Most commercial contracts get signed while the relationship is going well. Which is why hardly anyone reads them closely: you check the price, the delivery date and little else.
A contract, though, is not for the good days. It is for exactly the day something goes wrong. These three clauses are what separate solving the problem from inheriting it.
1. Confidentiality
Protects your trade secrets: the client list, the pricing structure, the operating processes, the suppliers.
The most common mistake is signing without specifying what counts as confidential and without setting how long that obligation lasts after the relationship ends. A generic clause saying the parties shall maintain confidentiality, with no definition and no term, is very hard to enforce.
It is also worth remembering that for something to be protected as a trade secret it is not enough to call it secret: you have to take real measures to keep it confidential. A well-drafted contract is one of those measures.
2. Liquidated damages and termination
Sets in advance the financial consequences if the other party fails to perform on time or delivers substandard work, and in which cases you can terminate.
The benefit is practical: it saves you a long lawsuit proving loss and damage, because the penalty is fixed from day one. Without it, you would have to prove the amount of the damage, which is the hardest and most expensive part of any claim.
The penalty should be proportionate to the contract value, and the contract should distinguish clearly between breaches triggering a penalty and breaches triggering termination.
3. Jurisdiction and competent courts
Defines in advance which law and which courts will resolve any dispute.
If your supplier or client is in another city or country and you do not fix your own domicile as competent, you can end up litigating where they are: with their lawyers, travel, translations and costs that often exceed the amount claimed. Many breaches are never pursued simply because pursuing them costs more than writing them off.
The fourth one, almost always missing
If the contract involves someone creating something for you — a logo, a website, software, photographs, copy — one more clause is needed: ownership and assignment of rights.
Paying for creative work does not automatically transfer the economic rights over it. Without an express written assignment, the company uses an asset that legally still belongs to whoever created it. It is the gap that shows up, without fail, the day someone wants to invest in the business or buy it.
Before you sign
- Check that confidentiality defines what it covers and how long it lasts.
- Verify there is a penalty clause and clear grounds for termination.
- Fix your jurisdiction.
- And if creation is involved, require the assignment of rights in writing.
If you would like us to review a contract before you sign it, write to us.