Maximising value from commercial agreements isn't just a finance department priority – it should be a guiding principle across your business. Whether you're a founder agreeing terms over coffee in a co-working space or a growing enterprise refining supply chain deals with overseas partners, the contracts you sign will either drive value or quietly erode it. And yet, many businesses treat them as a formality rather than a strategic tool.
Overlooking contract value can cost more than just money. It can lock you into inflexible terms, stifle growth, or even leave you exposed to costly disputes. That’s why working with our experienced commercial law solicitors isn’t about ticking a box – it’s about building stronger, more resilient agreements that reflect your commercial reality, adapt to change, and support your long-term goals.
Our commercial solicitors view every commercial agreement as an investment. Whether you're negotiating, drafting, or reviewing your contracts, we help you build value into each clause, ensuring your contracts actively contribute to your business success rather than just sitting in a drawer.
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Why your business needs commercial contracts
Whether you are operating out of a back bedroom, you are a start-up, SME, third generation OMB, planning on a listing, or expanding your business into the UK market, you need a suite of commercial contracts. Relying on handshakes, verbal agreements, how you have always done things, or quick email exchanges is a recipe for disaster.
Commercial contract dispute litigation is expensive. Put the costs aside for a minute, and there are other risks; it is time-consuming, distracting, and can create reputational damage. Furthermore, despite employing the best commercial litigation solicitors, you cannot guarantee the outcome of court proceedings. That’s the negative reason why your business needs commercial contracts.
On the positive front, your business needs commercial contracts as without the financial security they provide you probably will not invest the time and money necessary to develop your product or services or expand into new markets.
Commercial contracts are sector and industry-specific
In an age where everything is available at the touch of a button, including your commercial lawyers, it is tempting to assume that any commercial contract available on the internet to download will do. That’s a false economy as even within the same sector your business needs may be very different. For example, what you may want in a high-end exclusive retail brand commercial contract may be rather different from the fast fashion end of the market.
You cannot assume that your business needs are the same as your competitors and therefore rely on the same contracts. For example, you may be sourcing your raw material from overseas and therefore need to focus on currency and trade and customs issues in your contracts. Alternatively, if you are purchasing for a specific market, you may need to refer to industry-specific regulations or standards in your manufacturing agreement or specific delivery or payment terms that you have negotiated.
Investing in negotiation
We are all led to believe that speed is best but when it comes to a return on investment in commercial contracts careful negotiation, and a willingness to walk away from the negotiation table for a while, can be more productive in the long run.
With every situation, you have to assess whether the time invested in negotiation will produce a return on investment. With rapidly rising inflation you may be best getting on with the contract and fixing the product price. With a SaaS contract, there may be little room to negotiate from the standard SaaS agreement. If you are a franchisor creating a franchise agreement it is imperative to get it right as your whole franchise chain may be based on your franchise agreement.
It is a question of knowing when it is worth spending time on a contract negotiation or review as whilst you may not have had much bargaining power at the time you signed the contract you may do so when you come to review it, either because of a change in your size and market status, the economy, or other factors. That’s why return on investment on commercial contracts is something you need to work on during the life of the contract to continue to get the best out of your contracts.
Getting to grips with how to successfully negotiate a commercial contract and understanding why you should regularly update your commercial contracts are both key to maximising long-term value.
For start-ups and SMEs, taking a more proactive approach to commercial contracts may involve reviewing who negotiates contracts, who has the authority to enter into contracts, who has the authority to sign off, whether there is a named employee responsible for contract management and review, and whether an annual contract review meeting is held to brainstorm. Sometimes it can take a business consultant or your commercial solicitor to look afresh at what you are doing and to ask questions about your return on investment to produce change.
Drafting a commercial contract
Any commercial contract contains what are referred to as boilerplate clauses or standard terms. The crucial point is that your suite of commercial contracts needs to be tailored to how your business operates and to tie in your contracts so they work together in your business interests.
Examples of bespoke terms include ones on:
- Product or service specification
- Delivery
- Payment terms
- Penalties for breach of contract
- The contract term – fixed or auto-renewal
- Termination clauses
- Variation
Understanding how boilerplate clauses in commercial contracts function and their meaning is crucial to ensuring that standard terms align with your business objectives.
Equally, if your agreements include renewal mechanisms, knowing how UK auto-renewal contracts operate and when terms might be considered unfair can help you avoid unnecessary legal or commercial risk.
Drafting a commercial contract is a bit like completing a jigsaw; all the pieces need to fit together. For example:
- Do you want to include a price escalation clause? If so, what formula do you want to use to increase the product or unit price? How does the price escalation clause fit with the termination provisions? Can a consumer terminate by choice at any point in the contract or are they restricted to termination by a specified notice period when an annual or self-renewing contract is due for renewal? What should the notice period be? A too-long notice period may deter potential consumers, but a too-short period may negatively impact your cash flow. It's also worth considering whether your terms could be seen as unfair under the Competition and Markets Authority guidance on contract terms, especially when dealing with individual consumers.
- In a manufacturing agreement, do you require the manufacturer to have insurance for a minimum specified sum? If so, does the contract provide you with a right to inspect the policy? When does legal ownership of the goods transfer hands so they become your insurable risk?
- What are your remedies for a breach of contract? If there is a contract dispute is there an agreement over your choice of commercial contract dispute resolution and is it the best fit for the circumstances of the contract? For example, international arbitration may be the preferred dispute resolution method for a multi-jurisdiction contract or where a speedy resolution is essential or you may prefer the court in England to have jurisdiction in the event of commercial contract dispute proceedings
Making your contracts work harder for your business
You may not have given your commercial contracts the attention they deserved at the outset, but that doesn't mean it's too late to correct course. Many contract issues can be resolved or avoided altogether through regular reviews, which enable you to adapt to growth, regulatory changes, or economic pressures such as inflation. From updating your Terms and Conditions (T&Cs) to reflect your current offering to introducing price escalation clauses that safeguard your margins, reviewing your agreements can have a direct impact on your commercial resilience.
Contract lifecycle management isn't just for big corporates. For SMEs and OMBs, simply identifying who is responsible for contracts, from negotiation to signing off to review, can be a significant step forward. With the right processes in place, you can reduce risk, capture more value, and respond more quickly to opportunity. Knowing what you should be doing at each stage of the contract lifecycle helps ensure that every agreement continues to serve its purpose as your business evolves.
If you're ready to get more from your commercial agreements, our commercial law solicitors are here to help. We work with businesses at every stage to establish robust systems, identify areas for improvement, and ensure that your contracts actively support your strategic goals, rather than holding them back.
