5 Contract Clauses Every EU Startup Should Negotiate

Most employment contracts include an IP assignment clause that transfers all work product created during employment to the employer. The scope of these clauses varies enormously, and badly drafted ones can create real problems.

The risk: Overbroad IP assignment clauses that claim rights to everything an employee creates — including work done on personal time, on personal devices, in unrelated fields. Beyond being difficult to enforce in many EU jurisdictions, they create ambiguity about who owns what, and they deter technical talent who have side projects or want to maintain a freelance practice.

What EU law says: Under most EU member state employment laws, an employer has rights to work product created in the course of employment — but "in the course of employment" has limits. German law (§ 69b UrhG for software) and Greek copyright law both draw distinctions between work created in the scope of duties and work created independently. The contract clause should reflect this, not try to override it entirely.

For founders hiring early employees who may have pre-existing projects or want to maintain technical side work, carving out a clear exclusion protects both parties and avoids disputes later.

Limitation of liability clauses cap the damages one party can recover from the other if something goes wrong. Standard vendor and SaaS agreements almost universally cap the vendor's liability while placing no cap on yours.

The typical setup: Vendor's liability is capped at fees paid in the last 3–12 months. Your liability for misuse, IP infringement, or payment obligations is uncapped. The vendor excludes all indirect, consequential, and special damages. You have no corresponding exclusion.

Why it matters: If a SaaS tool fails and causes you €150,000 in lost business, their cap of "last 3 months' fees" might be €3,000. Meanwhile, if you miss a payment or use the software in an unauthorized way, you're fully exposed.

What to negotiate:

• Mutual liability caps: your exposure should be capped symmetrically with the vendor's.
• Carve-outs from caps that apply to both parties equally: gross negligence, willful misconduct, confidentiality breaches, and IP infringement claims are commonly excluded from caps on both sides.
• If you can't get a mutual cap, push for a higher cap on vendor liability — "fees paid in the last 12 months" is more defensible than 3 months.

Most US and UK company contracts designate US state law or English law as the governing law, with disputes resolved in US or English courts. For an EU SME, this creates a significant practical and legal disadvantage.

The practical problem: If a dispute arises with a US vendor and you're a Greek or French company, enforcing a judgment from a US court in the EU requires recognition proceedings — expensive, slow, and uncertain. Conversely, a US vendor suing you in a US court can do so at far lower cost than it would cost you to defend.

What EU mandatory law overrides: Even if a contract specifies non-EU governing law, EU mandatory rules apply in certain contexts. Employment contracts with employees working in an EU member state will be subject to that country's mandatory labor law regardless of a New York choice of law clause. Consumer contracts within the EU are protected by the Rome I Regulation (EC) 593/2008, which preserves consumer protection regardless of governing law.

What to push for:

• Mutual jurisdiction: either party can sue in their own courts, and judgments are mutually enforceable (reference the Hague Convention on Choice of Court Agreements if applicable).
• EU governing law: for contracts primarily performed in the EU, push for the law of the member state where you're incorporated or where performance primarily occurs.
• At minimum: add a carve-out that EU mandatory law applies regardless of governing law, and that disputes involving less than a threshold amount (€50,000, for example) can be brought in local courts.

This clause has cost more EU startups more money than almost any other. It's not legally complex — it's just easily missed. The contract auto-renews for another 12 months unless you give 90 days notice before the renewal date. You miss it once, and you're locked in for another year.

The pattern: Annual contracts with auto-renewal and long notice windows are a standard feature of enterprise SaaS agreements. The notice window is typically buried in the commercial terms or schedule, not in the main agreement. Some contracts require notice by certified mail to a specific legal address — email is not sufficient.

What to negotiate:

• Shorter notice windows: 30–45 days is reasonable for most SaaS agreements. 90 days is defensible only for services with significant implementation dependencies. 180 days is excessive for almost anything.
• Longer renewal terms: many contracts auto-renew annually but can be modified to renew for a shorter initial period (monthly after the first year), giving you more flexibility.
• Mutual termination for convenience: particularly important in early-stage vendor relationships where the product may not deliver as promised. A right to terminate for convenience with 30–60 days notice, even if it means forfeiting a portion of prepaid fees, preserves optionality.
• Notice by email: ensure the contract allows termination notice by email to a designated address, not only by physical mail.

Employment contracts commonly include non-compete and non-solicitation clauses. The enforceability and permitted scope of these clauses varies enormously across EU member states — far more than most founders (and many HR advisors) realise.

What EU law actually allows:

• Germany: Non-competes are only enforceable if the employer pays compensation equal to at least 50% of the employee's last contractual remuneration for the duration of the restriction (§ 74 HGB). An unpaid non-compete is voidable at the employee's option.
• France: Similar compensation requirement (typically 30–50% of salary), plus geographic and temporal limits. Courts frequently strike down overbroad non-competes.
• Greece: Non-competes must be reasonable in scope and duration, and are subject to Article 281 of the Greek Civil Code (abuse of rights). Courts assess proportionality.
• Netherlands: Non-competes require written form and, since 2015 amendments, justification statements for fixed-term contracts. Unreasonable restrictions can be reduced or annulled by courts.

What to negotiate if you're the employer:

• Narrowly define the restricted activities to your actual competitive concern. "Any business competing with the Company" is likely unenforceable. "Services in [specific technology area] to [defined customer categories]" is more defensible.
• Set reasonable duration: 6–12 months is typically the enforceable maximum in most EU jurisdictions. 2-year non-competes are frequently struck down.
• Include the compensation if required by local law. A non-compete clause without the required compensation is either unenforceable or, in some jurisdictions, binding on you but not the employee.

What to negotiate if you're the employee:

• Push back on geographic scope: "worldwide" or "across the EU" is almost never proportionate for a role in a single national market.
• Request the maximum compensation permitted by local law.
• Ask for a carve-out on activities clearly unrelated to the employer's business.