Beyond the Non-Compete: The Contract Clauses That Actually Burn Fractional Executives

I've already made the case, in Non-Compete Clauses and Fractional Executives, that most non-competes in fractional agreements are borrowed from employment law and don't fit a relationship built on split time across multiple clients. That post gets forwarded to me more than almost anything else I've written, usually with a one-line message: "our lawyer sent this over, what do you think?" But the non-compete, loud as it is, is rarely the clause that actually causes damage later. A few quieter ones do more harm.

The first is IP assignment written too broadly. A standard employment-agreement IP clause assigns the company everything you create "in connection with" the engagement — which sounds fine until you realize that a fractional executive's entire value proposition is a set of frameworks, methodologies, and playbooks built and refined across dozens of engagements before this client ever showed up. If that language isn't carved out explicitly, you have technically signed away the thing you're being paid to bring in the door. The fix is straightforward: retain ownership of pre-existing IP and grant the client a license to use anything built specifically for them during the engagement, rather than assigning ownership outright.

The second is liability exposure without a cap. Fractional executives are frequently asked to sign indemnification language written for full-time employees, who are typically shielded by corporate insurance and employment law in ways a 1099 contractor is not. Signing an uncapped indemnification clause as an independent contractor is agreeing to personally backstop enterprise-scale risk for a fraction of an executive's full-time compensation. This is where an errors-and-omissions policy stops being optional, and where a liability cap tied to fees actually paid — a common and defensible ask — belongs in every contract before signature, not after a dispute.

The third is termination language with no notice period or kill fee. Full-time executives have severance norms, however imperfect, built around them. Fractional contracts frequently have none, which means a client can end an engagement with zero notice the week before a fee is due. I'd rather see a thirty-day notice period or a defined kill fee than a longer non-compete — it's the clause that actually protects income, and it's far more often the one nobody thinks to negotiate.

None of this is a reason to avoid contracts with teeth — companies, especially the PE-backed ones I described in The Ownership Structure Problem, have real reasons to protect what they're paying for. It's a reason to spend the negotiating capital where it actually matters. Fractional executives who fight hardest over the non-compete and wave through the IP and liability language have their priorities backwards — and I say that having made exactly that mistake once, early on, before I knew better.