Most businesses would love to operate exclusively on their own standard terms of sale or purchase. Reality has other ideas. Depending on where you sit in the supply chain, you’ll often find yourself being asked, or quietly pressured, to sign up to a customer’s or supplier’s terms instead.
That’s not always a problem. But standard terms are written to favour the party that drafted them, and the assumption that “it’s just their boilerplate” can land you with obligations you’d never have agreed to if you’d read them properly. Before you put a signature on anything, here are six areas worth a careful look.
1. Payment Terms
If you’re the supplier, this is the section that can quietly damage your cash flow. Large buyers often have standard payment periods that stretch well beyond what’s comfortable, and sometimes the wording is layered enough that the true payment date isn’t obvious at first glance.
A few specific things to watch for:
- Mandatory discounts. Some terms compel you to apply discounts once a customer hits a certain volume, or to automatically match preferred terms you’ve given to other customers. Both can be costly if you haven’t priced them in.
- Fixed pricing clauses. Be cautious about locking in prices for a long period, especially if your raw material costs move around. From the buyer’s side, watch out for clauses letting the supplier increase prices periodically, and make sure you’ve got a clean exit if the increase doesn’t sit right with you.
- Interest on late payment. Check whether it’s reasonable, and whether it applies symmetrically.
2. Delivery Terms
Delivery clauses can become a flashpoint if things go wrong. As a seller, you’ll generally want to avoid “time is of the essence” wording, because it can turn a minor delay into a serious breach.
Many contracts incorporate INCOTERMS by reference, so make sure you actually understand which one applies and what it commits you to. Also look at:
- Any liquidated damages payable for late delivery.
- Packaging requirements; if you can’t realistically meet the spec, that’s a problem before you’ve even shipped.
3. Warranties
Warranty wording is one of the most heavily negotiated parts of any supply contract for good reason. If you’re the supplier, lengthy or open-ended warranty periods are a serious risk. If you’re the buyer, you want a sensible warranty in place and you should be wary of standard terms that try to exclude any warranty at all.
The remedy for a breach matters just as much as the warranty itself:
- Suppliers will usually want the right to repair or replace the product themselves, and to prevent the customer running off to a competitor for the fix.
- Buyers want a supplier who’s obliged to act quickly, with a clear refund route if the issue can’t be sorted.
4. Termination
Read the termination provisions carefully. Do you actually have a right to walk away, and is it clear when that right kicks in? Many one-sided standard terms make it easy for the other party to terminate while leaving you with limited options.
Just as important: what happens after termination? Some standard terms require an outgoing supplier to assist with handover to a replacement supplier, which can mean weeks of additional work you weren’t expecting. That might be appropriate in some contracts, but not in most. Don’t get tied into post-termination obligations you can’t comfortably deliver.
5. Intellectual Property
IP issues need to be dealt with explicitly, not assumed. The risk is straightforward: you can easily hand over rights you didn’t realise you had, or end up paying for something you don’t actually own.
This catches businesses out most often in IT and website design contracts. It’s surprisingly common for a business to assume it owns the copyright in its own website, only to discover later that the designer who built it holds the IP. The same trap exists in plenty of other creative and technical procurement.
Be clear, in writing, about who owns what.
6. Overall Liability
Make sure the total liability position under the contract is unambiguous. Suppliers will usually want their total liability capped and consequential or indirect losses (such as loss of profit) excluded.
Buyers need to push back where that goes too far. Depending on what’s being supplied, excluding all consequential losses may leave you carrying risks that should sit with the supplier. The goal isn’t to extract the most generous terms possible; it’s to make sure that if something goes wrong, the contract reflects a fair allocation of who carries the cost.
And There’s More to It
The six areas above are the most common pitfalls, but they’re not the whole picture. Data protection clauses, restrictive covenants, non-poaching provisions, indemnities, jurisdiction, and confidentiality wording all deserve their own careful read, and the right answer often depends on the specifics of your industry and supply chain.
Where Specialist Legal Advice Earns Its Keep
The challenge with standard terms isn’t usually that they’re hostile. It’s that they’re written to be signed without question, and the points that matter most to your business are often buried in clauses that look routine.
Commercial contract review sits at the intersection of contractual risk, commercial reality, and sector-specific knowledge, which is why most businesses benefit from working with a firm that handles these reviews regularly rather than as an occasional matter. A firm like Darwin Gray, for example, advises businesses on reviewing standard terms before signing, negotiating amendments where it counts, and putting their own contracts in shape so they’re not at a disadvantage next time round. Catching issues at the review stage is almost always cheaper than living with them for the life of the contract.
