Whether you're a small business owner, a start-up founder, or managing a commercial venture in South Wales, having a well-drafted contract is essential. Commercial agreements govern the relationship between parties and set expectations for deliverables, payment terms, liabilities, and disputes. At Fonseca Law in Ebbw Vale, our experienced commercial and conveyancing solicitors understand how crucial these contracts are - and how poorly drafted ones can lead to costly legal battles.

This guide offers practical tips on drafting a strong commercial contract under UK law (including Welsh regulations). We explain the essential clauses, common pitfalls to avoid, and why legal guidance can make all the difference.

What is a commercial contract?

A commercial contract is a legally binding agreement between two or more parties - businesses or individuals - detailing rights, obligations, and remedies. Examples include supply agreements, service contracts, distribution deals, and partnership agreements. A clear and enforceable contract minimises confusion, helps prevent disputes, and protects your interests.

Why get your contract right?

Enforceability: Ambiguous or incomplete terms may render parts of the agreement unenforceable.

Dispute resolution: Well-defined clauses reduce litigation risk and offer clear paths for resolving disagreements.

Risk management: Proper limits on liability and clarity on responsibilities can safeguard your business.

Regulatory compliance: Contracts must comply with UK laws, such as consumer protection, data privacy, and competition rules.

Key elements of a strong commercial contract

1. Clearly define the parties

Begin by identifying all parties with full legal names and addresses. If a party is a company, include its registered company number. This removes ambiguity and ensures enforceability.

2. Precise descriptions of goods or services

Set out exactly what is being supplied or delivered - not just in general terms. Include quality standards, timelines, delivery or performance dates, and any specific requirements. This helps avoid disputes over missed or faulty delivery.

3. Payment terms

Define the price clearly, including currency. Outline when and how payment is to be made, whether by invoice terms, instalments, or milestone-based payment. Include late payment provisions, such as interest and compensation charges, consistent with the UK Late Payment of Commercial Debts Regulations.

4. Duration and termination

Specify the contract’s start date and how long it runs. Include renewal or auto‑renewal clauses if applicable. Most importantly, set out circumstances when either party may terminate: breach, insolvency, or other material events, along with notice periods.

5. Confidentiality and data protection

If sensitive information will be exchanged, include robust confidentiality terms. Ensure compliance with UK data protection laws (GDPR and UK GDPR) if personal data is processed, setting out permitted use, storage, and deletion of that data.

6. Liability and indemnity clauses

Include limitations on liability (in proportion to the contract value) and appropriate indemnities. For example, indemnities may cover breaches of data protection or third-party claims. Ensure clauses comply with UK Unfair Contract Terms legislation - especially for non-consumer contracts.

7. Intellectual property rights

Clarify who owns existing and newly created intellectual property - such as logos, trademarks, content or designs. Specify whether ownership transfers, or licences are granted, and any limitations on usage.

8. Sub‑contracting and assignment

If using sub‑contractors or giving parties the right to assign the contract to another entity, make this explicit. Use language that allows consent or restricts transfer, depending on your preferences and risk appetite.

9. Dispute resolution and governing law

Include a choice of law clause (UK/Wales) and a dispute resolution method - mediation first, then arbitration or court action. Consider clauses on escalation processes and jurisdiction (e.g. Welsh courts or English courts).

10. Force majeure (unforeseen events)

Protect against events outside control, like natural disasters or government restrictions. Set out which events trigger relief and how disputes over force majeure are handled - possibly including notice requirements and maximum durations.

Common pitfalls to avoid

• Using vague or broad language (“reasonable”, “subject to”) without defining terms.
• Leaving out key obligations, such as service levels or delivery requirements.
• Ignoring late payment legislation, possibly allowing unfair terms or penalties.
• Drafting in a way that misaligns with industry standards or regulations.
• Neglecting review for legal compliance, especially on data protection or consumer law.

Read: Common types of civil litigation cases and how to handle them

Practical steps to draft a business-ready contract

Start with a clear outline: draft key terms (parties, scope, payment, duration).

Write in plain English: avoid dense legal jargon - clarity supports enforceability.

Use defined terms consistently: define terms like “Commencement Date” or “Delivery Period” to maintain consistency.

Review for legal compliance: ensure the contract reflects UK consumer law, data protection laws, and competition rules.

Get independent legal review: either you or the counterparty should seek expert advice before final signature.

Tailoring contracts for businesses in Wales

Contracts involving Welsh businesses or individuals may also need to consider both English and Welsh language requirements if specified. In regulated sectors such as agriculture, food, or healthcare, be aware of devolved Welsh regulations - such as Welsh branding, marketing permissions or trade rules under Welsh Government guidelines.

Working with a solicitor who understands Welsh regulations - like our team in Ebbw Vale - helps ensure that your contract is both legally robust and regionally appropriate.

When you should seek legal help

If your contract involves:

• High value or ongoing commitments
• Complex risk-sharing between parties
• Sensitive data or IP rights
• Regulated industries or public-sector involvement

…you should absolutely involve a solicitor.

Fonseca Law’s commercial and conveyancing solicitors offer:

• Expert review and drafting tailored to your needs
• Support with negotiation and amendments
• Guidance on enforcement and dispute risk mitigation

How Fonseca Law can help

We’re equipped to support businesses across South Wales in drafting and reviewing commercial contracts - from supplier agreements and service contracts to lease and property-related commercial deals.

Our local expertise ensures your contracts:

• Meet both UK legal standards and Welsh-specific requirements
• Protect your financial position and commercial reputation
• Reduce risk of disputes through clear, well-drafted terms

Whether you’re based in Ebbw Vale, Cardiff, Swansea or the wider region, our team can support you through every stage - preparation, negotiation, signing and enforcement.

A commercially sound and legally compliant contract sets the stage for successful business relationships. Clear drafting and attention to legal detail help prevent misunderstandings, protect your assets, and give you confidence to pursue business opportunities.

Read: Understanding civil litigation

If you’d like help drafting, reviewing, or negotiating a commercial contract, reach out to our experienced team at Fonseca Law in Ebbw Vale, where local insight meets expert conveyancing and commercial law advice.