Relationship building in games is very hard, there is a lot of distrust. Milestones can be very hard to pin down as a task being complete is very subjective (when are player controls done? when implemented or when they feel good? what does feel good mean?). You can meet every milestone and deliver a game that isn't fun, you can miss every milestone and deliver a best selling game.
At it's core the industry is trying to use the Hollywood movie model for financing, designing and developing games. It's not working, they are far less linear, far more interactive and significantly less well known as an art form.
There are no (or few) unique problems in videogames but they do tend to be in the extreme compared to the other arts and engineering problems.
> If agreement is terminated due to missing milestones or due to a decision by Developer to cease development of game indefinitely, Developer must repay all amounts paid by the Publisher
Is this normal? I'm not sure if this is a healthy relationship, seems like the publisher takes no risk at all for the development of the game like this, they just take the risk of the game not selling when it releases. And they could affect that as well, by pushing for more aggressive milestones at the end of development if they think the game wont sell enough until the developer either fails to deliver or it is good enough. Seems like these type of contracts would result in a lot of overtime crunching.