Vendor contracts protect the vendor — not you. Auto-renewal traps, uncapped indemnification, and one-sided price escalation clauses are standard. LiabilityScore™ analyzes every clause in your service agreements and flags the terms that create hidden liability, lock-in risk, or unlimited financial exposure.
What We Analyze
Auto-renewal with a 30-day or shorter notice window
Enterprise software and professional services contracts routinely auto-renew for 12 months unless canceled with 60–90 days' written notice. A 30-day window means you need to decide to cancel before you've received your annual renewal invoice — catching most teams off-guard.
Uncapped indemnification obligations
Broad indemnification clauses can make you responsible for all losses the vendor suffers arising from your use of the service — including third-party IP infringement claims, regulatory fines, and data breach costs. Without a dollar cap tied to fees paid, your exposure is unlimited.
Limitation of liability capped at 1 month's fees
If a vendor's platform goes down for a week, causing you $200,000 in lost revenue, a liability cap of 'one month's fees' ($2,000) means you're absorbing $198,000 of the loss. Low liability caps disproportionately favor vendors with high-consequence services.
SLA remedies limited to service credits only
When vendors breach their SLA, agreements often limit your remedy to a service credit equal to a percentage of monthly fees — not actual damages or the right to terminate. A 10% credit on a $5,000/month contract gives you $500 when you expected 99.9% uptime and received 90%.
Vendor assignment rights without consent
Many vendor contracts allow the vendor to assign the agreement to any acquirer or successor without your consent. This means your contract can be transferred to a competitor, a different quality-tier provider, or a private equity roll-up — and you're bound to the new owner's service.
What is an evergreen clause in a vendor contract?
An evergreen clause automatically renews a service or vendor contract for another full term unless written notice is given within a specific window before the expiration date. With short notice windows — often 30–60 days — many businesses miss the deadline and get locked into another year at the vendor's current terms.
What is an indemnification clause and who does it protect?
An indemnification clause requires one party to compensate the other for certain losses, damages, or legal costs. In vendor contracts, vendors often include broad indemnification language that shifts liability for data breaches, IP infringement, or service failures entirely to the customer. Uncapped indemnification obligations can expose you to unlimited financial liability.
What is a limitation of liability clause?
A limitation of liability clause caps the amount one party can recover from the other — typically at the fees paid in the prior 12 months or a fixed dollar amount. While these protect vendors from catastrophic claims, extremely low caps (e.g., $1,000 for a $100,000/year contract) leave you virtually unprotected if the vendor causes significant harm.
Can a vendor raise prices mid-contract?
Many vendor agreements include unilateral price increase rights tied to CPI, usage metrics, or simply the vendor's discretion with 30 days' notice. Without a corresponding termination right triggered by price increases, you may be trapped at a higher rate for the remainder of your contract term.
What should I check before signing a multi-year vendor contract?
Key areas to review: auto-renewal notice windows, early termination fee calculation, price escalation rights, data ownership and portability on exit, SLA remedies (credits vs. cure periods), indemnification scope, and whether the vendor can assign the contract to an acquirer. LiabilityScore™ flags all of these in one scan.
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