Let’s be honest: almost nobody actually reads the fine print. You get handed a 12-page stack of legalese for a new job, a freelance client, or a venue rental, and your brain instantly goes into skim mode. You scroll straight to the bottom, sign your name, and pray for the best.
We get it. But here’s the thing—while California has some of the strongest worker and consumer protection laws in the country, signing a bad contract can still mess up your life. Fast.
Before you put your name on anything, take five minutes to look out for these five common contract traps, along with the actual state laws that handle them.
1. The “You Can’t Work Anywhere Else” Clause (Non-Competes): What it looks like: A line claiming that if you leave the company, you aren’t allowed to work for a competitor or start your own business anywhere nearby for the next year or two.
The California reality check: If you’re an employee here, this is a massive red flag—mostly because it’s practically illegal. California straight-up hates non-competes. Under California Business and Professions Code Section 16600, non-compete clauses for employees are completely void. In fact, California doubled down on this with state laws (SB 699 and AB 1076) that actually make it a civil violation for an employer to even put one in your agreement or try to enforce an old one from out of state.
The takeaway: Unless you’re selling off a business you own, tell them to take it out. If they refuse, that tells you a lot about who you’re dealing with.
2. The Delaware Sneak-Attack (Out-of-State Dispute Clauses): What it looks like: Buried near the end in tiny font is a sentence saying any legal fights have to be settled under Delaware or New York law, and you have to fly to another state if things go to court.
The California reality check: Why should someone living in Sacramento or San Diego have to hop on a cross-country flight to resolve a pay dispute? If you’re an employee, California Labor Code Section 925 has your back. It stops companies from forcing California-based workers to litigate outside the state or under another state’s rules.
A quick note for business owners: If this is a contract between two businesses (B2B), that Labor Code protection doesn’t apply. You’ll need to speak up and negotiate local venue terms so you don’t get dragged into court 3,000 miles away.
3. “If Things Go Sideways, You’re Buying” (One-Sided Indemnity): What it looks like: “Indemnification” is just legal jargon for “I promise to pay your bills if someone sues us.” The red flag happens when the language goes completely one way, forcing you to cover all their legal bills and damages even if they were the ones who made the mistake.
The California reality check: State courts interpret these clauses line-by-line, but they will enforce them if you agreed to it in clear language. Never take on 100% of the risk for something you don’t control. If they insist on an indemnity clause, insist on making it mutual so everyone is responsible for their own blunders.
4. The Zombie Subscription (Sneaky Auto-Renewals): What it looks like: The contract quietly renews for another full year unless you send a written letter by certified mail exactly 60 days before midnight on a Tuesday. Okay, maybe not that extreme, but close.
The California reality check: California has some of the toughest rules around automatic renewals in the nation (the Automatic Renewal Law, or ARL). If a business wants to lock you into a recurring deal, those terms have to be clear, obvious, and presented in bold or large text before you sign. Plus, if you sign up online, they’re legally required to let you cancel online just as easily.
5. “We Get Paid If We Win, You Get Nothing” (One-Sided Attorney Fees): What it looks like: A sneaky clause that says, “If there’s a dispute, the Company gets to recover all its legal fees from you.” Notice who isn’t mentioned? You.
The California reality check: Companies put this in contracts to scare people away from ever taking them to court. But California law has a fantastic plot twist for this specific bully tactic. Under California Civil Code Section 1717, any one-sided attorney’s fee clause is automatically converted by law into a two-way street. If the contract says they get their legal fees paid if they win, the court will automatically grant you your legal fees if you win instead.
Contracts don’t have to be a blind leap of faith. California law gives you a lot of built-in protections, but catching these issues before you sign saves you thousands of dollars and months of headaches down the road.
Got a contract sitting on your desk that looks a little off? Send it over to Fry Law Corporation for a quick review before you hand over your signature.
