Billions on the line: how poorly drafted contracts without checklists and guardrails can cost organizations

How can one sentence make—or break—everything?

Imagine this.

You’re in a boardroom after months of negotiations. Everyone is exhausted but relieved. The deal you’re about to sign is monumental—a merger, a vendor contract, a partnership that could transform your business. The lawyers have reviewed it. The bankers have modeled it. The executives nod in agreement.

You sign. The ink dries. The champagne pops.

And then, months later, it unravels.

A single sentence buried in the contract gives the other party an escape hatch. A harmless phrase in the fine print shifts millions in liability onto you. One overlooked clause quietly hands away rights to something invaluable.

Suddenly, the carefully planned deal collapses. The company loses billions. The future is rewritten by one line of text you barely remember reading.

This isn’t rare. It’s happened to energy giants, universities, billion‑dollar corporations, and small businesses alike. They didn’t fail because there were no contracts—they failed because the contracts weren’t reviewed carefully enough to avoid obvious, preventable risks. Without a robust contract risk management process, even sophisticated teams can miss the very language that determines who bears the fallout when things go wrong. Strong contract risk management practices are what separate resilient organizations from those exposed to hidden liabilities.

These cautionary tales show the risks of poor contract management—how one overlooked clause can shift millions in liability. Each example illustrates why contract and risk management must be intentional, proactive, and systematic.

The following cases are drawn from in‑depth research by Ben Dillon of Cleveland Krist PLLC law firm (on behalf of DocJuris), whose detailed case analysis highlights how often one overlooked clause can reshape an entire deal.

When procurement and services contracts are missing a key provision that harms one side

Williams Companies, Inc. v. Energy Transfer Equity, L.P., No. CV 12168VCG, 2016 WL 3576682, at *1 (Del. Ch. June 24, 2016), aff'd, 159 A.3d 264 (Del. 2017)

In 2015, Williams Companies agreed to merge with Energy Transfer Equity (ETE) in a $37.7 billion deal. The contract included a condition that appeared harmless: ETE’s tax counsel had to issue an opinion that the transaction would be tax-free. But the agreement only required “commercially reasonable efforts,” not “best efforts,” and that made all the difference.

As energy prices dropped, the deal became financially unfavorable to ETE. Their attorneys ultimately declined to issue the required opinion—an exit hatch the contract gave them.

Williams sued, but the court sided with ETE. Because the deal only required “commercially reasonable efforts,” ETE hadn’t breached the agreement. The result: the merger collapsed.

What’s the fix?

Negotiate for your counterparty to use best efforts to perform any conditions, or, better yet, make performance of that condition a stand-alone obligation. Requiring commercially reasonable efforts—instead of best efforts or performance—regarding a key condition gives a party leeway to walk away once a deal no longer suits them.

Monetary loss

• $6 billion in shareholder value lost.
  
• $428 million in out-of-pocket losses to terminate an earlier merger.
  
• $300 million in banker, legal, and financing fees.

Facts about this case

• Williams and ETE sign a complex Merger Agreement with closing conditioned on a law firm representing ETE issuing a “721 Opinion” that the deal “should” be tax-free under I.R.C. §721(a) for ETE.
  
• ETE gets cold feet after market fluctuations create a $4 billion value swing that could make the transaction partially taxable for ETE.
• ETE’s attorneys start fresh on months-long analysis for the 721 Opinion and ultimately tell both sides it cannot give the opinion that the deal should be tax free for ETE.
  
• ETE announces that it will terminate if it doesn’t receive that 721 Opinion contemplated by the Agreement.
  
• Williams sues ETE, arguing it breached an obligation to use “commercially reasonable efforts” to secure the 721 Opinion.
  
• Court determined ETE did not breach this obligation and allowed it to back out of the deal because the agreement did not require ETE to provide the 721 Opinion or to use its best efforts to do so.
  
• Williams’ stockholders lost out on billions of upside through the merger and Williams lost hundreds of millions in out-of-pocket costs in pursuing it.

In re AAGS Holdings LLC, 608 B.R. 373, 379–80 (Bankr. S.D.N.Y. 2019)

A land sale agreement in New York required closing by a specific time and made “time of the essence.” But it didn’t include an automatic termination clause if the buyer missed the deadline.

The buyer missed the deadline by only 16 minutes, then immediately filed for bankruptcy. That filing triggered federal protections and gave the buyer 60 extra days to close—blocking the seller from finding another buyer.

What’s the fix?

If time is truly of the essence, make termination automatic by the failure to close by the stated date (and time).

Monetary loss

• Seller lost the right to cancel a $27.5 million purchase agreement.
  
• Seller was forced to give the buyer 60 additional days to close, preventing other sales.

Facts about this case

• Buyer signs a Purchase & Sale Agreement to buy a Queens development site for $27.5 million; posts a $100k deposit.
  
• Agreement provides that closing “shall occur at 10:00 a.m. on Sept. 20, 2019” and “TIME SHALL BE OF THE ESSENCE.”
  
• If buyer fails to close, agreement allows seller to terminate and keep the deposit by giving written notice; there is no automatic lapse.
  
• Buyer’s lender needs more time; seller demands steep extra deposits for an extension. No agreement is reached.
  
• Buyer files Chapter 11—16 minutes after the scheduled closing—invoking Bankruptcy Code §108(b)’s 60-day grace period.
  
• PSA remained in effect because it did not self-terminate. Termination required seller’s written notice under the agreement, which hadn’t been provided at the time of the bankruptcy filing.
  
• Because the deal had not self-terminated and the seller never served the contractually required written termination notice, any post-petition attempt to terminate would violate the automatic stay and be void.

Avasthi & Assocs., Inc. v. Banik, 343 S.W.3d 260, 264–65 (Tex. App.—Houston [14th Dist.] 2011, pet. denied)

A scientist providing consulting services submitted monthly invoices to an engineering firm, expecting payment. But the firm’s obligation to pay only arose after it received funds from its client. When the client didn’t pay, neither did the firm.

What’s the fix?

Make sure payment is an explicit, standalone obligation and don’t count on an implied promise to pay.

Monetary loss

• Contractor narrowly avoided loss of payment for all professional services.

Facts about this case

• An engineering consulting firm signs a consulting agreement with scientist related to a major development project between consulting firm and its client.
  
• Section 3.4 requires the scientist to submit monthly invoices, and requires the firm each invoice within 15 days after it receives the corresponding funds from its client.
  
• The scientist resigns when his first invoice isn’t paid, and the consulting firm sued him for failure to give sufficient notice of resignation under their agreement.
  
• The scientist argues the contract was illusory because he’s not entitled to compensation, and the trial court granted his motion for summary judgment.
  
• The appellate court reversed and salvaged the agreement after identifying a promise to pay by the consulting firm elsewhere in the contract.

When business customers are left holding the bag on a data breach by its SaaS provider

Travelers Cas. & Sur. Co. of Am. v. Blackbaud, Inc., No. N22C12130 KMM, 2025 WL 1009551, at *12 (Del. Super. Ct. Apr. 3, 2025)

A major SaaS provider, Blackbaud, suffered a data breach that affected thousands of nonprofits, hospitals, and schools. But its service agreements capped its liability at either $25,000 or six months of subscription fees.

When insurers covered breach-response costs and sought to recover $1.56 million from Blackbaud, the courts enforced the liability cap—shifting the risk back to the customers.

What’s the fix?

If your SaaS vendor’s mistakes can leave you on the hook for millions, negotiate a higher cap or carveout for data-breach losses, and don’t count on the contract to save you even when it’s the SaaS provider’s fault.

Monetary loss

• $1.56 million unrecovered by insurers.

Facts about this case

• Blackbaud suffered a data breach, resulting in losses for business customers.
  
• Business customers recovered under their insurance policies for the losses.
  
• Insurance companies sued Blackbaud and sought subrogation, alleging the insured’s incurred investigation costs because they could not rely on Blackbaud's breach response.
  
• Agreement between Blackbaud and its business customers included a liability cap, which the court determined “demonstrate[d] the parties’ intent to allocate the risk of loss in the event that Blackbaud breaches the Contract or commits a tort.”
  
• This clearly allocated the loss risk to the business customers who were fortunately insured.
  
• Blackbaud settled with attorneys general for nearly $50 million, but the insurer that bore the costs for the business customers could not be made whole on the $1.56 million they were out of pocket.

When a bad NDA leads to unexpected losses

Bd. of Trs. of Leland Stanford Junior Univ. v. Roche Molecular Sys., Inc., 563 U.S. 776, 131 S. Ct. 2188 (2011)

Stanford University lost ownership of valuable HIV test patents because of a single clause in an NDA. A Stanford researcher developed groundbreaking technology in federally funded labs. By Stanford’s policy and under the Bayh-Dole Act, those inventions should have belonged to the university.

But while training at a private biotech firm called Cetus, the researcher signed a confidentiality agreement. Hidden inside was a devastating phrase: he “hereby assigns” any resulting inventions to Cetus. Years later, Stanford filed patents for the technology and sued Roche (which had acquired Cetus) for infringement. The Supreme Court ruled against Stanford. That single clause trumped Stanford’s internal policies and federal funding agreements.

What’s the fix?

Require prior written consent from Stanford for any subsequent agreements a Stanford researcher signs, and confirm all IP grants are “subject to” existing obligations.

Monetary loss

• Substantial—lost rights to enforce patents for HIV test kits later commercialized worldwide.

Facts about this case

• Bayh-Dole Act allows universities (including Stanford) to take ownership of patents on inventions created with use of federal funds.
  
• Stanford researcher had promised to assign any future inventions to Stanford while working in Stanford labs.
  
• Researcher was trained at a private firm to learn PCR technique, and signed an NDA with that firm assigning it any inventions “arising from [researcher’s] access.”
  
• Stanford filed patent applications on researcher’s subsequent work and eventually sued the private firm for infringing on its patents, but the researcher’s NDA vested title in the patents with the firm.
  
• Patents did not automatically vest with the university under Bayh-Dole Act.

When a force-majeure clause didn’t cover the loss

55 Oak St. LLC v. RDR Enterprises, Inc., 2022 ME 28, ¶¶ 20–21, 275 A.3d 316 (Me. 2022)

A restaurant’s lease excused rent during total government shutdowns like COVID lockdowns. But when the restrictions eased and it could operate at only 25% capacity, the clause no longer applied. The restaurant couldn’t generate enough revenue to survive, but the landlord demanded full rent. The court sided with the landlord because the clause didn’t anticipate partial closures.

What’s the fix?

Consider force-majeure events that can result in partial (yet still significant) losses of revenue.

Monetary loss

• $19,685.03 in unpaid rent.

Facts about this case

• Court determined that while pandemic shutdowns initially excused rent under force-majeure terms, the clause did not provide partial rent relief for events preventing the restaurant from operating at full capacity.

Phoenix Bulk Carriers (BVI) Ltd. v. Triorient LLC, No. 20CV936 (JGK), 2020 WL 4288031 (S.D.N.Y. July 26, 2020)

A charterer’s contract protected it from “delay or failure of suppliers of cargo.” But when the buyer’s renegotiations led the supplier to cancel, the arbitrator ruled it wasn’t a true supplier failure—it was self-inflicted. The force-majeure clause didn’t apply.

What’s the fix?

Tie force-majeure to specific external triggers or outcomes (here, the cargo not being tendered by the supplier) and avoid loose wording regarding “failures” or “delays” for disruptions that could have been prevented.

Monetary loss

• $523,105.72.

Facts about this case

• Charterer was granted right by Venezuelan government to buy iron from state-owned supplier and chartered a shipping company to deliver it to Turkey.
  
• Charterer ultimately was unable to execute contract with the iron supplier, who pulled out of the deal after the charterer tried to renegotiate.
  
• Shipping company had already sent the ship out to Venezuela, and charterer never called them off or informed them that the deal was in flux.
  
• Force-majeure clause protected charterer from “delay or failure of suppliers of cargo” but arbitrator (later affirmed by the court) found that the cancellation by the supplier was not a failure of the supplier to perform but a self-inflicted consequence of the charterer retrading.

When an unclear termination provision led to automatic renewal

Baby Dolls Topless Saloons, Inc. v. Sotero, 642 S.W.3d 583 (Tex. 2022)

A Texas nightclub employed dancers as independent contractors under agreements that ended December 31 each year. But a single clause said, “This license shall thereafter be automatically extended for successive one‑year periods.” The contract used “license” and “agreement” interchangeably, leaving it unclear whether only the performance license renewed—or the entire agreement, including its arbitration clause.

Years later, a dancer died in a car accident. Her family sued for wrongful death, but the nightclub argued the arbitration clause had automatically renewed. The Texas Supreme Court agreed.

What’s the fix?

Be explicit about what triggers an automatic renewal and which parts of the agreement are renewed.

Monetary loss

• Loss of public trial and right to a jury for wrongful-death action.

Facts about this case

• Dancer died in a car accident leaving the club she worked at, and family brought wrongful death action against the club for serving her alcohol knowing she was intoxicated.
  
• She had a written agreement with the club that included an arbitration provision.
  
• The agreement used inconsistent language about the contractual relationship, referring to certain key provisions of the agreement as “the License,” but also used that term interchangeably with “the Agreement.”
  
• Regarding termination, it provided that: “This Agreement … shall terminate on December 31 [2017] … . The License shall thereafter be automatically extended for successive one year periods running from January 1 through December 31 of each year thereafter.”
  
• The Texas Supreme Court refused to distinguish between the “Agreement” and the “License” and concluded that all provisions of the agreement—including the arbitration provision—automatically extended along with any “license.”

When the difference between “paid if paid” and “paid when paid” hurts one side

Faith Techs., Inc. v. Fid. & Deposit Co. of Md., No. 10-2375-MLB, 2011 WL 251451, at *3 (D. Kan. Jan. 26, 2011)

A subcontractor completed more than $500,000 worth of work, assuming payment was guaranteed. But the subcontract included a “pay-if-paid” clause: the general contractor only had to pay the subcontractor if the property owner paid them first. When the owner defaulted, the subcontractor had no legal recourse.

What’s the fix?

Avoid “paid if paid” clauses if you have no contractual remedy for an upstream failure of payment.

Monetary loss

• Over $500,000 in unpaid invoices.

Facts about this case

• The court held the pay-if-paid clause regarding the contractor’s obligation to pay the subcontractor was valid under state law and shielded the contractor from contractual liability.

When other drafting oversights lead to substantial loss

Adelman v. Proskauer Rose, LLP, No. 2084CV00735-BLS2 (Mass. Super. Ct. May 16, 2023)

A limited partner was wiped out of 27.5% equity and future carried interest because a redemption clause was allegedly copy-pasted from another deal. The clause allowed the general partner to redeem the limited partner’s interest in connection with a financing, acquisition, or asset sale without consent.

The case settled confidentially on the eve of trial.

What’s the fix?

Agreements aren’t one-size-fits-all: ensure every term is needed for this deal.

Monetary loss

• Confidential settlement on eve of trial where plaintiff sought $636 million in damages.

Facts about this case

• Plaintiff cofounded an investment platform as a limited partner and engaged a law firm to draft the limited-partnership and general-partner agreements.
  
• The agreements allowed the general partner to enter into major transactions without the limited partner’s consent and to redeem the limited partner’s interest unilaterally in the deal.
  
• General partner used the clause to redeem limited partner’s 27.5% equity and all future carried-interest for nominal value.
  
• Limited partner sued the firm for legal malpractice, alleging the clause was negligently copied from another deal and allowed the majority owner to wipe him out.
  
• Court denied the firm’s motion for summary judgment, which meant that case would proceed to trial on damages claim, and the case settled on the eve of trial.

Bridgeland Resources, LLC and Zargon Acquisition, Inc. v. Winston & Strawn LLP, Cause No. 23-77047, 125th District Court, Harris County, Texas

A mineral-rights owner transferred 25% of its equity in exchange for a promised long-term services contract. But the contract language didn’t make the equity transfer contingent on execution of the services agreement. As a result, the owner lost a quarter of the company for only a few weeks of services.

What’s the fix?

Draft every contingency as an express condition; otherwise a merger clause will invalidate oral agreements and let one side keep its upside even if the expected quid pro quo never materializes.

Monetary loss

• Pending lawsuit seeking $175 million in damages.

Facts about this case

• Bridgeland held an interest in mineral rights and transferred 25% of the equity in its company to an oil-and-gas operator, who agreed to provide drilling and operational services at favorable pricing for many years.
  
• The operator informed Bridgeland it could not provide the contemplated services and proposed an alternative arrangement through a sister company.
  
• The arrangement involved two separate agreements: one regarding the transfer of a 25% equity interest in Bridgeland, and the other to secure long-term operational services at favorable pricing.
  
• The agreement transferring the equity interest was finalized and executed, but only a letter agreement for six weeks of services was executed.
  
• The sister company and the original operator made oral representations about a long-term deal, but this was never formalized.
  
• Because the equity transfer agreement contained a merger and entire-agreement clause, the operator argued the transfer was not contingent on long-term services.

AT&T’s 2011 Failed T-Mobile bid

AT&T agreed to buy T-Mobile for $39 billion without a contractual off-ramp if regulators blocked the deal. The DOJ’s Antitrust division sued to block the merger, forcing AT&T to abandon it and absorb $4 billion in breakup costs.

What’s the fix?

Build a clear off-ramp for specific anticipated obstacles, and include contingency clauses for regulatory obstacles outside the parties’ control.

Monetary loss

• $4 billion in breakup costs.

Facts about this case

• AT&T agreed to purchase T-Mobile for $39 billion in March 2011.
  
• The deal included a $3 billion breakup fee and $1 billion in spectrum rights.
  
• The parties knew the deal required regulatory approval given the resulting market share.
  
• The DOJ Antitrust division sued to block the acquisition in August 2011.
  
• After realizing the DOJ’s commitment to blocking the deal, AT&T withdrew its request to the FCC for approval and announced it was reserving $4 billion to cover breakup costs.
  
• The deal would have resulted in AT&T serving more than 40% of wireless customers, making regulatory approval a long shot.
  
• AT&T had no contractual exit and had to absorb the $4 billion loss.

Why better contracts mean better outcomes

Look back at these stories—failed mergers, hidden liability caps, lost intellectual property, force majeure gaps, renewal traps, and payment clauses that shifted risk downstream. None of these disasters happened because there was no contract. They happened because the contract didn’t say what it needed to say.

It wasn’t bad luck. It wasn’t unforeseeable chaos. It was preventable.

And it always started with just one sentence. One that gave a party an escape when the market turned. One that shifted the cost of a data breach onto the wrong side. One that handed away groundbreaking inventions. One that kept a contract alive years beyond its intended life.

The reality is simple: contracts decide who wins and who loses when things go wrong. They’re not just paperwork—they’re the blueprint for every business relationship. Yet too often, deals are rushed to signature without anyone catching the subtle risks lurking in boilerplate language.

That’s where strong guardrails, structured playbooks, and compliance-driven reviews change the outcome. A well‑designed playbook doesn’t just flag obvious risks; it provides clear guardrails and fallback positions so your team negotiates with confidence. Compliance checks ensure the contract aligns with your internal policies, external regulations, and industry standards before you ever sign.

When these systematic measures are in place, you’re no longer relying on luck or memory. You’re reducing risk by understanding every obligation in advance—knowing who is responsible for what, how liabilities shift, and what hidden clauses could hurt you down the road. You’re not just reacting to problems after they surface—you’re preventing them entirely.

How DocJuris can help

DocJuris makes sure those risks never slip through the cracks. It doesn’t just help you review faster—it helps you review smarter and more consistently. Guided playbooks rooted in your company’s policies flag risky clauses before they’re signed. AI-powered redlining highlights ambiguous language instantly. Automated guardrails and checklists ensure every agreement follows a structured contract risk management process, addressing the risks of poor contract management before they escalate.

With DocJuris, you don’t just sign faster. You sign with confidence. You close deals knowing they’ll hold up under pressure, protect your business, and eliminate costly surprises down the road.

Don’t leave your most important agreements exposed to the risks of poor contract management. A well‑defined contract risk management process protects your organization, reduces downstream liability, and empowers teams to negotiate with confidence. See how leading teams are transforming contract and risk management into a true competitive advantage with DocJuris.

Book a personalized demo today—and take the first step toward faster, safer, and smarter contracts.