Whether you’re a startup founder landing your first big deal or an established business leader managing multiple partnerships, negotiating commercial contracts is one of the most important and most overlooked skills in your toolkit.
Contracts underpin everything from supplier agreements and service terms to licensing deals and strategic partnerships. Too often we see businesses get carried away by the moment and sign on the dotted line without properly understanding the risks or negotiating terms that protect their interests longer term.
This guide to commercial contracts will walk you through the essentials of effective negotiation, from what to look out for, to how to hold your ground (without blowing the deal).
What is a commercial contract?
A commercial contract is any legally binding agreement between businesses that outlines the rights, responsibilities, and obligations of each party. These can cover a wide range of business arrangements, such as:
- Service agreements
- Consultancy contracts
- Supply and distribution deals
- Partnership or collaboration agreements
- Licensing and IP arrangements
- Software or tech platform terms
While the format and content may vary, most commercial contracts include terms around payment, timelines, deliverables, termination rights, liability, and dispute resolution.
Why negotiation matters
The negotiation stage isn’t just a formality, it’s your opportunity to shape the deal in a way that aligns with your business goals and protects you from unnecessary risk.
Here’s what a strong negotiation can help you achieve:
- Clarity – so you’re not left second guessing obligations or deliverables.
- Balance – so neither party carries an unfair share of risk or responsibility.
- Protection – in case something goes wrong down the line (and sometimes, it will).
- Commercial value – ensuring the terms support long-term business sustainability.
6 things to negotiate before you sign
1. Scope of work
You’ve heard of scope creep right? This is how to prevent that from happening. Make sure your contract clearly defines what’s being delivered, by whom, and when. Vague descriptions lead to confusion and frustration as each party assumes a different position. Ask yourself and of your client: is it clear what’s in and what’s out of scope?
2. Payment terms
Cash is king for most businesses and larger organisation ‘standard 90 day payment terms’ could make or break your business. So before you accept standard payment terms, make sure that you’ve considered the cash flow impact and where you can, negotiate for:
- Instalments (especially for large projects)
- Shorter payment windows (e.g. 30 days instead of 60 or even 90)
- Clarity around late payment interest
3. Termination rights
Perhaps it wasn’t the deal you were expecting or maybe life has thrown a curveball and you need to exit. Whilst we hope the worst doesn’t happen, you should always prepare for it by adopting:
- Mutual termination rights
- Exit clauses for breach or non-performance
- Minimum notice periods
4. Liability and indemnities
This is where risk is allocated. Push back on unlimited liability or unfair indemnities, take this on and your insurance will be sky high! For most SMEs, a liability cap that reflects the contract’s value is reasonable.
5. Intellectual property
If your business creates something, content, software, branding, training materials, be crystal clear about who owns it. Don’t assume IP remains yours unless it’s spelled out.
6. Dispute resolution
No one likes to think about disputes, but it’s smart to plan for them. Try to agree on a sensible approach, such as:
- Negotiation first
- Mediation or arbitration before court
- Jurisdiction (especially if you or they operate across borders)
Red flags to watch out for
Some contract terms should ring alarm bells. If you spot any of the following, don’t ignore them:
- One-sided clauses giving all the power to the other party
- Automatic renewals with no opt-out
- Ambiguity – if you’re not sure what something means, ask or amend
- Blank sections or references to non-existent documents
- Clauses that conflict with verbal agreements or prior emails
A contract is a legal document and it should reflect what was agreed in plain English.
How to negotiate confidently (without making it awkward)
Negotiation doesn’t have to be adversarial. It’s simply a conversation to make sure both sides are on the same page.
Here are some tips to negotiate effectively and respectfully:
- Start from a place of collaboration, not confrontation. “We just want to make sure everything’s clear before we move ahead.”
- Know your non-negotiables. These are the areas where you won’t compromise – whether it’s IP ownership or liability caps.
- Use plain language. Don’t feel pressured to adopt legalese. Ask for things to be rewritten in simpler terms if needed.
- Be open to trade-offs. If the other side won’t budge on one point, can you get something else in return?
- Get legal advice if you’re unsure. A lawyer can help you spot issues and propose reasonable alternatives without slowing the deal down.
When to get legal support
You don’t need a solicitor at the table for every deal but when the stakes are high or the terms are complex, legal advice is worth its weight in gold.
We typically recommend getting advice if:
- The contract is high value or long-term
- You’re entering into something new (e.g. a licensing deal, franchise, or SaaS agreement)
- The other side has sent you a heavily weighted or jargon-filled contract
- You’re concerned about liability, IP, or unclear obligations
Even a quick contract review can help you go into negotiations with clarity and confidence.
Final thoughts: Commercial contracts are partnerships, not traps
At their best, commercial contracts reflect a strong working relationship, with clear expectations and shared responsibility. But that only happens when both parties take the time to negotiate terms that work.
Use this guide to commercial contracts as a starting point and remember, a good contract is one you’re comfortable signing because you fully understand and agree with it.
Need support reviewing or negotiating a contract? We help businesses across the UK negotiate smarter, fairer deals every day. Let’s make sure yours is one of them.
