Written by Fraz Butt, Senior Director · SRA-regulated · Last reviewed 8 September 2026
Every commercial contract, whether with a supplier, a customer or a platform, should clearly set out what each party is agreeing to do, how much will be paid and when, what happens if something goes wrong, and how either party can bring the arrangement to an end. We regularly see businesses sign contracts without properly understanding these core clauses, only to find themselves exposed when a dispute arises. This guide explains the clauses that matter most.
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Scope and Obligations
The contract should describe precisely what is being provided, whether goods, services or both, and to what standard. Vague descriptions cause more disputes than almost any other issue, since each party may reasonably believe they are entitled to something different.
Payment Terms
This clause should cover the price, when invoices are issued, when payment is due, and what happens if payment is late, including whether interest or a fixed charge applies. Businesses that do not specify late payment consequences often find they have little practical leverage when a customer is slow to pay.
Liability and Limitation of Liability
This is one of the most important, and most commonly misunderstood, clauses in any commercial contract. It sets a cap on how much one party can claim from the other if something goes wrong, and it often excludes certain types of loss, such as loss of profit, entirely. Businesses providing services in particular should think carefully about whether their liability cap is proportionate to the value of the contract, since an uncapped liability clause can expose a small business to a claim far larger than the contract is worth.
Termination
The contract should set out how either party can bring it to an end, including any notice period, and whether either party can terminate immediately for a serious breach. Contracts that are silent, or unclear, on termination often trap a business in an arrangement it wants to exit, or allow the other party to walk away with little warning.
Intellectual Property and Confidentiality
Where a contract involves the creation of any work, whether software, design or written content, it should be clear who owns the resulting intellectual property. As a default, the party creating the work often retains ownership unless the contract says otherwise, which can be a significant, and avoidable, surprise for the business paying for it. For more on registering and protecting that intellectual property once ownership is secured, see our guide on protecting your intellectual property.
Related reading: protecting your intellectual property.
Governing Law and Dispute Resolution
For contracts with an international element, it is important to specify which country’s law applies and where any dispute will be resolved. Without this, a dispute can become significantly more complicated and expensive to pursue, particularly against a party based overseas.
Getting the Balance Right When Negotiating
Understanding these clauses is only the first step. Knowing which points are worth negotiating, and which are standard market practice, comes with experience. We cover practical negotiation tips separately in our guide on negotiating commercial contracts.
Related reading: negotiating commercial contracts.
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Frequently Asked Questions / Questions & Answers
What is the most important clause in a commercial contract?
There is no single most important clause, but liability and termination provisions are among the most commonly disputed, since they determine what happens when something goes wrong or when a party wants to exit.
Can I use a template contract for my business?
Templates can be a useful starting point, but they rarely reflect the specific risks of your startup business, and relying on one without review can leave you exposed. See our guide on why generic terms and conditions carry risk for more detail.
What does limitation of liability mean in a contract?
It is a clause that caps the amount one party can claim from the other, and often excludes certain categories of loss entirely, such as loss of profit or indirect losses.
Who owns intellectual property created under a contract?
Unless the contract states otherwise, the party who actually creates the work, such as a contractor or agency, often retains ownership of the intellectual property, even if another party paid for it.
Should a contract be reviewed before signing?
It is advisable, particularly for contracts of significant value or duration, since a short review before signing is far less costly than resolving a dispute after the event.
Speak to Saracens Solicitors
For advice on drafting or reviewing a commercial contract, speak to our Corporate Law team.
Visit our Corporate Law service page or call us on +44 (0)20 3588 3500 to arrange a consultation.
Saracens Solicitors, Thanet House, 231 to 232 Strand, London, WC2R 1DA.
