What can go wrong if I rush a contract?

Picture this: you’ve just been given 24 hours to sign a complex contract that could make or break a critical deal. The clock is ticking, and the temptation to quickly skim and sign is strong, just to finalise the agreement.

While legal risks may not be top of mind, rushing through a contract without careful review could expose your business to significant liabilities. It’s essential to pause, recognise the potential risks, and take key steps to safeguard your business from costly mistakes. 

Are you a busy business owner, striving to attract new customers while managing the demands of your business? If you find yourself in need of a high-pressure, urgent contract review, you can contact our commercial solicitors for practical advice on your best options.  

What is the issue?

Rushing to sign a contract can lead to a range of potential issues, such as: 

• Overlooking important clauses – In the rush to sign, you might miss crucial details like payment terms, liability provisions, indemnities, or termination rights. For example, a customer could impose extended payment terms that strain your business’s cash flow or include a termination right for minor breaches. 

• Agreeing to unfavourable terms – Without a thorough review, you may unknowingly accept onerous or one-sided terms. For instance, an uncapped indemnity clause could leave you liable for substantial financial losses beyond your business's capacity, or a lack of a limitation of liability clause could result in unlimited liability for contract breaches. 

What should I do first?

If you're under pressure to sign a contract, here are some immediate steps to take: 

• Review high-risk areas – Focus on key commercial terms like payment terms, liabilities, and termination clauses. Pay attention to any clauses that pose significant risks, such as uncapped indemnities or strict penalties for non-performance. Understanding these risks will help you assess their impact and decide whether to push back on specific terms. 

• Request more time – Ask the other party for an extension to properly review the contract, explaining why a careful review is essential to fully understanding the terms. 

• Seek clarification – If any terms raise red flags, ask for immediate clarification. For example, if meeting the customer’s deadlines seems unfeasible or certain terms are unclear, address these concerns right away. 

Triage

If an extension isn’t an option and you need to act quickly, focus on triaging the contract by addressing the most critical elements. Here’s how: 

• Request a red-flag legal review – Have your legal team conduct a swift evaluation to pinpoint high-risk clauses that could have significant financial or legal consequences, such as onerous liability provisions. Your lawyers can offer practical guidance on how to proceed, whether that means negotiating, pushing back, or signing, based on the contract's specific risks. 

• Prioritise negotiating critical clauses – Focus on clauses that could severely affect your business. Even under tight deadlines, negotiation is often possible. If you identify terms that pose major risks, you can propose amendments. For example, negotiate a liability cap or adjust payment schedules to align better with your cash flow needs. Although time is limited, making even small adjustments can greatly reduce your risk exposure. 

Strategy

To avoid the pitfalls of rushing into contracts, your business must develop a proactive strategy for handling urgent contract situations. These steps can help to streamline the process: 

• Establish an internal review process – Create a streamlined procedure for quickly reviewing contracts, including a checklist for high-risk clauses and clear guidelines for when to involve legal counsel. Implementing a consistent process ensures you can respond effectively under pressure and minimises the risk of missing critical issues. Developing a contract playbook can also speed up future reviews and negotiations. 

• Train your team – Educate your team on how to identify high-risk clauses in contracts, so they’re better prepared when urgent contracts land on their desks. Training equips them to spot potential red flags early, escalate issues appropriately, and resist pressure to sign without proper review. Empowering your team to push back on unreasonable deadlines can prevent hasty decisions. 

• Invest in negotiation skills – Consider offering negotiation training to key team members. Effective negotiation, even in time-sensitive situations, can lead to more favourable terms and significantly reduce risks for your business. 

Response

Don't let time pressure push your business into making rushed contractual decisions that could have long-term negative consequences. Remember, you always have options. Seek legal advice before signing anything in haste. An experienced and pragmatic lawyer can help you navigate urgent contract situations, offering solutions to protect your business while maintaining strong relationships with your counterparties.