5 Critical Commercial Contract Pitfalls (And How to Avoid Them) 

In today’s fast-paced world of business, commercial contracts can often be seen as administrative hurdles rather than critical, legal protection. It’s not uncommon for organisations to rush the contracting process, accepting informal email exchanges or boilerplate terms just to get the deal across the line. 

However, poorly drafted and unexamined agreements can leave your business exposed to financial loss, operational disruption, and lengthy legal disputes. 

Here are five of the most common commercial contract issues we see across businesses: 

1. Accepting the other party’s standard terms without review or amendment 

Standard terms and conditions are rarely neutral. Instead, they’re drafted to favour the party who creates them. Accepting these terms without a thorough review can severely compromise your legal and financial position. 

For buyers, seller terms often: 

• restrict liability for a wide range of issues 

• exclude essential warranties regarding quality or performance 

• limit your rights to reject faulty goods or services or to recover damages 

For sellers, buyer terms often impose: 

• onerous quality standards 

• lengthy payment windows 

• strict delivery obligations 

• severe financial remedies or rights to cancel for minor delays 

Never treat standard terms as non-negotiable. Always review terms sent via email links or purchase orders, evaluate where the liabilities fall, and push back or negotiate amendments where the risks are unacceptable. 

2. Agreeing a deal without any written contract 

Relying on handshakes, verbal promises, or informal email trails is one of the most common and costly mistakes a business can make. 

When a dispute arises under an unwritten agreement, courts must piece together what was agreed from emails, accounts of conversations, and past conduct. Where the parties’ intentions are unclear, the court will apply default “background law” (statutory rules) which is likely to prejudice at least one of the parties. For example, warranties relating to quality may be implied. The same can be true for provisions relating to delivery and statutory interest. 

That’s why it’s important to not rush into a deal without written terms. Ensure that key deliverables, costs, and liabilities are clearly documented. It’s also important to go back and  clarify any long-standing arrangements operating on informal terms. If you have any such informal agreements, get in touch with our Commercial Contracts Law team for advice on how to safeguard your future interests. 

3. Ambiguous payment terms 

Unclear payment terms are a leading cause of friction and can disrupt cash flow without warning. A well-drafted contract should eliminate all ambiguity surrounding when, how, and how much money changes hands. From a seller’s perspective this should be as flexible as possible. Buyers, on the other hand, will want fixed and precise pricing terms and lengthy credit arrangements. 

When drafting or reviewing agreements, consider whether the following questions are clearly answered: 

• When is payment due? 

• Are invoices payable before or after delivery, or are they tied to specific project milestones? 

• Are there strict timeframes for issuing invoices and raising payment queries? 

• Does the contract include clear rights to charge contractual interest on overdue amounts or suspend services for non-payment? 

• How is the price calculated? 

• Is the price fixed or tied to a fluctuating price list? 

• Does the contract include a price variation clause allowing the supplier to raise prices or to  pass on rising operational costs? 

4. Oversights in IT and complex procurement 

Large and complex IT projects can often carry high execution risks. A common failure is the agreement of major financial commitments under generic standard terms. For complicated tech procurement agreements, generic terms rarely suit the scope of the project. 

Key vulnerabilities in procurement contracts include: 

We explore this in more detail in our article on navigating modern IT agreements, but here are some of the most common issues when it comes to IT and service level agreements: 

Scope drift or mismatch: 

Disputes between organisations are often due to scope drift, where expectations between two parties are at odds. This is most often due to poorly defined specifications at the IT agreement stage. Most disputes revolve around disagreements between what the buyer thinks the software/product/service will do versus what the supplier has actually built or provided. 

Lack of testing: 

Complex procurement projects require alignment between your technical, commercial, and legal teams before contracts are signed. It’s often best to ensure agreements include some form of acceptance testing – with a mechanism for satisfactorily resolving any failures. Functional specifications and milestone criteria should therefore be clearly attached to the main agreement and not left for future resolution. 

For any future IT agreements, ensure your agreements include: 

• mutually agreed specifications 

• clear testing procedures 

• transparent and clearly described milestones 

• formal sign-off criteria (for the release of payments) 

5. Neglecting termination rights and force majeure 

It’ll come as no surprise that organisations often focus on the start of a business relationship while giving little thought to how the relationship might end. But it’s crucial that termination rights are considered from the start of a business relationship. Factors to consider include: 

Force majeure 

Performance can be rendered impossible by unforeseen external events, including: 

• extreme weather  

• floods 

• fires 

• wars/armed conflicts 

• supply chain collapses 

• global health crises (eg covid) 

Without a properly drafted Force Majeure clause, a party unable to perform its obligations through no fault of its own could find itself in a serious breach of contract. 

Termination rights: 

Businesses also need clear legal routes to exit an agreement when things go wrong or commercial priorities shift. It’s important to consider the potential reasons you may need to terminate a contract: 

Termination for breach: 

This means the right to terminate immediately if the other party fails to perform key obligations. Note that under general law, this right is significantly restricted. 

Termination for convenience:  

This means the flexibility to end the contract simply by giving advance written notice if the relationship becomes uncommercial, strained or a party simply wants to contract with other parties. 

Specific insolvency/payment/change triggers:  

These ensure organisations have explicit right to terminate if the other party enters administration or liquidation, is subject to a change of control, or fails to pay invoices on time. 

How Napthens Can Help 

Reviewing and negotiating commercial contracts isn’t about creating friction—it’s about building clarity, mitigating operational risk, and protecting your bottom line before problems occur. 

Whether you need a suite of robust standard terms, support negotiating a high-value procurement contract, or a health check on existing commercial arrangements, our experienced Commercial Contracts team is here to help. 

Get in touch one of our specialist Commercial Law Solicitors. We can help you protect your business relationships and ensure commercial contracts that work in your organisation’s interest.