A UK B2B commercial contract should clearly answer: who the parties are, what''s being supplied, for how much, on what timeline, with what consequences if it goes wrong. The core clauses are: scope, price and payment terms, IP ownership, warranties, liability cap and exclusions, termination rights, confidentiality, and governing law. Skip these and disputes get expensive.

Most UK SMEs trade on a mix of informal handshakes, single-page "order confirmations", and properly drafted contracts depending on deal size. The right level of formality scales with the value at stake and the consequences of getting it wrong.

When you need a formal contract

Situation	Minimum formality
One-off transaction under £500 with low-risk counterparty	Invoice with payment terms is usually enough
Ongoing services under £10K/year	Letter of engagement with key terms
Services £10K-£50K/year, or any one-off project £10K+	Proper services agreement
Anything over £50K, regulated, multi-year, or involving IP	Solicitor-reviewed bespoke agreement
Anything involving employees of either party, sensitive data, or regulated activity	Always solicitor-reviewed

The cost of a properly drafted commercial agreement (£500-£3,000 from a solicitor) is dwarfed by the cost of a dispute over an under-documented arrangement.

The 10 core clauses every B2B contract needs

1. Parties

Full legal names of both parties (the legal entity name, not the trading brand). Registered office addresses. Company numbers. Get this wrong and you may be contracting with the wrong entity entirely (a subsidiary vs holding company can be the difference between a solvent counterparty and an empty shell).

2. Scope / specification

What is being supplied. Specific, measurable, with deliverables identified. The most disputes arise from scope ambiguity.

Bad: "Marketing services." Good: "Monthly: 4 SEO articles of 1,500-2,000 words each, monthly performance report, monthly strategy review call (60 min). Quarterly: full SEO audit and strategy refresh."

A separate Statement of Work (SoW) is usually clearer than a list inside the main contract, especially for ongoing relationships.

3. Price and payment terms

• The fee. Specific number or formula.
• VAT treatment (plus VAT at the prevailing rate).
• Payment terms (Net 30, Net 14, on completion).
• Late payment consequences (statutory interest under the Late Payment of Commercial Debts Act 1998 is 8% over base rate, plus £40-£100 fixed sum).
• What happens on non-payment (right to suspend, right to terminate).

4. Term and termination

• Start date and end date (or "rolls month-to-month").
• Notice period to terminate for convenience (typical: 30 days for monthly services, 3 months for annual).
• Termination for cause (material breach, insolvency, change of control).
• Consequences of termination — return of materials, transition assistance, payment for work done.

5. Intellectual property

Who owns what, when. Three common models:

• Customer owns the output: standard for service work where the customer is paying for deliverables they''ll use independently (websites, content, software development).
• Supplier retains tools, customer gets licence: standard where the supplier brings pre-existing IP that they''ll re-use across customers.
• Joint ownership: rare and usually problematic in practice — pick one.

Make this explicit. IP disputes are some of the most expensive to litigate.

6. Warranties and representations

What each party warrants — typically:

• Authority: each party has the right to enter into the contract.
• Compliance: each party will comply with applicable laws.
• Quality: services will be performed with reasonable skill and care.
• No conflicts: the work won''t breach pre-existing obligations.
• IP: deliverables don''t infringe third-party IP.

The standard Sale of Goods Act and Supply of Goods and Services Act warranties apply by default — but commercial parties can modify or exclude many of them.

7. Limitation of liability

The cap on what either party can be liable for if things go wrong. Critical clause — defines the worst-case risk.

Typical structure:

• Excluded losses entirely: indirect, consequential, loss of profits, loss of opportunity, loss of data. (Note: you can''t exclude liability for death or personal injury caused by negligence — UCTA 1977.)
• Capped losses: total liability under the contract capped at, e.g., fees paid in the 12 months before the breach, or a fixed amount.
• Carve-outs: certain breaches (indemnity for IP infringement, confidentiality, fraud) often carved out from the cap.

This clause is heavily negotiated. Suppliers want low caps; customers want high caps. Settle at 1-2× annual fees for most B2B service contracts.

8. Indemnities

Where one party agrees to indemnify the other against specific losses. Typical indemnities:

• IP infringement (supplier indemnifies customer against third-party IP claims).
• Data protection breach (where one party causes the breach).
• Bribery / unlawful conduct.

Indemnities give the indemnified party a contractual right to recover specific losses — typically not subject to the general liability cap.

9. Confidentiality

Definition of confidential information, restrictions on use, duration (typically 2-5 years post-termination), exclusions (information already public, independently developed, lawfully obtained from third parties).

For services dealing with sensitive data, a separate NDA before contract may make sense.

10. Governing law and jurisdiction

• Governing law: England and Wales (or Scotland if Scottish parties).
• Jurisdiction: exclusive or non-exclusive courts of England and Wales.
• Dispute resolution: mediation as a precursor to litigation is increasingly standard.

Without these clauses, jurisdiction defaults can be ambiguous — particularly for cross-border arrangements.

Common UK SME contract mistakes

1. Using the wrong template

Generic templates from online sources often miss UK-specific elements, are written for the wrong industry, or don''t reflect current case law.

2. Not reading what you''re signing

Particularly when a customer hands you their standard terms. Read them. Negotiate the worst clauses. Walk away if needed.

3. Mismatching parties

Contracting with the wrong legal entity. Always check Companies House to confirm the entity exists and is the right one.

4. Verbal variations

"We agreed on the call that we''d also do X" — without written variation, the contract still says what it says. If you agree something different, document it.

5. Auto-renewal traps

Some contracts auto-renew for 12 or 24 months unless cancelled within a tight window. Calendar the cancellation window when you sign. The DMCC Act 2024 limits some auto-renewal practices but doesn''t eliminate them.

6. Ignoring change of control

When the counterparty gets bought, your contract often transfers automatically — but you can include a "change of control" termination right if you''d rather not be locked into the buyer.

7. No exit plan

When the contract ends, what happens? Data return? Service transition? Final payments? If the contract doesn''t say, expect disputes.

When to use a solicitor vs a template

Use a template + own review:

• Standard services or supply at low-to-moderate value.
• Bespoke fields filled in by you (parties, scope, fees, term).

Use a solicitor:

• High value (£50K+).
• Multi-year commitment.
• Regulated activity.
• Significant IP transfer.
• Cross-border element.
• Anything where the counterparty is much larger and has presented their own terms.

A typical UK SME might use templates for 80% of contracts and solicitors for the 20% that matter most.

What to do this month

• Audit your top 10 commercial contracts. Are the basics in place? Liability caps reasonable? IP clear?
• If you use templates, get them reviewed by a solicitor once per year (£500-£1,500 to refresh the standard library).
• For your next 5 contracts above £10K, commit to using a proper agreement (not just an invoice or PO).