Category: Commercial Law
You sign a contract, deliver the work and send the invoice.
Then the problems start.
The customer says the work was “not quite what they expected”. A payment date suddenly becomes negotiable. A project expands far beyond the original quote, but your contract does not clearly allow you to charge for the extra work. Before long, the profit you expected has disappeared.
This is a familiar problem for small business owners. Your contract may look professional, but a few unclear or one-sided clauses can quietly expose you to unpaid invoices, wasted time and expensive litigation.
If nothing changes, these issues rarely stay small. In 3 months, another invoice goes unpaid because the payment clause is vague and the customer knows there is room to argue. In 6 months, a customer disputes the scope of the work and you are doing extra jobs for free just to keep the relationship intact. In 12 months, a contract dispute has cost you far more than the original job was worth, and a term copied from somebody else’s contract turns out to be the reason you are exposed in the first place.
That is why a contract review now, while working relationships are still good, is a straightforward business decision. It protects your margin before a preventable problem turns into a stressful and expensive one.
The good news is that you do not need a 60-page contract filled with complicated legal jargon. You need the right protections, written clearly and checked against the way your business actually operates.
Here are five clauses worth reviewing.
1. Payment terms that allow customers to delay paying you
Cash flow can make or break a small business. Yet many business contracts treat payment as an afterthought.
A payment clause should do more than state a price. It should explain:
- When you will issue invoices
- When payment is due
- Whether you require a deposit
- Whether payment will be made in stages
- What happens if an invoice is disputed
- Whether you can suspend work if payment is overdue
- Whether you can charge interest and recovery costs
If your contract does not set a payment date, statutory rules may apply. The GOV.UK guidance states: “If you have not agreed a payment date, the customer must pay you within 30 days of getting your invoice or receiving the goods or services.”
For qualifying commercial debts, the Late Payment of Commercial Debts (Interest) Act 1998 may also give you a right to statutory interest and fixed compensation. However, relying on legal remedies after a customer has failed to pay is not always the best commercial strategy.
A well-drafted clause can make your expectations clear from the beginning. It can also give you a stronger basis for suspending further work or pursuing the debt if necessary.
Do not allow a customer to keep adding work while withholding payment for work already completed. Your contract should protect the business that pays your wages.
2. A vague description of what you are actually agreeing to do
Many contract disputes begin with a simple disagreement:
“That was not included.”
“It was obviously part of the deal.”
If your contract does not clearly define the work, you may find yourself providing additional services without additional payment. This is especially common in consultancy, construction, design, marketing, IT and professional services.
Your scope clause should identify:
- The services or goods you will provide
- The agreed specifications
- The expected timescales
- What the customer must provide
- What is expressly excluded
- The assumptions on which your price is based
- How additional work will be approved and charged
A useful contract should make it difficult for either party to rewrite the agreement after work has begun.
You should also include a practical change-control process. For example, if the customer requests extra work, the request should be recorded in writing with any effect on price and delivery dates clearly confirmed.
This does not need to be hostile. It protects both sides from misunderstanding.
If you regularly hear, “Could you just add this one small thing?”, your contract needs to explain what happens next. Otherwise, small additions can consume hours of unpaid time and reduce the value of the entire project.
3. Liability wording that leaves you carrying an unlimited risk
You should stand behind the quality of your work. But that does not mean accepting unlimited responsibility for every loss a customer might claim.
A liability clause normally deals with the financial consequences of a breach of contract, negligence or other failure. It may:
- Set an overall cap on liability
- Exclude certain types of loss, such as loss of profit or goodwill
- Identify specific risks that cannot be excluded
- Require each party to maintain appropriate insurance
- Deal with third-party claims
This area requires care. Under the Unfair Contract Terms Act 1977, some exclusions are not permitted and others must satisfy a test of reasonableness. For example, you cannot generally exclude or restrict liability for death or personal injury caused by negligence. Fraud cannot be excluded either.
The position can also change if you contract with consumers rather than other businesses. Consumer contracts are subject to additional protection under the Consumer Rights Act 2015.
The biggest mistake is copying a liability clause from another company’s contract without considering your own business. A suitable cap for a small consultancy may be entirely inappropriate for a manufacturer, contractor or software provider.
Your insurance, pricing, bargaining position and the potential size of the loss all matter. This is one of the areas where advice from a commercial law solicitor can prevent a serious problem later.
4. Termination wording that makes it difficult to leave a bad relationship
A contract should explain not only how the relationship starts, but also how it ends.
Without a clear termination clause, you may become trapped in an arrangement that is damaging your business. You may be dealing with repeated late payments, poor cooperation, missed deadlines or a customer who has lost confidence in the relationship.
Your contract should consider:
- Termination for serious or material breach
- The notice required before termination
- Whether the breaching party gets time to put matters right
- Termination for insolvency
- Termination at the end of a fixed term
- Termination for convenience, where appropriate
- What happens to outstanding payments and work in progress
It should also state which provisions continue after termination. Confidentiality, intellectual property, payment obligations and dispute provisions often need to survive the end of the contract.
Be careful with automatic renewal provisions and termination charges. They need to be clear and suitable for the relationship. A clause that appears to give you flexibility may not work as expected if the notice process is unclear or the other party disputes whether it was properly exercised.
If you are considering terminating an agreement now, do not simply send an angry email. Check the contract first. An incorrectly worded termination notice can create a dispute where none previously existed.
5. Dispute wording that sends you straight towards litigation
A dispute clause is often ignored because everyone assumes the relationship will remain positive.
That assumption can be expensive.
A sensible clause should set out what happens when the parties disagree. It might require:
- A written notice explaining the dispute
- A meeting between senior representatives
- Negotiation within a defined period
- Mediation or another form of alternative dispute resolution
- Court proceedings only if the earlier steps fail
This does not remove your right to bring a claim where urgent action is needed. It does, however, create a clear route for resolving disagreements before costs escalate.
Good dispute resolution can preserve commercial relationships, protect your reputation and reduce the disruption caused by a court claim. In some cases, an early negotiated settlement is far more valuable than winning a judgment after months of stress.
You should also check whether your contract identifies the courts of England and Wales and the law that governs the agreement. A poorly drafted jurisdiction clause can create uncertainty over where a claim should be brought.
Our dispute resolution service helps businesses assess their options, including negotiation, mediation and litigation where necessary. The earlier you take advice, the more choices you usually have.
A contract review can be a straightforward business decision
You do not need to wait until a customer refuses to pay or threatens a claim.
Set aside an hour and gather:
- Your current contract or terms and conditions
- A recent quotation
- A typical invoice
- Any order form or purchase order you use
- Examples of disputes or payment problems you have experienced
Then ask yourself:
- Could a customer misunderstand what I have agreed to deliver?
- Can I charge for additional work?
- What happens if payment is late?
- Is my liability limited in a sensible way?
- Can I terminate if the relationship breaks down?
- Is there a clear process for resolving disputes?
If the answer to any of these questions is unclear, it may be time to have the documents reviewed.
Tyto Law can assist with commercial contracts, contract reviews and business disputes. We provide clear advice without unnecessary jargon, whether you are based in Lincoln, Crowle, North Lincolnshire or the surrounding area.
Our initial consultation costs a fixed fee of £175. This fee does not apply to Wills, Lasting Powers of Attorney or Probate matters. Appointments can be arranged at our offices, online, at your business premises or at another convenient location.
A contract should help you make money, not quietly give it away. Have a conversation with us before a clause becomes a costly dispute.
Contact Tyto Law Solicitors to arrange an appointment.
About the author
Oliver Saxon : Principal Solicitor
Oliver Saxon entered the legal profession in 2009 and qualified as a solicitor in 2012. He founded Tyto Law Solicitors in 2018 after working with high-street and Legal 500 firms.
As Principal Solicitor, Oliver oversees matters at Tyto Law and advises clients on dispute resolution, commercial contracts and a range of personal legal issues. He is committed to providing practical, straightforward advice that helps clients understand their options and take action with confidence.
Tyto Law Solicitors has offices in Crowle, North Lincolnshire, and Lincoln, with flexible weekday, evening and weekend appointments available.
This article provides general information about commercial contracts under English and Welsh law. It is not a substitute for advice on your particular circumstances.