Five Contract Clauses Every Dallas Business Owner Should Stop Signing Without Review

Texas is a contract-friendly state. Texas courts enforce commercial agreements as written, give parties wide latitude to allocate risk, and rarely override express terms based on equitable considerations. The same body of law that protects sophisticated parties drafting their own contracts enforces unfavorable terms strictly when those terms appear in routine vendor and customer agreements signed without much thought. A Dallas business law attorney reviewing commercial contracts regularly sees the same five clauses cause the same problems, often years after signing, when nobody remembers what the agreement actually said until the dispute starts.

These five deserve a careful read every time.

1. Choice of Law

A choice of law clause tells the court which state’s substantive law governs the contract. The choice has real consequences in Texas, which generally enforces these clauses but applies several specific tests.

For commercial contracts, Texas applies the Restatement (Second) of Conflict of Laws Section 187. The chosen law is enforced if the chosen state has a substantial relationship to the parties or transaction, or the parties had another reasonable basis for the choice. The Texas Business and Commerce Code § 1.301 governs choice of law for UCC transactions, and Section 271.001 explicitly authorizes parties to “major transactions” valued at $1 million or more to choose the law of any state, regardless of relationship to the transaction.

The Texas Supreme Court’s decision in Exxon Mobil Corp. v. Drennen, 452 S.W.3d 319 (Tex. 2014), reinforced the willingness of Texas courts to apply chosen out-of-state law in commercial agreements, applying New York law to enforce a forfeiture-for-competition provision that would have raised public policy concerns under Texas non-compete law.

The questions a Dallas business owner should ask before signing:

• Does the chosen law favor the counterparty’s typical position on key issues like statute of limitations, damages caps, implied warranties, and fee shifting?
• Does it interact unfavorably with regulatory regimes that follow the company regardless of contract law (employment, consumer protection, professional licensing)?
• For Texas-related transactions, is the choice undermining protections Texas law would otherwise provide?

A Dallas business signing a vendor agreement governed by Delaware law is not getting a worse deal automatically, but the choice changes how disputes will be evaluated, and most companies have not thought through the implications.

2. Forum Selection in Light of the Texas Business Court

A forum selection clause specifies where disputes must be litigated. Texas courts generally enforce these clauses under In re AIU Insurance Co., 148 S.W.3d 109 (Tex. 2004), unless the chosen forum is unreasonable, was procured by fraud, or violates strong Texas public policy.

The Texas Business Court, effective September 1, 2024, has changed how Dallas business owners should think about forum clauses. The First Business Court Division in Dallas has concurrent jurisdiction with district courts over qualifying commercial disputes above $5 million in controversy, including corporate governance matters, fiduciary duty claims, securities claims, IP disputes, and indemnification disputes.

A forum selection clause that specifies “the courts of Dallas County” can be read to permit either the Business Court or the district court. A clause that specifies “the First Business Court Division of the Texas Business Court, located in Dallas” gives both parties access to the specialized forum if the case meets the jurisdictional threshold. Counsel drafting commercial agreements with Texas-based parties should now consider whether the Business Court is the appropriate forum and draft accordingly.

For Dallas business owners, two practical considerations matter. Litigating in your home venue is materially less expensive than traveling to another state, even when the substantive law is the same. And consenting to personal jurisdiction in a forum where you have no operations creates real exposure if a dispute arises.

3. Indemnification and the Texas Express Negligence Doctrine

Texas courts apply two specific doctrines to indemnification clauses that catch many business owners off guard.

The express negligence doctrine, established in Ethyl Corp. v. Daniel Construction Co., 725 S.W.2d 705 (Tex. 1987), and reinforced in Storage & Processors, Inc. v. Reyes, 134 S.W.3d 190 (Tex. 2004), requires that an indemnification clause use specific language to indemnify a party against the consequences of its own negligence. Generic language like “indemnify and hold harmless from all claims arising from this agreement” does not reach the indemnitee’s own negligence under Texas law.

The conspicuousness requirement, also from Ethyl Corp., requires that an indemnification provision covering the indemnitee’s own negligence appear in a manner that would attract attention. Bold or capitalized text, headers, or colored print all satisfy the requirement. Boilerplate buried in a 30-page agreement in standard 10-point type often does not.

Construction contracts have specific additional rules under Texas Civil Practice and Remedies Code Chapter 130, which voids certain indemnity provisions in construction contracts that purport to indemnify a party for its own negligence.

A Dallas business signing an indemnification clause should confirm whether the company is the protected party or the protector, whether the duty to defend is included (which triggers obligations before liability is established), and whether the language reaches the other side’s own negligence with the express and conspicuous language Texas requires.

4. Attorneys’ Fees Provisions Under Civil Practice and Remedies Code § 38.001

Texas follows the American Rule on attorneys’ fees: each party pays its own counsel absent a statute, rule, or contract provision. Texas Civil Practice and Remedies Code § 38.001 provides one of the most important fee-shifting statutes for breach of contract claims.

The 2021 amendment under House Bill 1578 closed a significant loophole. The prior version of the statute allowed recovery of fees only against “individuals” and “corporations,” which Texas courts read strictly to exclude LLCs, partnerships, and other unincorporated entities. The amendment, effective September 1, 2021, replaced “corporation” with “organization,” which now includes LLCs, partnerships, business trusts, REITs, and most other entity forms. The exclusions for quasi-governmental entities, religious organizations, and charitable organizations remain.

Two limitations of § 38.001 still matter for contract drafting.

The statute allows recovery only by prevailing plaintiffs, not by defendants who successfully defend against a contract claim. Contract drafters who want reciprocal fee shifting need to include an express provision rather than relying on the statute.

The statute requires presentment, meaning the plaintiff must present the claim to the defendant at least 30 days before filing suit and the defendant must fail to pay during that window. Skipping presentment forfeits the statutory fee recovery even on a winning claim.

A Dallas business owner signing a contract should know whether the agreement supplements, replaces, or waives § 38.001. A well-drafted reciprocal fee-shifting provision is generally more favorable to a defendant-prone party than relying on the asymmetric statute alone.

5. IP Assignment Under Texas Law

Intellectual property assignment provisions are where service providers and creators often give away more than they realize, and where customers often receive less than they think they paid for.

For service providers, the trap is broad assignment language that covers “all intellectual property created in connection with this agreement.” That language can sweep in pre-existing tools, methodologies, frameworks, and code libraries the provider built before the engagement and uses across many clients. The fix is a carve-out preserving the provider’s background IP, paired with a license to the customer for what they actually need.

For customers, the trap is ambiguous ownership language that leaves the actual deliverable in the provider’s hands with only a license back to the customer. A Dallas technology company paying a development firm for a custom platform should own the platform, with clean assignment language and a covenant of further assurances ensuring proper IP transfer documentation gets executed.

Texas courts apply contract principles to IP assignments rather than special equitable rules. The federal Copyright Act and Lanham Act overlay state contract law, with specific requirements for the assignment of copyrights, trademarks, and patents to be effective. Work-for-hire treatment under copyright law requires both written agreement and the work falling within enumerated categories, which most service-provider work does not.

When to Have a Dallas Business Law Attorney Read the Contract

Not every contract justifies a full legal review. Routine purchase orders and standard NDAs with low-risk vendors can usually be handled internally. The contracts that warrant attention from a Dallas business law attorney share certain features: significant dollar value, long term, broad indemnification, exposure to the counterparty’s customers, substantial IP at stake, or unfamiliar choice-of-law and forum-selection provisions.

The Mundaca Law Firm reviews and negotiates commercial agreements for Dallas businesses across industries. If you have a contract sitting in your inbox waiting for a signature, send it over before you sign rather than after the dispute starts.