than other states'
What to Do: Choose Arizona law and local jurisdiction to keep disputes manageable and predictable.
5. Termination & Exit Clauses
You need a clear path to end a contract—whether due to nonperformance, change of business needs, or legal risk.
Common Exit Triggers:
Material breach
Convenience termination with notice
Mutual agreement
Why It Matters: Some contracts lock you in with no termination rights unless you go to court
What to Do: Build in a reasonable notice period and allow termination for cause and for convenience when possible.
⚠️ Bonus Clause to Watch: Personal Guarantee
If you sign a lease or vendor contract personally instead of as your business entity, you may be held personally liable—even if your business closes.
Always sign as your LLC or corporation, not individually.
🧠 Final Thoughts
Contracts aren’t just legal paperwork—they’re business risk documents. One bad clause can derail years of growth.
If you're reviewing a new contract or updating an old one, don’t guess. A short legal review now could save you from expensive mistakes later.
Need help reviewing or negotiating a contract? Let’s protect your business from hidden risks and help you sign with confidence.
Hurley Law Group
Business & Contract Law for Small Businesses and Healthcare Providers
📞 308-383-1867
🌐 hurleylawgroup.com
✉️ eric@hurleylawgroup.com