Contract Clauses That Quietly Cost You Money

A contract has landed and someone wants it signed this week. Read four clauses before anything else — payment, liability, termination and renewal — because that is where the money is. It is almost never in the price and the deliverables everyone actually sat and negotiated; it is in the quiet terms that decide who pays when something goes wrong, how much, and how easily you can get out.

Payment terms: check the trigger, not the number

"30 days" tells you nothing until you know 30 days from what. From the invoice date? Delivery? Acceptance? The end of the month in which you invoiced? "Net 30 from month-end" stretches a 30-day term to nearly 60 — invoice on the 2nd and you are not due to be paid until the 30th of the following month. Find the trigger, then check your own invoicing process matches what you signed.

Two more to hunt for. A "pay when paid" clause in a subcontract means you are not paid until the main contractor's own client pays them, which moves someone else's credit risk onto you. And staged payments tied to "completion" are worth little if completion is never defined — tie each stage to a date or a described milestone.

The liability cap: read it against the worst outcome, not the invoice

A cap sets the ceiling on what one side can be made to pay, usually as a multiple of the fees — so a £10,000 contract capped at fees paid means £10,000 is your ceiling whatever the loss. That is comfortable when you are the supplier and dangerous when you are the customer, because the harm a failure does to you rarely bears any relation to what you paid for it.

Three checks. Whose liability is capped — theirs limited to £5,000 with yours left unlimited is the common trap. What figure, and whether it is fees paid in the last 12 months or the whole contract value. And what sits in the carve-out — the "nothing in this clause limits liability for…" list, where fraud, breaches of confidentiality, IP infringement and personal injury usually sit uncapped. A reassuringly low cap can leave you fully exposed on the events most likely to hurt.

Do not sign a bad cap on the assumption a judge will rescue you. Liability for death or personal injury caused by negligence cannot be excluded at all, and the Unfair Contract Terms Act 1977 requires exclusions and limitations in standard terms to be reasonable — but between businesses the courts will generally hold you to what you agreed. It cuts both ways: in your own terms, a defensible cap is worth more than an aggressive one, because a limitation found unreasonable leaves you with no limit at all rather than a slightly higher one.

Late payment: you have rights your contract never mentioned

Silence in the contract does not mean you cannot charge. On business-to-business debts, the Late Payment of Commercial Debts (Interest) Act 1998 gives you statutory interest at 8% above the Bank of England base rate, plus fixed compensation of £40 on debts under £1,000, £70 between £1,000 and £9,999.99 and £100 at £10,000 or more — per invoice, whether or not your contract says a word about it. The base rate has stood at 3.75% since 18 December 2025, so statutory interest runs at 11.75% a year. You can also claim reasonable recovery costs above the fixed sum where your actual costs were higher.

The trap runs the other way too. If your own terms set a lower interest rate, you may have quietly swapped a strong statutory right for a weaker contractual one. Read your own payment clause before you rely on the statutory position.

Termination, and the renewal nobody diarises

Two dates decide whether you can leave: the renewal date, and the last day of the notice window. Evergreen clauses roll the contract for another full term unless you give written notice inside a narrow period — often 60 or 90 days before the anniversary — and nothing happens to remind you, because the renewal is automatic and silent. Put both dates in the calendar the day you sign, with the reminder set a month before the window opens rather than the day it closes.

While you are there, check whether either side can terminate for convenience or only for cause, the notice period, and what happens to work in progress and prepaid fees. Then check what survives: confidentiality and outstanding payments usually do, and a licence to keep using something you paid to have built sometimes does not — which you want to find out now, not the week you switch supplier.

In practice — illustrative example

The renewal nobody diarised

A 12-person agency signs a £1,800-a-month software contract with a 12-month term and a clause requiring 60 days' written notice before renewal. They decide to switch tools in month 10 — but the cancellation window closed a week earlier. The contract auto-renews for another full year: roughly £21,600 they had not planned to spend, on a tool they had already decided to drop. One calendar reminder set on the day they signed would have saved all of it.

Indemnities: the clause that sits outside the cap

An indemnity is a promise to cover another party's losses, and it is more dangerous than an ordinary breach-of-contract claim for three reasons: it often sits outside the liability cap, it can be triggered without proving breach in the usual way, and the normal limits on recovering remote losses may not bite. Three questions settle it. What exactly am I indemnifying? Is it capped? Is it mutual? If the answers are "everything", "no" and "no", that is not a detail to concede in order to get the deal signed this week.

The boilerplate that decides whether a dispute is affordable

Governing law and jurisdiction sets whose law applies and which courts hear a dispute. Agreeing to a foreign court turns a modest argument into an unaffordable one, so check that disputes sit under the law of England and Wales in courts you could realistically use. Entire agreement makes the signed document the whole of the deal, so a promise made in an email, a pitch deck or a sales call that never reached the contract simply falls away — before signing, read back through your own correspondence and confirm every promise you are relying on appears in the operative terms. Assignment and change of control decides whether the other side can hand your contract to a company you never chose to work with.

Before you sign, and what to do if it is already on your desk

Diarise every notice and cancellation deadline the day you sign, not later.
Get any promise you are relying on into the operative terms, not the covering email.
Ask for anything unclear in plain English in writing — silence is not agreement, and it is not protection either.

If the contract is in front of you now, send it with the deadline and book a legal review. A contract review starts at £249 +VAT for a contract of ordinary length: a marked-up copy showing where the problems are, a written summary separating standard terms from real risk, and a follow-up call. To pressure-test it yourself first, run the free contract risk checker, or read our guide to business contracts.

One limit, stated up front: a contract that has already become a dispute is contentious work. If the other side has instructed solicitors or threatened a claim, it goes to RHF Solicitors (SRA no. 324115), and you hear that on day one rather than halfway through.

This is general legal information, not advice on your situation, and nothing here is wording you can drop into a contract. For advice tailored to your business, book a legal review. Buzz Legal provides non-reserved business legal support; reserved legal activities are carried out by RHF Solicitors, authorised and regulated by the SRA (no. 324115).

Common questions

Which clause costs businesses the most money in practice?

The liability cap, closely followed by the payment terms. A cap limits the maximum one side can be made to pay if things go wrong, and it is usually set as a multiple of the fees — so a £10,000 contract with liability capped at fees paid means £10,000 is your ceiling, whatever the loss. That is comfortable when you are the supplier and dangerous when you are the customer, because the harm a failure causes you rarely bears any relation to what you paid for it. Read the cap against the worst realistic outcome, not against the invoice. If the two are wildly apart, that is the clause to negotiate first, and the one most people never mention.

Can I charge interest on a late invoice if my contract does not mention it?

Yes, on business-to-business debts. The Late Payment of Commercial Debts (Interest) Act 1998 gives you statutory interest at 8% above the Bank of England base rate, plus fixed compensation of £40 on debts under £1,000, £70 between £1,000 and £9,999.99 and £100 at £10,000 or more, per invoice, whether or not your contract says a word about it. You can claim reasonable recovery costs above the fixed sum where your actual costs were higher. It does not apply to consumer debts. The base rate has been 3.75% since 18 December 2025, so the rate to apply is 11.75%. Most businesses never claim any of this, which is exactly why late payers keep paying late.

What is an indemnity clause, and should I worry about it?

An indemnity is a promise to cover another party's losses, and it is more dangerous than an ordinary breach-of-contract claim for three reasons: it often sits outside the liability cap, it can be triggered without proving breach in the usual way, and the normal limits on recovering remote losses may not bite. A wide, one-way indemnity can leave you paying third-party claims and legal costs with very little connection to anything you did wrong. Three questions to ask: what exactly am I indemnifying, is it capped, and is it mutual. If the answer is everything, no and no, that is not a detail to concede in the interests of getting the deal signed this week.

Does an entire agreement clause mean the emails we exchanged do not count?

Often, yes — that is precisely what it is for. An entire agreement clause is designed to make the signed document the whole of the deal, so a promise made in an email, a pitch deck or a sales call that never made it into the contract can simply fall away. Well-drafted versions go further and record that you have not relied on any representation outside the document. The consequence is simple and painful: if something mattered enough to make you sign, it needs to be in the operative terms, not in the covering email. Before signing, read back through your own correspondence and check that every promise you are relying on appears in the contract itself.

How do I stop an auto-renewal clause locking me in?

Find two dates before you sign: the renewal date, and the last day of the notice window for stopping it. Put both in the calendar with a reminder a month before the window opens, not the day it closes. Evergreen clauses roll the contract for another full term unless you give written notice inside a narrow period, often 60 or 90 days before the anniversary, and missing it by a week is how businesses end up paying another year for something they stopped using. If you are the one drafting, keep renewal and notice terms fair and flag them clearly — a renewal buried in small print is exactly the sort of term a court may decide was never properly incorporated.

Are liability caps enforceable, or will a court strike them out?

Between businesses, courts will generally hold you to a cap you agreed. The Unfair Contract Terms Act 1977 requires exclusions and limitations in standard terms to be reasonable, and liability for death or personal injury caused by negligence cannot be excluded at all, but “I agreed to a bad cap” is not on its own a route out of it. Do not sign a cap on the assumption a judge will rescue you later. The point cuts both ways: if you are relying on a cap in your own terms, an aggressive one is worth less than a defensible one, because a limitation held to be unreasonable leaves you with no limit at all rather than a slightly higher one.

What can Buzz Legal do about a contract already in front of me?

Send the document and the deadline. A contract review starts at £249 +VAT for a contract of ordinary length and gets you, once the scope is agreed in writing: a marked-up copy showing where the problems are, a written summary separating standard terms from real risk, suggested replacement wording for the clauses worth arguing about, and one follow-up call or email exchange. Reviewing and drafting contracts is non-reserved work, so no solicitor is required for it. What we cannot take on is a contract that has already become a dispute — if the other side has instructed solicitors or threatened a claim, that is contentious work for RHF Solicitors (SRA no. 324115), and you will hear that on day one rather than halfway through.

The contract clauses that quietly cost you money