I review contracts daily. The terms that actually determine a business owner’s financial exposure are rarely the ones they focus on. Price, scope, timeline—those get attention. The clauses buried in the back half of the agreement, written in dense legal language, are the ones that matter most when something goes wrong.

These five clauses appear in nearly every commercial contract. They’re not obscure. They’re not optional. And getting them wrong is expensive.

1. Right of First Refusal

Picture this: you get a call from someone you’ve never met, telling you they’re your new business partner. Your co-owner sold their interest over the weekend. You had no idea it was happening, no chance to buy the interest yourself, and no say in who just walked into your company.

A right of first refusal (ROFR) prevents that. It gives you the opportunity to match any third-party offer before the other party can accept it. If your partner wants to sell, you get to buy at the same price and terms before an outsider can.

You’ll find ROFRs in operating agreements, shareholder agreements, commercial leases (for adjacent space), franchise agreements (for nearby territories), and sometimes vendor contracts where a supplier offers a preferred customer the right to match competing bids.

The flip side matters too. If you’re the one subject to a ROFR, it limits your ability to sell. Potential buyers lose interest when they know the other party can simply match their offer after they’ve invested time and money in negotiations.

Getting the Terms Right

Define the trigger precisely. A bona fide third-party offer? A decision to sell? Death or disability? Vague triggers create disputes. In Minnesota, courts enforce ROFRs with clearly defined terms but may find provisions with vague or missing timelines unenforceable as unreasonable restraints on transfer.

Set a response deadline. Thirty to sixty days is standard. An indefinite right creates unreasonable delay and can effectively freeze the asset.

Clarify matching terms. Does the holder match only the price, or the full offer including non-monetary terms like seller financing or earnouts? This distinction matters more than most people realize.

Include a waiver mechanism. If the holder declines, the selling party should be free to proceed on substantially similar terms. If the deal terms materially change, the ROFR should retrigger.

2. Early Termination

You signed a three-year vendor contract. Eighteen months in, the vendor’s quality has declined, your business has pivoted, or the service simply isn’t what you need anymore. Without an early termination clause, you’re locked in—or you’re walking away and facing a breach of contract claim.

This is the clause that determines the cost of changing your mind.

For-Cause vs. For-Convenience

The distinction is fundamental, and I flag it for clients constantly.

Termination for cause means the other side breached. This should be in every contract. Define what constitutes a material breach, and include a cure period—typically 30 days—so the breaching party has a chance to fix the problem before termination kicks in.

Termination for convenience lets a party walk away for any reason, usually with advance notice. It’s more flexible but creates uncertainty on the receiving end. If you agree to it, negotiate adequate notice periods and transition provisions so you’re not left scrambling.

Termination Fees Under Minnesota Law

Many contracts impose an early termination fee—the remaining contract balance, a percentage of the remaining term, or a fixed amount. Here’s what businesses often miss: under Minnesota law, that fee must be a reasonable estimate of actual damages, not a penalty.

Courts applying Minn. Stat. Section 336.2A-504 (for leases) and common law principles examine whether the fee bears a reasonable relationship to anticipated loss. A fee that’s disproportionate to actual damages may be found unconscionable and unenforceable. I’ve seen contracts with termination fees that would never survive judicial scrutiny.

Notice and Transition

Thirty to ninety days’ notice is typical for commercial contracts. The clause should also address what happens after termination: return of property and data, continuing obligations like warranties on completed work, final payments for services already rendered, and cooperation during the transition period.

3. Indemnification

This is the most negotiated clause in commercial contracts, and for good reason. An indemnification provision answers one question: if something goes wrong because of your actions, who pays? Get this wrong and you could be on the hook for losses you didn’t cause.

Mutual vs. One-Sided

The clause I push back on most often is one-sided indemnification. In most arm’s-length business relationships, both parties should indemnify each other for losses caused by their own negligence, breach, or misconduct. If the other side’s draft only has you indemnifying them, ask why. Unless the risk profile clearly justifies it, mutual indemnification is the appropriate baseline.

Scope and Triggers

Watch the language carefully. Indemnification for losses “arising out of or related to” the contract is dramatically broader than indemnification for losses “caused by” a party’s breach or negligence. That first formulation can make you responsible for losses you had nothing to do with. Push for fault-based triggers.

Caps and Defense Obligations

An uncapped indemnification obligation is an unlimited liability exposure. Common caps include the total contract value, insurance coverage limits, or a multiple of fees paid.

One point that catches businesses off guard: the obligation to pay for the other party’s legal defense can exceed the underlying damages. If you agree to defend the other party, make sure you control the defense—including selection of counsel and settlement decisions.

Minnesota-Specific Rules

Minnesota courts apply strict construction to indemnification provisions that attempt to shift liability for one party’s own negligence. The language must clearly and unequivocally express that intent. In construction contracts, Minn. Stat. Section 337.02 makes indemnification provisions unenforceable except to the extent the loss is attributable to the indemnifying party’s own fault.

For a more detailed treatment, see our comprehensive guide: Indemnification Clauses: What Every Business Owner Should Negotiate.

4. Limitation of Liability

A $25,000 software subscription shouldn’t put your company at risk for $2 million in consequential damages if the software fails. That’s the problem this clause solves.

Limitation of liability caps the total damages one party can recover from the other. While indemnification determines who pays for specific losses, limitation of liability sets the ceiling. You’ll see it in virtually every SaaS agreement, professional services contract, vendor agreement, and construction subcontract.

Setting the Cap

Common caps range from 1x to 3x the total fees paid under the contract. Too low and you’ve effectively eliminated your remedies as the buyer. Too high and you’ve provided no meaningful protection as the service provider. The right number depends on the contract value and the realistic downside exposure.

Consequential Damages Exclusions

Most limitation of liability clauses exclude indirect, consequential, incidental, and special damages—lost profits, lost revenue, lost business opportunities. This exclusion is standard in commercial contracts and is generally enforced by Minnesota courts between sophisticated parties. But understand what you’re giving up: if a vendor’s failure costs you a major client, that exclusion means you can’t recover those lost profits.

Carve-Outs

Certain claims should sit outside the cap entirely:

  • Intellectual property infringement — A single IP claim can exceed the contract value many times over
  • Confidentiality and data breaches — Notification costs, credit monitoring, regulatory fines, and litigation are unpredictable and potentially massive
  • Willful misconduct or fraud — Courts may not enforce caps on intentional wrongdoing regardless of what the contract says
  • Third-party indemnification claims — Consider whether the liability cap applies to indemnification obligations or whether those are treated separately

Enforceability in Minnesota

Minnesota courts enforce these clauses between sophisticated parties unless they’re unconscionable, against public policy, or the result of a special social relationship. Under Minn. Stat. Section 336.2-302, a court can refuse to enforce an unconscionable provision—but when two experienced business parties negotiated the agreement, the clause is generally presumed conscionable.

One practical point: make the clause conspicuous. Bold text, capital letters, or a separate section heading. Minnesota courts look at whether the provision was hidden from the other party.

5. Force Majeure

Before 2020, force majeure clauses were boilerplate. Nobody read them. The pandemic changed that permanently.

Businesses across every industry suddenly needed to know: does our contract excuse performance when a global health crisis shuts everything down? The answer depended on the exact language—and many businesses discovered their clauses weren’t specific enough to cover what was actually happening.

A force majeure clause excuses performance when extraordinary events beyond a party’s control make it impossible or impractical. The French term translates roughly to “superior force.”

Why Specificity Matters

Minnesota courts enforce force majeure provisions as written. A vague clause referencing only “acts of God” may not cover a pandemic, a cyberattack, or a government regulatory action. List events relevant to your business:

  • Natural disasters (floods, tornadoes, earthquakes)
  • Pandemics, epidemics, and public health emergencies
  • Government actions, orders, or regulations
  • War, terrorism, and civil unrest
  • Supply chain disruptions and material shortages
  • Cyberattacks and technology failures
  • Labor strikes and work stoppages
  • Utility failures (power, internet, telecommunications)

After the specific list, include catch-all language: “and other events beyond the reasonable control of the affected party that could not have been reasonably foreseen or prevented.” This covers events you haven’t anticipated while establishing a standard for what qualifies.

Obligations During a Force Majeure Event

The clause should address more than just excusing performance:

  • Notice requirements — How quickly must the affected party notify the other side? 48 to 72 hours is reasonable.
  • Mitigation — The affected party should use reasonable efforts to minimize the impact and resume performance as soon as practicable.
  • Duration limits — If the event continues beyond 90 to 180 days, the non-affected party should have the right to terminate.
  • Payment obligations — Does the suspension also suspend payment, or does the non-performing party continue to owe?

What Happens Without One

If your contract has no force majeure clause, you may still have common law defenses—but they’re harder to establish:

  • Impossibility — Performance must be objectively impossible, not merely difficult or expensive
  • Impracticability — Performance must be impractical due to an unanticipated event, and the impracticability must be substantial
  • Frustration of purpose — The contract’s purpose must be substantially frustrated by an unforeseen event

Here’s the critical point: Minnesota courts have noted that an express force majeure clause may preclude reliance on common law impossibility or impracticability doctrines entirely. The theory is that the parties already addressed the topic contractually. That makes the specific language of your force majeure clause potentially your only avenue for relief.

Reading These Clauses Together

These five clauses don’t operate independently. They form a risk allocation framework, and the interaction between them matters as much as the individual terms. Does the indemnification obligation exceed the limitation of liability cap—and if so, which controls? Does termination trigger or extinguish indemnification obligations? Does a force majeure event relieve indemnification obligations, or do they survive?

Contracts that answer these questions clearly prevent disputes. Contracts that leave gaps create expensive ambiguity. Before signing any significant agreement, make sure you understand not just what each clause says individually, but how they work together to define your total exposure.

For guidance on contract review and negotiation specific to your business, contact Aaron Hall.

Frequently Asked Questions

What is the most important clause in a business contract?

The indemnification clause is often the most consequential because it determines who bears financial responsibility when something goes wrong. A poorly drafted indemnification clause can expose your business to unlimited liability for the other party’s mistakes. Every indemnification clause should have clear scope limits, notice requirements, and reasonable caps.

What makes a termination clause enforceable in Minnesota?

An enforceable termination clause should specify: (1) whether termination is for cause, convenience, or both, (2) required notice period, (3) cure period for breaches, (4) post-termination obligations (payment for work completed, IP ownership), and (5) survival clauses for provisions that outlast the contract. Ambiguous termination clauses are interpreted against the drafter.

Should my business contracts include a dispute resolution clause?

Yes. Without a dispute resolution clause, disputes default to litigation in whatever court has jurisdiction, which can be expensive and unpredictable. A dispute resolution clause lets you choose between mediation, arbitration, or litigation, specify the venue, and potentially limit discovery costs. For most business contracts, a tiered approach (negotiation, then mediation, then arbitration or litigation) works well.