Every business relies on agreements. You agree prices with customers, buy products and services from suppliers, employ people, work with freelancers and perhaps rent commercial premises. As your business grows, the number and value of those relationships usually grow with it. Yet contracts are often something smaller businesses only think seriously about when something goes wrong.
A customer refuses to pay because they disagree about what was included. A supplier lets you down at a critical moment. A business partner wants to leave. An employee joins a competitor. A client claims ownership of work you thought belonged to you. The right contracts cannot prevent every disagreement, but they can make expectations, responsibilities and remedies much clearer. So, which agreements should an SME consider, and when is it worth bringing in a solicitor?
Customer Contracts and Terms and Conditions
For many SMEs, customer or client agreements are among the most important contracts in the business. They should make it clear what you are providing, how much the customer will pay, when payment is due and what happens if either party wants to terminate the relationship. Depending on what your business does, you may also need provisions covering liability, intellectual property, confidentiality, delays, cancellation, variations to the original scope and dispute resolution. If you regularly provide similar goods or services, standard terms and conditions can help create consistency across your customer relationships. However, your terms need to reflect how your business actually operates. If you deal with consumers rather than other businesses, additional consumer protection requirements also need to be considered. A generic template may look impressive, but that does not necessarily mean it protects you when you need it.
Supplier Agreements
Your supplier relationships can have a direct impact on your ability to serve your own customers. A good supplier agreement should therefore consider more than price. Delivery dates, service levels, quality standards, payment arrangements, liability and termination rights can all be important. Imagine a supplier provides a critical component for your business and suddenly stops delivering. Can you terminate the agreement and use somebody else? What happens if their failure causes you to miss deadlines with your own customers? These are much easier questions to address when the commercial relationship is being established than when something has already gone wrong.
Shareholders’ and Partnership Agreements
Going into business with someone can feel straightforward when you share the same ambitions. Problems often arise when circumstances change. What happens if one shareholder wants to leave? Can they sell their shares to anyone? How should the business be valued? What happens if the owners cannot agree on an important decision?
A shareholders’ agreement can establish how key decisions are made, how shares may be transferred and what happens when somebody wants to exit the business. Similar considerations apply to partnerships, where a partnership agreement can set out contributions, profit sharing, responsibilities and what should happen if a partner leaves, retires, dies or becomes unable to continue. Putting these arrangements in place while everyone is getting along can be considerably easier than trying to negotiate them after a disagreement has developed.
Employment Contracts and Agreements With Freelancers
Taking on people brings another layer of legal responsibility. Employment contracts should clearly establish important terms including pay, working hours, duties, holiday and notice. Depending on the employee’s role, businesses may also need to consider confidentiality, intellectual property and appropriate restrictions following termination. Agreements with freelancers and contractors are equally important. Who owns the work they create? What exactly are they being paid to deliver? When does payment become due? What happens if the project is cancelled halfway through? The written agreement should also reflect the reality of the working relationship. Simply describing someone as self-employed does not necessarily determine their legal or tax status.
Confidentiality and Intellectual Property
For some SMEs, their most valuable assets are not physical at all. Customer lists, business plans, designs, software, processes, written material, photographs and branding can all have considerable commercial value. Confidentiality agreements or NDAs can be useful when sensitive information needs to be shared with potential investors, contractors, commercial partners or prospective purchasers. Intellectual property provisions are also important when other people create work for your business. Paying someone to produce a website, photograph, design or piece of software does not necessarily mean that every relevant intellectual property right automatically transfers to you. Understanding ownership at the beginning can prevent a very expensive disagreement later.
Commercial Leases
Taking on business premises can be one of the largest financial commitments an SME makes. A commercial lease may contain obligations concerning rent, service charges, repairs, insurance, permitted use and what condition the property must be left in when the lease ends. You should also understand whether you have the ability to break the lease early and what happens when the contractual term expires. Signing first and discovering the implications later can leave a business committed to significant costs for several years. This is an area where obtaining legal advice before signing is particularly important.
What Are the Risks of Not Taking Legal Advice?
One of the reasons businesses avoid solicitors is understandable: legal advice is another cost. However, the more useful question is often what the potential cost could be if an important agreement is wrong. Poorly drafted or unsuitable contracts can create uncertainty about payment, leave your liability wider than expected, fail to protect valuable intellectual property or make it difficult to end an unsuccessful commercial relationship. You could also unknowingly accept terms that allow another business to terminate an agreement at short notice, prevent you from working with certain customers or competitors, impose substantial financial obligations or transfer rights you did not realise you were giving away.
Sometimes the problem is not what a contract says, but what it does not say. If there is no clear mechanism for dealing with additional work, price increases, missed deadlines, disputes or termination, the parties may have very different views about their rights when circumstances change. At that point, determining what was actually agreed can become much more expensive and disruptive than reviewing the agreement would have been at the beginning.
What Are the Benefits of Having a Solicitor Review Your Contracts?
Good legal advice is not about making every contract longer or more complicated. A commercial solicitor should first understand your business, what you are trying to achieve and where the real risks lie. They can identify clauses that expose your business unnecessarily, highlight obligations you may not have noticed and suggest areas where negotiation may be appropriate. They can also help ensure that the agreement reflects the commercial deal you believe you have made. There is another benefit that is sometimes overlooked: confidence.
When you understand your contract, you can make better commercial decisions. You know what you are promising, what the other party must deliver, when you can walk away and what happens if something goes wrong. That clarity can be particularly valuable when negotiating with a much larger customer or supplier whose standard contract has been drafted primarily to protect their own interests.
Can You Just Use an Online Template or AI?
Online templates and AI tools have made it easier than ever to produce something that looks like a legal contract. For low-risk situations, these tools may help businesses think about the issues that need to be documented. But a professional-looking document is not necessarily an appropriate contract. A generic document does not automatically understand how your business makes money, where your risks lie, which party has the stronger bargaining position or what would happen to your business if the agreement failed. There is also the possibility of using outdated wording, inappropriate clauses or provisions intended for a different jurisdiction. The more valuable or strategically important the agreement, the less sensible it is to rely on a document simply because it looks legally convincing.
When Should You Call a Solicitor?
You do not necessarily need legal advice every time you place an order or agree to carry out a small piece of work. However, the level of legal scrutiny should generally increase with the level of risk. If an agreement is worth a significant amount of money, will last for several years, involves valuable intellectual property, contains a personal guarantee or could restrict what your business does in the future, getting advice before signing is worth serious consideration. The same applies when you are taking commercial premises, entering business with another shareholder or partner, selling part of your business, signing a contract provided by a much larger organisation or agreeing terms that you do not fully understand. You should also consider calling a solicitor when a commercial relationship starts to go wrong. Early advice may give you more options than waiting until positions have hardened and a dispute has escalated.
Your Contracts Should Grow With Your Business
The contracts you used when your business first started may not be appropriate five years later. Perhaps your customers are larger. Your projects are more valuable. You have employees. You have developed intellectual property. You are working with national organisations rather than local customers. As the potential consequences of something going wrong increase, your contractual protection should develop too. Reviewing your key agreements periodically can help identify gaps before they become problems.
How Rohan Solicitors Can Help
At Rohan Solicitors, we work with SMEs, entrepreneurs and established businesses on the agreements that underpin their commercial relationships.
We can draft new agreements, review existing contracts, advise you on contracts you have been asked to sign and help negotiate terms where changes are needed.
If a disagreement has already arisen, we can also help you understand what your contract says, what your options are and the most appropriate way forward.
The aim is not to complicate your business with unnecessary legal paperwork. It is to give you clear agreements that reflect how your business actually works and provide appropriate protection when you need it.
If you would like to review your existing contracts or discuss an agreement before signing, speak to the commercial team at Rohan Solicitors.
01444 450901
enquiries@rohansolicitors.co.uk
