Business Contracts: The Agreements Every UK Company Needs
Business contracts are legally binding agreements between a business and its customers, suppliers, partners, staff or investors that set out each party’s obligations, payment terms and what happens if something goes wrong.
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Getting the right set of business contracts in place early protects cash flow, intellectual property and relationships as the company grows.
This guide explains the main types of business contracts, the clauses that matter most and the UK laws that shape them. When you are ready, Adam Bernard Solicitors can draft or review each document for you.
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Corporate vs Commercial Contracts: What Is the Difference?
Corporate contracts govern how a company is owned and run; commercial contracts govern how it trades with others.
- Corporate contracts cover the internal structure of the business: shareholder agreements, directors’ service agreements and joint venture agreements. Most are shaped by the Companies Act 2006.
- Commercial contracts cover trading relationships: supply, distribution, services, licensing, franchising and online sales.
The Core Business Contracts Most Companies Need
Most trading businesses need at least five documents: customer terms, supplier terms, employment contracts, a confidentiality agreement and data protection paperwork.
Depending on your model, you may also need:
- Customerterms and conditions – for business clients, a supply of services agreement or sale and purchase contract; for consumers buying online, e-commerce terms and conditions.
- Route-to-marketagreements – distribution agreements, franchise agreements and influencer agreements.
- Confidentiality and protection – non-disclosure agreementsand properly limited non-compete clauses.
- Dataprotection documents – data processing agreements with suppliers who handle personal data on your behalf.
- Technologycontracts – SaaS agreements and service level agreements.
Essential Clauses in Any Business Contract
Whatever the type, a well-drafted business contract should answer six questions: who, what, when, how much, who carries the risk and how it ends. The key clauses are:
- Partiesand definitions – the correct legal names, company numbers and defined
- Scope– a precise description of the goods, services or rights being
- Priceand payment – amounts, invoicing, payment dates and interest on late
- Liabilityand indemnities – caps and exclusions, which in B2B contracts must satisfy the reasonableness test in section 11 of the Unfair Contract Terms Act 1977.
- Intellectualproperty – who owns what is created and what each party may
- Term,termination and exit – notice periods, termination for breach and handover
- Dispute resolution, governing law and jurisdiction – usually English law and the courts ofEngland and Wales.
Implied Terms: The Rules That Apply Even If Your Contract Is Silent
UK statute implies terms into many business contracts automatically, so a contract that ignores them can still bind you to them. For example:
- Goodsmust match their description and be of satisfactory quality under the Sale of Goods Act 1979.
- A business supplying services must use reasonable care and skill under section 13 of the Supplyof Goods and Services Act 1982.
- Unpaidcommercial invoices carry statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998 unless the contract provides a substantial alternative remedy.
- Wherea contract is with a consumer, the Consumer Rights Act 2015 applies and unfair terms are not binding on the consumer.
Can Third Parties Enforce Your Business Contracts?
Under the Contracts (Rights of Third Parties) Act 1999, a person who is not a party can enforce a term that purports to benefit them unless the contract excludes that right. Most commercial contracts therefore contain an express exclusion. The rules are set out in the Contracts (Rights of Third Parties) Act 1999.
Signing Business Contracts Electronically
Electronic signatures are generally valid for business contracts in England and Wales. Electronic signatures are admissible in evidence under section 7 of the Electronic Communications Act 2000. Deeds require extra formalities, such as witnessing, so check before signing documents such as guarantees or some property documents remotely.
Common Mistakes in Business Contracts
- Usinga template drafted for a different sector or for consumers rather than
- Naming a trading name rather thanthe legal entity, which can create enforceability
- Uncappedliability, or liability caps that are unlikely to be found
- Noclear process for changes, so scope creep leads to payment
- Failingto update terms after a change in law.
How Adam Bernard Solicitors Can Help
Our commercial solicitors draft complete contract suites for new businesses, review documents you have been asked to sign through our contract review service, and update existing terms through our contract redrafting service. For an overview of everything we do, visit our commercial contract solicitors page.
Call 0207 100 2525 (24/7) or book a free consultation to discuss your contract.
This page is for information only and does not constitute legal advice.
Frequently Asked Questions
What are the most common types of business contracts?
What makes a business contract legally binding?
Can a business exclude all liability in a contract?
Are electronic signatures valid on business contracts?
How often should business contracts be reviewed?
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