What Business Owners Should Know Before Signing a Commercial Contract
Read before you sign
It may seem obvious, but many business owners sign contracts without reading them thoroughly. Take time to understand every clause, particularly those relating to payment, delivery, and liability.
If terms are unclear or unfavourable, negotiate before signing. Once executed, you are bound by the contract's terms.
Liability and indemnities
Pay close attention to limitation of liability clauses and indemnity provisions. These determine how much you could be liable for if something goes wrong and whether you must compensate the other party for their losses.
Ensure liability caps are proportionate and that you are not accepting unlimited liability for matters outside your control.
Termination and notice
Understand how and when either party can terminate the contract. Check notice periods, grounds for termination, and any penalties for early exit.
Automatic renewal clauses can catch businesses off guard. Know when contracts renew and what notice is required to prevent unwanted extensions.
Dispute resolution
Review dispute resolution clauses carefully. Some contracts require mediation or arbitration before court proceedings. Others specify a particular jurisdiction or governing law.
Understanding these provisions upfront can save significant time and cost if a dispute arises.
When to seek legal advice
Seek advice before signing contracts with significant financial exposure, long terms, or unusual provisions. The cost of a review is typically far less than the cost of resolving a dispute.
A solicitor can identify risks, suggest amendments, and help you negotiate more favourable terms.
This article is general information only and does not constitute legal advice.
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