Commercial Law
Five Contract Clauses Businesses Should Read More Carefully
The provisions in a commercial agreement most likely to matter once a relationship or a transaction runs into difficulty.
Most commercial disputes trace back to a handful of clauses that were signed without close attention. Five are worth reading more carefully than the rest of the agreement.
Termination provisions
How, and on what notice, either party can end the agreement determines how much flexibility a business retains if the relationship no longer works. Vague or one-sided termination language creates risk later.
Liability and indemnity clauses
These provisions determine who bears the cost if something goes wrong. Businesses should understand the extent of the exposure they are accepting, and whether it is proportionate to the value of the agreement.
Payment terms and remedies for late payment
Clear payment terms, and a clear remedy where payment is late or withheld, protect cash flow and give a business a defined position to act from if a counterparty does not pay.
A contract is read most closely twice: when it is signed, and when something goes wrong. The second reading should not be the first time these clauses are properly understood.
Confidentiality obligations
Confidentiality clauses often extend beyond the life of the agreement itself. Businesses should understand what information is covered, for how long, and what happens to that obligation if the agreement ends.
Dispute resolution clauses
The forum and process agreed for resolving a future dispute, whether litigation, arbitration or mediation, is often set months or years before any dispute exists. It should be considered deliberately, not left to a template default.
This article is provided for general informational purposes and does not constitute legal advice. It does not describe the position under any specific piece of legislation or the outcome of any particular case. Readers with a specific matter should seek advice on their own circumstances.