Contract trap · Vendor and freelance
One-sided unlimited liability
The vendor must 'indemnify, defend and hold harmless' the client from 'any and all claims' — third-party IP claims, consequential losses, attorneys' fees — with no cap, while the client's liability is capped at 1-3 months' fees and excludes consequential damages; the vendor must carry $1-2M insurance naming the client; late delivery costs the vendor 0.5-1% of the price per day uncapped plus fixed sums 'per breach', while the client's late payment carries 0.01% capped at 5% (or nothing) and the client may 'set off' penalties against invoices unilaterally.
- Severity
- Severe
- How often it turns up
- Common
- Holds up?
- Depends where you are
- Clause phrases
- 24
What it looks like in a contract
Redline matches these phrases against your document verbatim. Drafters rarely invent new wording — they copy it, which is why the same sentences turn up across unrelated contracts.
In English-language contracts
- indemnify, defend and hold harmless
- from and against any and all claims, losses, damages, liabilities, costs and expenses
- regardless of cause
- Client's aggregate liability shall not exceed the fees paid in the preceding
- IN NO EVENT SHALL CLIENT BE LIABLE
- shall maintain insurance of not less than $1,000,000
- additional insured
- liquidated damages
- per day of delay
- $___ per breach
- Client may set off
- no interest shall accrue on late payments
In Russian-language contracts
- возмещает все убытки в полном объеме, включая упущенную выгоду
- ответственность Заказчика ограничена стоимостью услуг
- самостоятельно урегулирует все претензии третьих лиц
- гарантирует, что результат не нарушает прав третьих лиц
- без ограничения суммы
- обязуется застраховать ответственность
- неустойка в размере 1% за каждый день просрочки
- 0,5% от стоимости за каждый день
- штраф в размере 1 000 000 рублей за каждый факт
- Заказчик уплачивает пени 0,01%
- но не более 5% от стоимости
- удерживает неустойку из суммы оплаты
Check your own contract
Paste a clause, a page or the whole document. Nothing leaves your browser: the matching runs here, on this page, against the phrases above.
Why it bites
A $3,000 design job can carry six-figure exposure if a stock image or library turns out to be unlicensed; 1% per day is 365% per year — a two-week slip on a 1 000 000 ₽ project wipes out the fee; set-off lets the client decide the penalty and simply pay less; the insurance mandate alone can cost more than the fee.
Is it enforceable where you are
The same clause can be routine in one country and void in another. What follows is what the law says where you are — not advice on your particular contract.
B2B terms get much less protection: in the UK, UCTA 1977 s.3 tests standard terms for reasonableness; in the EU, the Late Payment Directive 2011/7 caps payment terms and P2B Regulation 2019/1150 applies to platforms.
United States
Fully enforceable between businesses; indemnities read as written incl. attorneys' fees; liquidated damages enforceable if a reasonable forecast of harm, penalties void (Restatement (Second) of Contracts §356); 1.5%/month late interest common and usually lawful; set-off clauses enforced; unconscionability defences rarely succeed for a business signatory.
- Cited
- Restatement (Second) of Contracts §356
European Union
Germany applies AGB control even B2B (§307 BGB): standard-form unlimited liability for slight negligence or exclusion of the drafter's own liability often invalid, standard-form penalties reviewed under §307 (§343 reduction excluded for merchants, §348 HGB); Belgium's B2B unfair-terms law (2019) voids manifest imbalance; Late Payment Directive 2011/7: clauses excluding interest on late payment are grossly unfair, excluding the €40 recovery fee presumed unfair.
- Cited
- §307 BGB
- §348 HGB
- Directive 2011/7
United Kingdom
UCTA 1977 s.3: exclusions/limits in the drafter's written standard terms must be reasonable but courts usually uphold broad B2B exclusions (Goodlife Foods v Hall Fire 2018); Cavendish Square v Makdessi [2015] UKSC 67: a clause stands unless out of all proportion to a legitimate interest; Late Payment Act 1998 ss.8-9: terms ousting statutory interest void unless a 'substantial remedy' is given.
- Cited
- [2015] UKSC 67
- Cavendish Square v Makdessi
- Goodlife Foods v Hall Fire
- Late Payment Act 1998
- UCTA 1977 s.3
Russia
По умолчанию убытки возмещаются в полном объеме (ст. 15 ГК), договором можно ограничить (ст. 400) кроме умышленного нарушения (ст. 401 п. 4); асимметрию можно атаковать как несправедливое условие (ст. 428, ст. 10; Пленум ВАС № 16 п. 9-10), но успех редок; ст. 333 ГК — суд уменьшает несоразмерную неустойку, для предпринимателя только по его заявлению (Пленум ВС № 7/2016 п. 71), ставки 0,5-1% в день регулярно режут до 0,1% или двукратной ключевой ставки; односторонний зачет допустим (ст. 410), но спорную неустойку без признания зачесть нельзя.
- Cited
- Пленум ВС № 7/2016
- ст. 10
- ст. 15 ГК
- ст. 333 ГК
- ст. 400
- ст. 401 п. 4
- ст. 410
- ст. 428
Where this has actually happened
Regulator actions, court rulings and the contracts they were fought over.
- Goodlife Foods Ltd v Hall Fire Protection Ltd [2018] EWCA Civ 1371 — broad exclusion in B2B standard terms upheld as reasonable under UCTA
- Cavendish Square Holding BV v Talal El Makdessi [2015] UKSC 67
- Постановление Пленума ВС РФ от 24.03.2016 № 7, п. 71-75 (снижение неустойки предпринимателю только по заявлению)
What to do
In order, from the thing that takes a minute to the thing that takes a letter.
- Mutual cap at fees paid under the SOW (or 12 months' fees) and mutual exclusion of consequential damages
- Limit indemnity to claims that the Deliverables as delivered infringe third-party IP, excluding client-supplied materials and client modifications, with notice and control of the defence
- Mirror penalty rates both ways, cap total penalties at 5-10% of the SOW, require written notice and a cure period, delete unilateral set-off or limit it to undisputed amounts
- Price insurance into the fee. RU: always plead ст. 333 in court — the judge cannot reduce a penalty for a business on their own initiative.
Traps that travel with it
Drafters who use one of these usually use several.