The commercial terms are agreed, the contract arrives by email, and someone asks whether it is alright to sign. Most of the time it gets a skim, nothing jumps out, and it gets signed. The difficulty is that the document was drafted by the other side, and it was drafted to protect the other side, not you or your interests. The clauses that cause trouble later rarely stand out, and they are the ordinary-looking paragraphs that decide who carries the risk when something goes wrong.
Reading this blog, or any blog for that matter, will not turn you into a commercial lawyer, and it is not meant to. Whilst nothing will beat a full review of a contract, there are some common things worth checking before anything is signed, and between them they catch most of the problems we see.
Is the scope actually clear?
Start with what is being bought and sold. A surprising number of contracts describe the deal in one sentence, or push it into a schedule that was never filled in. If you can read the scope and still have an argument about whether a particular task is included, so can the other side.
Genuinely ambiguous wording may be read against the party relying on it, but that is a last resort rather than a reliable safety net, and it will not stop the headaches, the time burn or the potential cost of trying to argue your position. It is much cheaper to fix the sentence now. Check that the scope sets out what is included, what is not, who is providing what and by when, and what happens when someone asks for something extra halfway through.
What is your liability, and what are you indemnifying?
Almost every contract limits liability, and the limit is usually the one the drafter wanted, and is limiting only their liability. Look for three things: 1) the cap itself (often a share of the fees, or the fees paid in the previous twelve months) and whether it applies to you, 2) what is excluded from recovery altogether, and 3) what sits outside the cap so that it is effectively unlimited. Keep in mind that not every limit works. Liability for death or personal injury caused by negligence, and for fraud, cannot be excluded at all, and where you are dealing on the other side’s standard terms the remaining exclusions have to be reasonable to be enforceable.
Indemnities deserve particular attention, as an indemnity is a promise to cover someone else’s losses, and depending on how it is drafted it can be recoverable as a debt on demand and sit outside the limits that apply to the rest of the contract. A single indemnity can undo the liability clause sitting above it. If you are giving one, you want it narrow, capped where possible, and confined to things genuinely within your control.
When do you get paid, and what happens if you are not?
Payment terms are not just the number of days. Look at what has to happen before you can invoice at all, because approval, acceptance and purchase order requirements can delay payment far more effectively than the payment period itself. Check what the contract says about interest on late payment, bearing in mind that if it is silent, business to business debts carry statutory interest and fixed compensation by default, whether you can suspend work if invoices go unpaid, and whether there is a set-off clause allowing the other side to deduct sums it believes it is owed before paying you.
Who owns what gets created?
If anything is being designed, written, built or developed, the contract should say who ends up owning it. Ownership and permission to use are different things, and being given a licence to use something is not the same as owning it. If you are buying something, check that you are getting what you think, including the right to change it later or hand it to a different supplier. If you are selling, watch for clauses that sweep up everything you produce, including the tools and templates you use for every client.
How does each side get out?
Finally, read the exit. How long does the contract run, does it renew automatically, and how much notice do you have to give to stop it renewing? Can either side terminate for convenience, or only for breach, and is that right mutual?
Then look at what happens afterwards – what you get back, what you have to hand over, how a transition works, and which obligations survive termination.
None of the above means winning every point, it is all about acceptable risk to you and your business. Plenty of terms are perfectly reasonable, and a negotiation that tries to change everything usually just slows the deal down and irritates the person on the other end. The value lies in knowing your risk appetite, and which handful of clauses actually matter for this deal, at this size, with this counterparty, and asking about those. The worst outcome of asking is that the answer is no, and you sign it anyway with your eyes open.
At Ares Legal we review contracts for a fixed fee agreed before we start, so you know the cost before you commit to it. Where contracts land on your desk regularly, our Ares Access subscription covers the flow of them for a fixed monthly fee.
This blog is for information purposes only and does not constitute legal advice. We recommend seeking professional advice before taking any action on the information provided.
