Seven important contract clauses to protect and empower your small business

Contracts are a vital tool for small businesses. They set expectations, help build strong business relationships, define responsibilities, and protect your interests when things don’t go to plan. Let’s look at contracts from the point of view of you as the service or product provider selling to other businesses. Here are the seven contract clauses every small business should be aware of to navigate commercial relationships with confidence.

1. Payment terms
   Ensuring you get paid on time is crucial for any business. Your payment terms should include specifics about when payments are due, how they should be made, and what happens if they’re late. For instance, you might include late payment interest charges, set off rights and provisions for recovering debt collection costs. These terms help you safeguard your cash flow and ensure professionalism in your business relationships.

2. Termination clause
   Every contract should plan for how the relationship might end. Stating the term of the contract and the mechanism for ending it early or for it renewing is important. A termination clause might include annual break clauses, thirty or sixty day notice requirements, or even an option for termination for convenience. It’s particularly useful to clarify whether the contract renews automatically or ends on a certain day. Flexibility here allows you to adapt depending on the services or products provided and the nature of the relationship.

3. Confidentiality clause
   When you’re sharing sensitive information, a confidentiality clause ensures it’s protected. Depending on the situation, this can be mutual or one-way. A good clause will detail how long information remains confidential after the relationship ends, how it must be returned or disposed of at the end of the relationship, and the remedies for breaches. It should also clarify when information stops being confidential, for instance, if it enters the public domain (but not due to a breach). Confidentiality clauses protect your business and build trust in partnerships.

4. Liability clause
   Liability clauses are about managing risk. A well-drafted clause will often include a cap on liability that’s proportional to the size of the deal and its risks. You might also need a “super cap” for key risks like breaches of data protection or confidentiality depending on if your customers push for it. Excluding indirect or consequential losses is common (these are unusual losses that don’t directly stem from the breach and that can only be claimed if the party who would be on for paying out knew or ought to have known they might happen at the time the contract was entered into, like lost profits from missed deadlines due to late service delivery or penalties incurred because software failed to perform). A strong liability clause ensures fairness while protecting your business from unforeseen costs.

5. Service and commercial terms
   This section is the heart of most contracts. It sets out what’s being provided and refers to documents like a scope of work (for services) or order forms (for products). These clauses usually make clear that delivery dates are estimated, with room for milestones to be adjusted by agreement. Service contracts typically state that services will be delivered with reasonable care and skill, and it’s worth considering excluding implied terms unless required by law. Clear, detailed terms here help both parties understand their obligations and avoid disputes.

6. Intellectual property (IP) rights
   If you’re creating anything for a client, an IP clause is essential. It should clarify which IP is existing (owned by you) and which is created during the contract (often assigned to the client upon full payment). You might also need to grant licenses for your existing IP, so clients can continue to use platforms, software, or tools provided as part of your service and ensure you have the right to remove such licences if you need to do so. This ensures there’s no confusion over ownership or rights during or after the relationship.

7. Dispute resolution clause
   Disputes happen, even in the best business relationships. A dispute resolution clause lays out how disputes will be handled, starting with informal reporting and escalating to mediation or arbitration or court proceedings if needed. It’s also important to include governing law and jurisdiction clauses to clarify which country’s laws apply and set out clearly if the parties will enter into binding arbitration rather than going to court. This ensures that disputes are resolved fairly, efficiently, and with minimal disruption to your business.

About Adaptable Legal Counsel

Adaptable Legal Counsel offers flexible legal services designed to meet the unique needs of small and medium-sized businesses. We specialise in helping businesses with drafting contracts, negotiating partnerships with larger clients, and tackling specific legal challenges, and much more. Whether you’re looking for legal counsel as a service, fractional legal support, or assistance with day-to-day commercial legal work, we’re here to help.

For more information about how Adaptable Legal Counsel can support your business, visit our website. To book a free, no-obligation initial chat, click here.

About Amy

Amy is a commercial solicitor with a strong background in commercial contracting. During her time at Panasonic and Reed Exhibitions (RX Global), part of the RELX Group, Amy gained invaluable experience advising on contractual matters. She now offers fractional legal support, helping SMEs navigate complex legal landscapes with confidence and efficiency. She now offers flexible legal services, including flexible retainers and fractional legal counsel as a service packages through Adaptable Legal Counsel.

Disclaimer: This blog is for informational purposes only and should not be considered legal advice. The content provided here is intended to offer general insights into key contract clauses for small businesses. For specific legal advice tailored to your circumstances, please consult a qualified legal professional. Adaptable Legal Counsel disclaims any liability for actions taken or not taken based on the information in this blog.