4 Steps to Take Before Signing a Contract in England

Your company will finalise numerous contracts during its existence, all of which will require negotiations on the terms and wording of the agreement. Indeed, trying to keep these negotiations as short as possible can be tempting. However, you must not rush this process or risk entering into a contract you do not entirely agree with. Additionally, you should take some critical steps before signing any contract. This article will explore essential steps to take before committing your company to a legally binding agreement.  

Why is the Wording of a Written Contract So Important?

The exact wording of clauses within a written agreement is vital for two main reasons.

Firstly, the terms of a contract are legally binding on each party. Therefore, if your business breaches any wording, it could face severe consequences.

Secondly, it is difficult to amend the terms of a contract once you sign it. Often, amendments can only occur when the written agreement expressly allows it or both parties come to an agreement. Unless you correct a spelling error, most alterations to a contract tend to favour one party over the other. Therefore, it can sometimes prove challenging to agree (or convince the other party to agree) to a change within the agreement. 

Therefore, it is vital to ensure the wording of a contract is correct before the parties sign. Let us take a quick look at four practical steps before agreeing to a contract.

1. Ensure the Names of the Parties Are Correct

This step may seem straightforward. However, it is surprisingly easy to get wrong. For instance, an error may be as simple as misspelling the name within the contract. Alternatively, the contract may use the parties’ brand name (for example, “CleanWell”) instead of their legal name (for example, “CleanWell Products Limited”).

Legal documents must accurately identify the contracting parties. Using an incorrect name for the other party can provide them with a loophole to escape liability for any future breach. Therefore, this is a vital first step. 

2. Does the Wording Accurately Reflect the Agreement?

The contract must record all essential terms of the commercial agreement between parties.

For example, say that one party agrees to pay your business £200 per week. You must record this agreement in the contract. Furthermore, you must include the exact details of the agreement. Using the example above, if your contract states that your business will provide goods or services in exchange for a “weekly amount”, the other company could argue the amount. Additionally, any future court could hold that failure to name a specific amount implies that the weekly payments could vary.

A contract ensures that the parties to the agreement, and any future court, can view and understand their obligations to each other. However, the contract becomes less concrete from a legal standpoint when the wording is vague.

3. Can Your Business Safely Exit the Contract?

Agreeing on how to end a contract before it begins may sound slightly counterintuitive. First, however, you must understand how you can safely and legally exit a contract, or you may find yourself legally bound to its terms. 

Commercial contracts need a termination clause when the parties can safely exit the written document. Furthermore, you may wish the termination clause to cover situations where the other company:

• fails to make due payments;
• commits a serious breach of the contractual terms; 
• makes it clear that they cannot fulfil the remainder of the contract length; or
• where the parties wish to replace the contract with an updated version.

A solid termination clause should also cover whether a party needs to give a period of notice to the other and, if so, how long this period is.

4. Consider Legal Advice Before Signature

Your business could benefit from obtaining legal advice during the negotiation, drafting and finalising a written agreement. You may benefit from this where the contract is valuable to your organisation in terms of:

• money; 
• reputation; or 
• complexity.

Additionally, an experienced lawyer will be able to provide specific advice to your business regarding whether:

• the wording is reasonable;
• the clauses are appropriate for a contract of that nature;
• any clauses are potentially unenforceable in practice (making them of limited – or no value – to you); and
• the wording fails to comply with specific legal requirements under English law.

A lawyer will generally reassure you about the content and fairness of any written agreement.

Key Takeaways

All businesses rely on contracts to thrive and succeed. However, while verbally negotiating deals with other business owners can be extremely valuable, drafting and finalising contracts can be pretty complex.

Your company can avoid rushing into an inaccurate or incomplete contract with another company by ensuring:

• the names of each party are correct;
• the wording accurately reflects the nature of the agreement;
• your company can safely and legally exit the contract; and 
• you consider legal advice before signing the contract.

If you need help negotiating and signing a contract, our experienced commercial contract lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 0808 196 8584 or visit our membership page.

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