Top 10 Contract Mistakes Costing Michigan Businesses Money in 2026 (And How to Fix Them)

Contracts are where most avoidable risks are hidden. Things like pricing, scope, deadlines, and remedies all come together in documents that are often signed too fast and read too late. Treating contracts as a strategic tool instead of a formality can save real money, reduce disputes, and keep you out of court. A bad contract ends up as a written record of regret, while a good one keeps trouble at a distance and gives you real tools to respond when a dispute shows up.

This guide is written for Michigan owners, executives, and in‑house leaders who regularly sign or negotiate contracts. It is not a technical treatise or a deep dive into case law, but a practical overview meant to highlight where real‑world risk hides in everyday agreements and how to start addressing it in plain language. It is not legal advice for any specific situation, so use it as a lens to spot issues and a prompt to have more focused conversations with your own counsel.

Below are ten common contract mistakes that quietly cost Michigan companies money, and practical ways to fix them.

1. Using One-Size-Fits-All Templates

You do not see the problem until it is too late.

Many businesses copy an old contract or download a generic template that was never designed for their industry, risk profile, or Michigan law, which can leave out critical protections on indemnity, IP, non-solicitation, or state-specific requirements.

A generic contract may look good enough when everyone is happy, but missing Michigan-specific protections, unclear scope, and weak remedies often surface only when a client stops paying or a deal goes sideways, and by then the damage is already done. In that moment, you may find yourself unexpectedly on the hook for liability or discover that valuable rights, like intellectual property ownership, have effectively transferred away from your business contrary to your intentions.

How to fix it:

• Build a set of core, Michigan-focused templates for your most common deals (services, vendors, SaaS, independent contractors, NDAs).

• Have a business lawyer review and hardwire your non-negotiables (payment terms, IP ownership, limitations of liability, venue, dispute resolution).
  

2. Vague Scope of Work and Deliverables

Measure twice, cut once.

Ambiguous scope is one of the fastest paths to disputes, write-offs, and soured relationships. When the contract does not clearly define what is included, what is excluded, and how changes are handled, you end up negotiating after the fact, usually at a loss.

Take a basic contract to paint a room: “paint the living room white.” On its face this indicates the job, but it misses critical details like how many coats, what prep work is included, who moves and protects the furniture, whether trim and ceilings are included, and what happens if there are defects or color issues. Every missing detail is a potential dispute.

How to fix it:

• Identify the contract goals for both parties and the most likely risks, then ensure the contract addresses those risks.

• Attach a detailed scope of work: deliverables, milestones, assumptions, client responsibilities, and acceptance criteria.

• Use bullet-pointed details to simplify drafting and turn the scope into an easy-to-follow checklist.

• Add a change-order process that requires written approval (even email by email) before extra work is performed.
  

3. Weak or Missing Payment Terms

A promise to pay is not a plan to pay.

Too many contracts say only, “Net 30” and leave everything else unsaid: deposits, invoicing schedules, late fees, interest, and remedies for non-payment. That vagueness translates directly into slow payments and bad debt.

How to fix it:

• Spell out invoicing timing, deposit requirements, progress payments, and what triggers each invoice.

• Tie payment milestones directly to the scope of work so everyone knows when the step is finished and when payment is expected.

• Include clear late-payment consequences (interest, suspension of services, recovery of collection costs as allowed by law), and align them with Michigan’s applicable statutes, such as Michigan’s usury law, and any industry-specific rules.
  

4. Failing to Limit Your Liability

Do not bet the farm on one deal.

Without a limitation-of-liability clause, your business can be exposed to open-ended damages far beyond the value of the contract. That risk may not show up until a customer or vendor has a significant problem and looks to you to cover all downstream losses.

Consider a Tier 3 Michigan supplier (“SupplierCo”) that makes a specialized widget used in brake assemblies and sells it to a Tier 2 manufacturer (“BrakeTech”) under a supply agreement that includes this language:

“Vendor shall be fully liable for any and all damages arising out of or related to this Agreement, regardless of cause, type, or amount.”

A few months later, a batch of SupplierCo’s widgets are alleged to be defective. BrakeTech shuts down production, air-ships replacement parts from overseas, and issues a major credit to its Tier 1 customer. BrakeTech then sues SupplierCo not just for the price of the defective widgets, but also for lost production time, expedited shipping, penalties owed to its Tier 1 customer, and alleged lost future business. Because the clause is completely open-ended, SupplierCo has no contractual cap to argue that its exposure should be limited to the purchase price or a defined dollar amount.

On a small-margin contract, SupplierCo has effectively bet the farm by agreeing to unlimited liability for a Tier 2’s entire web of downstream damages, instead of tying its maximum exposure to the value of the contract or excluding indirect and consequential losses.

How to fix it:

• Include a limitation-of-liability clause that caps damages (for example, to fees paid or a defined dollar amount) and excludes consequential or special damages where permissible.

• Align caps with your insurance coverage and risk tolerance, and adjust for higher-risk engagements.

• Use narrow, clearly defined carve-outs to the cap (for example, willful misconduct, certain third-party IP infringement claims, or specific indemnity obligations), instead of leaving everything uncapped.

• Ensure the limitation language applies to the fullest extent permitted by applicable law and is consistently carried through your templates, purchase orders, and statements of work so you are not accidentally expanding liability in attachments or emails.
  

5. Ignoring Indemnity and Insurance Provisions

If you do not know who is holding the bag, it is probably you.

Poorly drafted or one-sided indemnity clauses can shift massive risk onto your business, especially in technology, construction, and professional services. Many contracts also ignore whether either side is required to carry insurance and name the other as an additional insured.

How to fix it:

• Review indemnity clauses to confirm you are not taking responsibility for risks you do not control.

• Require appropriate insurance (general liability, professional, cyber, etc.) with certificate and additional-insured requirements proportionate to the deal.

• Confirm that the insurance actually meets the contract’s requirements, which often means looking past the certificate of insurance and checking the underlying policy details.
  

6. Mishandling Intellectual Property and Data

Treating your ideas and data like they are no big deal.

In 2026, IP and data are often more valuable than the services themselves. Contracts that default to work-made-for-hire language or say nothing about ownership, licenses, and data usage can create expensive disputes and lost asset value.

How to fix it:

• Clearly state who owns what: background or pre-existing IP, newly developed or foreground work product, and jointly created materials.

• Address data rights: who can use, store, analyze, and share data; how long; and under what security and privacy standards, mindful of evolving Michigan and federal requirements.

• Require compliance with federal regimes (like HIPAA, GLBA, COPPA where applicable) and anticipate Michigan’s proposed Personal Data Privacy Act by mandating clear notices, processor DPAs, security controls, and data minimization so the contract ages well as state law tightens.
  

7. Sloppy Term, Renewal, and Termination Clauses

Contracts that are vague about when you are in, when you are stuck, and when you are free.

Auto-renewals, unclear notice requirements, and vague termination rights can trap your business in bad deals or cut off good ones prematurely. Businesses often discover problems only when trying to exit or renegotiate. This is the most expensive time to learn about the mistake. If the parties and their lawyers cannot readily determine the outcome from the four corners of the contract, that uncertainty itself is evidence the agreement was not drafted properly.

Consider a small Michigan marketing agency that signs a three-year SaaS contract with fuzzy renewal language, including an automatic one-year renewal unless the customer gives “adequate notice,” without saying how much notice or in what form. The customer emails that they want to wind things down; the vendor later claims the notice was not proper, treats the contract as renewed, and demands another full year of fees while threatening suit.

A good lawyer might be able to convince a court that the agency effectively terminated the agreement, but a better lawyer would have drafted the renewal and termination language so clearly that the issue, and the legal spend, never arose in the first place.

How to fix it:

• Specify initial term, renewal mechanics (automatic or by mutual agreement), and how and when each side can give notice.

• Distinguish between termination for convenience (with notice, possibly a fee) and termination for cause (specific breaches, cure periods, and immediate termination triggers).
  

8. Forgetting About Non-Compete, Non-Solicit, and Confidentiality Realities

Building a scarecrow when you actually need a fence.

Plenty of very smart people grab tough‑sounding boilerplate from the internet without realizing they have built a scarecrow, not the sturdy fence they actually need. Businesses frequently cut and paste aggressive non‑compete or non‑solicitation language without thinking about whether it is enforceable, especially as state and federal policies around restrictive covenants keep shifting. Michigan has given indications it is moving away from broad employee non‑competes, with proposed bills like HB 4399 and related measures aiming to restrict their use and add notice and wage‑threshold requirements, while at the federal level the FTC’s attempt at a nationwide ban has been blocked and replaced with more targeted enforcement under its existing antitrust authority, and the FTC has already brought targeted enforcement actions framed as unfair or anticompetitive practices.

In practice, this means overreaching or poorly drafted restrictions are increasingly likely to be thrown out or draw regulatory scrutiny, while your real crown jewels (trade secrets and confidential information) may still be under‑protected.

How to fix it:

• Focus on strong, practical confidentiality and trade‑secret protection as your foundation.

• If you use non‑solicit or non‑compete language, tailor scope, geography, and duration to what is likely to be enforceable in Michigan and consistent with current legal trends and regulatory guidance.
  

9. No Clear Dispute Resolution Plan

Choose the battlefield, and do not let your opponent do it for you.

When disputes arise, the absence of a clear forum and process can mean costly venue fights, inconsistent outcomes, and unnecessary escalation. Leaving these issues unaddressed is effectively a decision to litigate on the other side’s terms and can create a legal version of economic warfare where the party willing to spend more has the advantage.

Think about a Detroit manufacturer and an out-of-state supplier whose contract is silent on where and how disputes get resolved. When a defect issue explodes into a lawsuit, the manufacturer sues in Michigan, the supplier sues in its home state, and the first six months (and tens of thousands of dollars) are spent just fighting over which court should hear the case, whether arbitration applies, and which state’s law controls before anyone even touches the merits. Because nothing in the contract settled forum, choice of law, or ADR, each side weaponizes procedure to gain home-field advantage, and whoever has deeper pockets can grind the other side toward a worse settlement or a less favorable forum.

How to fix it:

• Choose governing law and venue aligned with Michigan-based operations unless there is a strong strategic reason otherwise.

• Decide ahead of time whether you prefer court, arbitration, or mediation first, and include those choices explicitly with any carve-outs (like the right to seek injunctive relief).
  

10. Poor Signature, Authority, and Recordkeeping Practices

Who is signing what, and where is the paper trail.

Contracts signed by the wrong person, with inconsistent versions floating around email threads, are common and dangerous. Questions about who actually agreed to what can undermine enforcement and delay resolutions.

How to fix it:

• Confirm signing authority and have contracts signed by individuals with appropriate corporate authority, clearly identified with title and entity name.

• Use consistent processes and tools for e-signatures, version control, and central storage so your team can quickly find the operative, fully executed agreement.
  

Turning Contracts into a Strategic Asset in 2026

The businesses that handle 2026 most smoothly will not just sign fewer bad contracts; they will upgrade their entire contract process. That means aligning templates with Michigan law, training internal teams on key red flags, and looping in legal support earlier for high-impact deals.

For many growing Michigan companies, partnering with a business-focused attorney or fractional general counsel to audit and modernize contract templates is one of the highest-ROI legal moves available, because it reduces firefighting, clarifies expectations, and protects the value you are working so hard to build. If you would like a focused contract audit or help modernizing your templates before your next renewal cycle or major deal, contact us to schedule a flat-fee review.