Contracts Are War ③ How to Check Whether Your Contract Has a Hidden Risk
Hello, this is Administrative Agent Jean.
Have you ever read a contract carefully before signing it?
Many people say this when they receive a contract:
“I asked AI, and it said the contract looked fine.”
AI can read the sentences in a contract.
But how those sentences will work in an actual dispute, which clause will bind you later, and which wording may be used in favor of the other party are different questions.
AI does not sign the contract.
The responsibility usually returns to the person who signed it.
This is the final article in the three-part series on toxic contract clauses.
Part 1: The Other Side Already Knew What They Were Signing
Part 2: 3 Ways to Challenge Toxic Clauses
Part 3: How to Check Whether Your Contract Has a Hidden Risk
In Part 1, we reviewed five common toxic clauses.
In Part 2, we looked at how already-signed contracts may be challenged under the Korean Civil Act.
This article is not theory.
It is a practical checklist.
Take out your contract and compare it with the eight items below.
If even one item applies, it may be something to revise before signing or review strategically after signing.
Key Summary
| Checklist Item | Common Contract Type | Main Risk | |---|---|---| | Revisions until Party A is satisfied | Freelance, design, development | No clear completion standard | | All repairs borne by tenant | Lease special clauses | Tenant may bear age-related defects | | Non-compete after termination | Employee, freelancer, outsourcing | Future work or business may be restricted | | Penalty for any termination | Service, exclusive, agency | You may pay even when the other side is at fault | | All copyrights assigned | Content and creative contracts | Derivative and overseas rights may be transferred | | Signed without negotiation | All contracts | One-sided contract structure | | Large size gap + risk shifting | Platform and large-company contracts | Rights go to the other side, risks stay with you | | Contractual penalty or fixed penalty | Exclusive and service contracts | Reduction may be difficult |
8-Point Self-Check for Toxic Clauses
1. “Revisions Shall Continue Until Party A Is Satisfied”
Common contracts:
- Freelance service agreement
- Design contract
- Video production contract
- Development contract
- Content production contract
Why is it risky?
“Satisfaction” is not an objective standard.
You cannot know when Party A will be satisfied, what counts as final completion, or how many revisions are required.
This clause removes the delivery completion standard.
The freelancer may believe the deliverable has been completed, while the client says it is still not acceptable.
If the contract does not specify revision limits and acceptance standards, the dispute can become much longer.
If Checked, Review This
Check whether the contract includes:
- Number of revisions
- Scope of revisions
- Additional fees for change in planning or concept
- Delivery completion standard
- Review period
- Deemed acceptance if no objection is raised
If these are missing, it is better to document an agreement such as “up to two revision rounds after initial delivery.”
If you already signed, organize emails, KakaoTalk messages, task management records, and revision history to show the actual delivery process.
2. “All Repair and Maintenance Costs During the Lease Shall Be Borne by the Tenant”
Common contracts:
- Residential lease
- Commercial lease
- Office lease
- Lease contracts for foreign tenants
Why is it risky?
Article 623 of the Korean Civil Act states that the landlord must maintain the leased property in a condition necessary for the tenant’s use and profit.
But a special clause saying “all repairs are the tenant’s responsibility” may shift too much responsibility to the tenant.
This can include issues that were not caused by the tenant, such as:
- Old boiler failure
- Pipe problems
- Water leakage
- Ceiling cracks
- Deterioration from age
This is especially risky for foreign tenants who sign Korean contracts without fully understanding the special clauses.
Many discover the clause only when the landlord tries to deduct repair costs from the deposit at move-out.
If Checked, Review This
Check whether the contract distinguishes between:
- Ordinary wear and tear
- Age-related defects
- Damage caused by tenant fault
- Consumable replacements
- Major facility repairs
- Deposit deduction procedure
If the clause simply says “all repairs,” it is risky.
Before signing, tenant fault and ordinary wear should be separated.
If you already signed, gather photos, repair estimates, technician opinions, and move-in condition records to prove whether the defect was age-related or caused by tenant fault.
3. “For O Years After Termination, You May Not Work in the Same Industry Within O km”
Common contracts:
- Employment contract
- Freelance contract
- Instructor agreement
- Outsourcing agreement
- Beauty, cafe, fitness industry contracts
- Sales or technical position contracts
Why is it risky?
Non-compete clauses are not always invalid.
They may be recognized within a reasonable scope if there is a legitimate need to protect trade secrets, customer information, core technology, or special know-how.
But if the period is too long, the area is too wide, or the restricted work is too broad, the clause may become problematic.
The Korean Supreme Court considers factors such as:
- Whether there is a protectable employer interest
- The worker’s position before leaving
- The duration, location, and scope of the restriction
- Whether compensation was provided
- The reason for leaving
So the clause is not automatically valid just because it is written in the contract.
But it is also not automatically invalid just because it restricts occupational freedom.
If Checked, Review This
First check:
- Is the period longer than one year?
- Is the geographic scope too broad?
- Was separate compensation provided for the non-compete?
Also check whether the restricted work is broadly written as “all same or similar industries.”
Before signing, narrow the period, area, and industry, and clarify compensation.
If you already signed, check what trade secrets or customer information you actually accessed and whether the other side has a concrete protectable interest.
4. “If the Contract Is Terminated for Any Reason, Party B Shall Pay a Penalty”
Common contracts:
- Service agreement
- Agency contract
- Exclusive contract
- Outsourcing agreement
- Long-term freelance contract
Why is it risky?
The most dangerous phrase is “for any reason.”
This wording may make you pay a penalty even when the contract ends because of the other party’s fault.
For example, the other side may have failed to provide materials, delayed inspection, or failed to pay.
Even then, if the clause is written broadly, they may still claim a penalty simply because the contract ended early.
If Checked, Review This
Check:
- Does the penalty apply to both parties?
- Does it apply only to Party B?
- What happens if Party A is at fault?
- Are fees for work already performed settled separately?
- Is the penalty proportional to actual damage?
- Are termination grounds clearly separated?
Before signing, revise the clause so that the party at fault bears responsibility.
If you already signed, organize the actual reason for termination and collect evidence of the other side’s delay or breach.
5. “All Rights, Including Copyrights and Moral Rights, Belong to Party A”
Common contracts:
- Content production contract
- Design contract
- Video production contract
- Webtoon or web novel contract
- Advertising production contract
- Branding and marketing contract
Why is it risky?
Article 14 of the Korean Copyright Act provides that moral rights belong exclusively to the author.
In principle, moral rights cannot be assigned.
But contracts sometimes state that “all rights, including moral rights, are assigned.”
That wording may be legally problematic.
There is also another issue: economic copyrights.
Economic copyrights can be assigned or licensed, but if the contract simply says “all rights,” the scope may become too broad.
You must check whether the following rights are included:
- Derivative work rights
- Overseas use rights
- Video adaptation rights
- Merchandising rights
- AI training use
- Source file use
- Portfolio restriction
If Checked, Review This
Check whether the contract distinguishes:
- Assignment of economic copyrights
- License to use
- Duration of use
- Territory
- Media or platform
- Derivative work rights
- Source file delivery
- Portfolio use
- Moral rights restriction wording
Before signing, avoid “all rights” language and define rights specifically.
If you already signed, review which rights were actually transferred, whether moral rights wording is effective, and whether secondary use should be negotiated separately.
6. You Signed the Contract “As Is” Without Negotiation
Common contracts:
- All contract types
Why is it risky?
If the contract was prepared entirely by the other party, it likely already contains a structure favorable to them.
Signing without negotiation can become an important background fact.
Of course, a contract is not invalid simply because it was signed without negotiation.
But if a specific clause later becomes a problem, the fact that the contract was one-sidedly drafted may matter.
If Checked, Review This
Think back to the signing process.
- Did you request any revisions?
- Did the other side reject your revision request?
- Did you have enough time to review the contract?
- Did anyone explain the clauses?
- Did you fully understand the Korean contract?
- Are there emails or messages showing negotiation?
If you already signed, prepare a timeline of the contract negotiation process.
This is especially important for foreigners, first-time founders, freelancers, and small business owners.
7. The Other Party Is Much Larger, and All Risk Is Shifted to One Side
Common contracts:
- Platform contracts
- Large company and small company service contracts
- Small business contracts
- Freelancer and large agency contracts
- Creator and content supply contracts
Why is it risky?
A size difference alone does not make a contract invalid.
But if the larger party takes most of the rights while you carry most of the risk, the structure should be reviewed.
The Korean Supreme Court has held that if a party in a superior economic position uses that position to impose excessive burdens on the other party, the agreement may be invalid under Civil Act Article 103.
The key issue is not the size difference itself.
The issue is whether the size difference appears in the contract as unfair risk shifting.
If Checked, Review This
Check the following combinations:
- Can the other side terminate easily while you cannot?
- Is the other side exempt from liability while you bear all damage?
- Do rights in the deliverables transfer to the other side while defect liability remains with you?
- Do you pay a penalty even when the other side is at fault?
- Do you bear the risk of platform policy changes?
In these cases, review the entire risk allocation structure, not just one clause.
8. The Clause Says “Contractual Penalty” or Claims a Fixed Amount or All Revenue Regardless of Actual Damage
Common contracts:
- Exclusive contract
- Service agreement
- Agency contract
- Content contract
- Outsourcing agreement
Why is it risky?
Penalty clauses can have different legal characters.
The two main categories are liquidated damages and contractual penalty.
Liquidated damages are a pre-agreed estimate of damages. If the amount is unreasonably excessive, a court may reduce it under Civil Act Article 398(2).
A contractual penalty is closer to a sanction to force performance. It may not be subject to reduction under Article 398(2) in principle.
A contractual penalty may still be challenged under Article 103 if it is excessively heavy.
But the structure is more difficult.
If Checked, Review This
Look for words such as:
- Contractual penalty
- Sanction
- Penalty charge
- Regardless of actual damage
- Entire sales
- Entire revenue
- Entire remaining contract amount
- Fixed amount compensation
- Separate and additional damages
Even if the word “contractual penalty” is not used, the structure may function like a sanction.
Before signing, clarify the character of the penalty and make it proportional to actual damage.
How Many Items Did You Check?
0 Items
Your contract may not contain the representative toxic clauses covered in this series.
But these eight items are only common examples.
They do not cover every possible risk.
If the contract amount is large or the contract period is long, a full review is still recommended.
1–2 Items
This does not automatically mean the clause is invalid.
But it means the other party may use that clause to pressure you if a dispute arises.
If you have not signed yet, request revisions now.
If you already signed, review whether Civil Act Articles 103, 104, or 398(2) may apply.
3 or More Items
The entire contract structure should be reviewed.
Toxic clauses are more dangerous when they work together.
For example, if unlimited revisions and a one-sided penalty clause appear together, the client may claim the work was not completed and then demand a penalty.
If a non-compete clause and penalty clause appear together, leaving the contract and doing future work may both become difficult.
If blanket copyright assignment and risk shifting appear together, the other party may take the rights while leaving you with the liability.
3 Especially Risky Combinations
Combination A. Non-Compete + One-Sided Penalty
The contract restricts you from working in the same industry after termination, and even if the other party is at fault, you may still pay a penalty.
This makes it hard to leave the contract and hard to work after leaving.
First, check the period, area, industry scope, and compensation for the non-compete.
If there is no compensation and the scope is excessive, the non-compete clause itself should be reviewed first.
Combination B. Unlimited Revisions + One-Sided Penalty
There is no clear delivery completion standard, and the other party may claim that the work was unfinished, terminate the contract, and demand a penalty.
In this case, revision records are extremely important.
If the contract lacks completion standards, emails, messenger records, and work platform logs may later help establish what was actually completed.
Combination C. Blanket Copyright Assignment + Risk Shifting Through Superior Bargaining Power
This often appears in contracts between large platforms, agencies, or companies and small creators.
Rights transfer to the other side, but defect liability, damage liability, and complaint risk remain with the creator.
In this situation, the entire allocation of rights and risk must be reviewed.
Priority by Contract Type
Freelance or Service Agreement
Check in this order:
- Unlimited revision clause
- Copyright clause
- Penalty clause
- Termination clause
- Payment date
The core issues are often whether the work is considered complete and how far rights in the deliverables transfer.
Lease Special Clause
Check in this order:
- Repair responsibility
- Restoration obligation
- Deposit deduction
- Early termination
- Explanation of special clauses
In lease contracts, special clauses are often more important than the standard form.
One special clause can change how much of the deposit is returned.
Contract for Foreigners
Check in this order:
- Whether the contract language was understood
- Whether special clauses were explained
- Whether the relationship is lease, employment, or service
- Whether the contract activity conflicts with visa status
- Deposit, penalty, and termination clauses
Foreigners often sign Korean contracts without fully understanding the special clauses.
In these cases, explaining the contract structure may be more important than simple translation.
Large Company or Platform Contract
Check in this order:
- Limitation of liability
- Risk shifting
- Copyright or data rights
- Penalty and termination
- Responsibility for policy changes
When there is a large size difference between the parties, the whole risk allocation structure matters more than any single clause.
What To Send Before Consultation
For faster review, prepare:
- Full contract photos or PDF
- Enlarged photo of special clauses
- Emails or messages exchanged with the other party
- Contract amount
- Contract period
- Whether you already signed
- Whether negotiation is still possible
- Clauses you are worried about
- Actual work or transaction details
- What the other party explained
A contract cannot be reviewed by wording alone.
The wording, transaction structure, negotiation history, and relationship between the parties must be reviewed together.
A Checklist Is Only the First Step
This checklist is a first screening tool.
It helps identify risk signals.
But whether a clause is actually invalid, reducible, or negotiable depends on the entire contract context.
The same sentence can lead to a different result depending on the contract type, relationship between the parties, negotiation process, contract amount, and actual performance.
The important point is simple.
If you have not signed yet, you may still change it.
If you already signed, you should organize it quickly.
How an Administrative Agent Can Help
Contract drafting and documents concerning rights, obligations, and factual matters fall within the permitted scope of administrative agent work under the Administrative Agent Act.
Ethos Administrative Office can assist with:
- First review of toxic clauses
- Freelance contract drafting and review
- Service agreement drafting and review
- Lease special clause review
- Cohabitation agreement drafting
- Settlement agreement and undertaking drafting
- Contract negotiation timeline preparation
- Fact confirmation statement drafting
- Contract structure explanation for foreigners
- Administrative submission document preparation
However, litigation representation, legal dispute representation, notarization, registration, and tax filing are handled by the appropriate licensed professionals.
If litigation, injunction, damages claim, criminal complaint, or accusation is already in progress, attorney consultation may be required.
Closing the Series
A contract looks like paper when it sits in a drawer.
But once a dispute begins, it becomes one of the strongest pieces of evidence.
The person who checks the weapon first begins from a stronger position.
A toxic clause is not always invalid.
But it is also not something you must always accept.
The key is timing.
Before signing, you revise the sentence.
After signing, you fight over the sentence.
If your contract checked any of the items above, do not ignore it.
Review the structure first.