Insights for In-house Counsel Spring 2026 - Commercial contracts

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Late payment: UK to go ahead with "strongest laws in G7"

Why it matters:

The UK Government has confirmed plans to proceed with reforms that will give the UK one of the toughest late payment regimes in the world. This will include fines for persistent late payers, mandatory late payment interest of 8% above base, maximum 60 day payment terms (with some exceptions), a time limit for disputing invoices and a new low cost adjudication process for small businesses.

Our view:

Government rhetoric on reform proposals isn't always justified – but in this case, it's no exaggeration to describe these measures as "the most ambitious legislation to tackle late payments in over 25 years" and "the strongest legal framework in the G7". Our briefing explains the likely impact in more detail.

Watch out for a Bill - legislation to implement the proposals may well form part of the King's Speech expected in May. Timing is very unclear – but our best guess is that 2027 would be the earliest that measures could be brought into effect.
Think about how these proposals would affect both cashflow and how you deal with suppliers, particularly those with fewer than 50 staff (where the beefed up role for the Small Business Commissioner and the low cost dispute resolution system may shift the balance of power towards suppliers, compared with the status quo).
If you maintain a risk register, this legislation – once in force – should probably be on it, because there will be exposure to significant fines and increased reputational risk (the risk is likely to be higher for businesses already subject to the payment practices reporting regime).
If you want to get ahead of the game and make a virtue out of paying on time (for some businesses, this may be an easier "win" than other aspects of ESG, such as reducing carbon emissions), consider signing up to the Fair Payment Code.

Beware "standard" termination clauses: lessons from the Court of Appeal

Why it matters:

The Court of Appeal's ruling in URE v Notting Hill Genesis highlights the importance of not treating termination wording in a contract as boilerplate. What appears to be "standard" drafting may contain unexpected rights allowing one party to bring the agreement to an end and even to claim compensation. The ruling also looks at what happens where there is a delay in exercising a termination right. For more detail, read our briefing.

Don't treat termination provisions as boilerplate – for example, in this case, a change of control termination right had been combined with insolvency-related termination triggers, which would have made it easy to miss on review.
Delay in exercising a termination right can often lead to the right being lost – although as this case shows, don't assume that this will always be the case (here, despite a delay of 6 months, the termination right was still exercisable).

SPOTLIGHT ON TERMINATION:

This is the first in a series of briefings discussing common practical issues in connection with termination of commercial contracts. Among other things, we'll be looking at what counts as a material breach, when a breach allowing termination is likely to be seen as remediable and what happens when you have several termination rights that you could rely on at the same time. Watch this space.

How to avoid making a contract before you're ready

Why it matters:

With increasing use of informal channels such as WhatsApp for commercial dealings, staff may not always appreciate the risk of being found to have made a legally binding agreement – because they associate that with a formal, written document. However, if an exchange over WhatsApp contains all the key ingredients you need for a contract, then a legally binding agreement will often have come into existence – even where the parties have signalled a desire to document the arrangement in a formal written contract in due course. This is exactly what happened in the recent Court of Appeal case of DAZN v Coupang.

Our view:

The risk for parties of being contractually bound without a more detailed, formal agreement will often be significant; for example, suppliers are likely to be exposed to unlimited liability, whilst customers may be left with a contract that fails to protect their key interests (e.g. it may allow the supplier to terminate on very short notice or offer inadequate remedies for poor performance).

Use language such as 'subject to contract' to clearly communicate that there is no intention to be bound until a written contract is executed by the parties (this also allows parties to continue negotiations and provides a right to withdraw at any stage).
Ensure that deal teams are aware of the risks of being legally bound before the business is ready.
Once you are ready to contract, formalise the agreement as soon as possible, preferably by obtaining signatures from both parties on a written contract containing appropriate, detailed terms.
Have clear procedures for different types of contract – for example, where it's not feasible to involve in house legal or external advisers to review the detailed terms and oversee execution, design your contracting processes so that your standard terms of purchase or supply will apply to the deal.
Consider whether staff training on these issues is appropriate (read on for how we can help).

HOW WE CAN HELP:

We regularly work with clients to develop straightforward contract management procedures and deliver engaging and effective training to staff (we’re well aware that most staff won’t necessarily be as enthusiastic about the law as we are!). To find out more about how we can help, please get in touch.

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