Contract reviews: why you need them

Before signing up to any legal contract, you will want to know the full scope of the agreement and whether you or your organisation will be best served by entering into it. In this article, Darren Davies, partner at Hutchinson Thomas, explains why getting contracts reviewed by a legal professional can help avoid serious issues and save time and money in the long run.

A contract is any agreement between two or more parties which is enforceable by law. In a contract, legally enforceable commitments are made by all parties. Occasionally, some people incorrectly believe that they can avoid the hassles of a contract by entering into other types of agreements, for example, letters of agreement, memos of understanding, etc. However, an agreement that is enforceable by law is, from a legal perspective, a contract, regardless of its title. It is, therefore, advisable that all contracts should be drafted with due care and attention and reviewed by an experienced legal professional.

Businesses and other organisations deal with contracts all the time: clients, suppliers, employees, investors, landlords, tenants, consultants, and partners – all of these will require legal contracts before and during any professional dealings. But contracts can be tricky things to get right. In most cases, there is a lot they should include and it’s possible to miss something vital out, which won’t become obvious until it becomes a problem further down the line. Also, if they’ve been drafted by the other party, how can you be sure they have covered everything that needs to be included, and that the terms covered are fair to both parties – particularly to you?

When drafting or reviewing a contract, there are many things that will need attention. Some of these include:

  • Ensuring all party names and details (including registered company numbers and addresses) are correct, and signatures are collected from the right people with authority to sign.
  • Identify any blank areas or drafting notes left in the contract which need to be removed or completed.
  • Double-check the basic terms. For instance, duration of contract, clear definition of products or services, the all-important price and payment clauses. Do these terms suit you and your organisation? Does it match your understanding of what has been agreed and what you or your business needs?
  • Clear timings for performance by each party – are they realistic and achievable? What are the penalties or triggers within the contract for non-performance, and what risks are attached from your side? Carefully check what rights arise in respect of defective goods or services, and how they will be dealt with. Are there any rights to suspend supply or performance in the event of non-payment within a given timeframe?
  • Identify any guarantees within the contract. Ensure that you understand what you are agreeing to and that you are able to achieve the terms.
  • Identify any warranties and representations. You should carefully check the wording and attempt to limit liability wherever possible. Be mindful of any disclaimers or limitations from the other party.
  • Does the contract make reference to any other documents (“Incorporated documents”)? You will need to get hold of a copy of them too, as they will form part of the overall agreement.
  • Identify remedy provisions to work out the worst case scenario should you default on the contract.
  • What are the rights of termination for each party? How can you exit the contract if you need to? What notice will the other party give you if it needs to exit, and what costs will be involved?
  • Check that all dates and deadlines within the contract are clear and as agreed.
  • Check the requirements to maintain insurance policies. What is the framework for governance generally – reporting and compliance activities?
  • What happens if the other party becomes insolvent?
  • Dispute resolution – what does the contract say about methods of dispute resolution? It’s advisable to consider alternate dispute resolution (ADR) to avoid expensive court-based dispute resolution in the first instance.

Though most businesses will, undoubtedly, want to ensure all contracts are fair and legal, it’s important to understand that when drafting contracts, the other party will, understandably, have its own best interests at heart.

Here at Hutchinson Thomas, we have extensive experience of drafting and reviewing contacts covering every conceivable business transaction and agreement.

We can ensure that you have well-drafted documentation in place that will reduce the risk of a dispute arising and ensure that you and your organisation are fully protected – with your best interests at heart. If you do encounter a problem, we will work quickly to deal with it before it escalates.

We can negotiate on your behalf to resolve problems and believe in settling issues where possible without recourse to the courts. If you do become involved in litigation, we will represent you vigorously.

If you would like to discuss how we may be able to help your organisation, we would be happy to hear from you. Contact Darren Davies on 01792 439000 or email