5 Key Steps to Take Before Signing a Business Contract in the UK

Signing a new business contract is often an exciting time for a business. You might be bringing on a new client or have found a new provider of goods or services. Notably, there are initial steps you should take to clarify whether entering a contract is a good option for your business. Below, we unpack five key steps to take before signing a business contract.

1. Research the Other Side

Before entering into a business relationship with another party, researching the other side is essential. You want to be comfortable with the other party and their legitimacy as a business. After all, if you are not confident that they can fulfil their contractual obligations, there is little point in agreeing to a contract with them.

Before signing a business contract, you should ask the following questions about the other party:

• Do they have a website and online presence and do they look professional?
• Do they have reviews and are there any concerning comments?
• Are they correctly registered with Companies House and are their financials in order?
• Who are their key stakeholders?
• Should you undertake a credit or insolvency check? (This is particularly relevant if you are the provider of goods or services under the contract).

2. Check the Commercial Details of the Contract

Most business contracts will include a table of commercial details on the first or last page of, or attached to, the contract. Generally, a business will use a standard contract and simply update its details according to the other contracting party. As such, check to ensure the contract details match your negotiated terms.

Key commercial terms for you to double-check include the:

• contact details;
• description of the goods or services to be provided. Notably, many disputes arise where thorough descriptions of goods or services are not agreed upon in the contract;
• price of the contract (including any additional expenses or surcharges);
• payment terms; and
• length of the contract.

3. Check Each Party’s Contractual Obligations

Additionally, review the contract for your obligations and those of the other party before you sign it. This ensures that the other party has not included any extra commitments you have not agreed to in the negotiation. Likewise, it prevents the other party from removing some of their own commitments. 

4. Understand How Termination Works

When entering a contract, it is vital to clarify the circumstances in which you (or the other side) can end the contract. Indeed, there are many reasons you may wish to end a contract. For example, the business relationship might break down, or one side lacks funds to pay for goods or services. One party might also wish to change its business direction. 

So, before signing the contract, you should ask the following questions:

• Can you terminate the contract without consequence if the other party breaches the contract?
• Can you, or the other party, terminate the contract for any reason and at any time? If yes, are you okay with this?
• If the contract is terminated mid-term, will you need to pay an exit or break fee?
• Will the contract automatically renew at the end of the term if you do not provide notice to terminate the contract?

5. Seek Legal Advice

It is always important to have a solicitor review any business contract you intend to sign.

Solicitors can identify any red flags or unfair terms hidden in the contract that may pose a risk to your business. Likewise, a legal professional can raise any standard terms missing from the contract and make necessary amendments. 

Key Takeaways

Before entering a new business contract, it is prudent to research the other side and review the contract’s terms and conditions. Ensuring the contract reflects the deal you have negotiated and is well balanced and protective of your interests will minimise future disputes.

If you need help drafting or reviewing business contracts, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to solicitors to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

Frequently Asked Questions