How to Avoid Costly Commercial Disputes with Strategic Contract Drafting

Andrew Haimdas January 15, 2025

In the fast-paced world of commerce, a well-drafted contract is your best defence against costly disputes. Whether you are a startup navigating initial partnerships or a seasoned enterprise managing complex vendor relationships, strategic contract drafting ensures clarity, protects your interests, and promotes harmonious business dealings. Below, we share actionable insights to help you craft clear agreements that reduce the risk of misunderstandings and costly litigation.

1. Make It Clear

Ambiguity is the breeding ground for disputes. Contracts should be written in clear, concise language that minimises the risk of differing interpretations. Avoid overly technical jargon unless necessary, and define key terms explicitly. For example, if your contract references “delivery timelines,” specify exact dates and conditions rather than relying on vague phrases like “as soon as possible.”

2. What Issues Might Arise?

The best contracts account for potential challenges and outline how they will be addressed. Consider scenarios such as:

delays in performance;
changes in market conditions;
disputes over quality standards; and
early termination of the agreement.

Incorporate detailed provisions for resolving these issues, such as penalties for late delivery or processes for renegotiating terms if circumstances change significantly.

3. What Are You Doing? What Are They Doing?

A well-balanced contract reflects the responsibilities of all parties involved. Clearly outline each party’s obligations, deadlines, and deliverables. This not only promotes accountability but also ensures that expectations are aligned from the outset, reducing the likelihood of conflict.

4. How Are Disputes to Be Settled?

Even with a carefully drafted contract, disputes can arise. Including a well-thought-out dispute resolution clause can save time, money, and relationships. Options include:

mediation: encourages amicable resolution with the help of a neutral third party;
arbitration: offers a binding resolution outside of court, often faster and less expensive than litigation. However, arbitration can sometimes limit appeals, and costs may escalate if the arbitrator’s fees are high. It also lacks the public record of litigation, which can be a pro or con depending on the need for confidentiality; or
litigation: provides a structured process with opportunities for appeal and access to a public forum, which can create precedents and ensure accountability. However, it is often slower, more expensive, and may strain business relationships due to its adversarial nature.

By weighing the pros and cons of each method, you can tailor the dispute resolution clause to the specific needs of your business and the relationship in question.

5. Does the Agreement Cater to The Parties

While templates are a great starting point, they often fail to address the nuances of your specific business relationship. Customise every contract to reflect the unique circumstances, risks, and objectives of the parties involved. Boilerplate terms can lead to unintended consequences if they are not carefully reviewed and adapted.

6. How Is the Agreement Terminate?

Every business relationship has the potential to evolve or end. Clearly outline the conditions under which the agreement can be terminated, whether due to mutual consent, breach of contract, or unforeseen events. Specify notice periods, compensation for early termination, and the process for unwinding obligations.

7. Make Sure the Parties Meet Compliance Standards

Commercial contracts must align with applicable laws and regulations. Work with legal counsel to ensure your agreements meet industry-specific standards and do not include clauses that could be deemed unenforceable. Non-compliance can render a contract void or expose your business to legal liabilities.

8. Regularly Review and Update Contracts

Business conditions and legal landscapes change. Periodically review and update your contracts to ensure they remain relevant and enforceable. This proactive approach helps prevent outdated terms from causing confusion or conflict down the line.

9. Get Advice

Engaging experienced corporate lawyers during the contract drafting stage can save significant costs later. Legal professionals can identify potential pitfalls, suggest protective measures, and ensure the contract is watertight. Their expertise often pays for itself by preventing disputes or mitigating their impact.

10. Focus on Building Trust

Finally, strategic contract drafting is not just about avoiding disputes—it is about fostering strong, trust-based business relationships. A clear, fair, and comprehensive contract sets the tone for collaboration and mutual respect.

Conclusion

Here at The Jonathan Lea Network, we have significant experience and expertise in advising on and drafting commercial agreements. We are happy to utilise our skills and expertise to resolve common and uncommon issues that may arise during the process.

If you would like to know more about how we are able to assist, we often offer a no-cost, no-obligation 20-minute introductory call as a starting point. Please email wewillhelp@jonathanlea.net providing us with any relevant information to ensure that any call we have is as productive as possible. After this call, we can then email you a scope of work, fee estimate, and confirmation of any other points or information mentioned on the call.

This article is intended for general information only, applies to the law at the time of publication, is not specific to the facts of your case and is not intended to be a replacement for legal advice. It is recommended that specific professional advice is sought before relying on any of the information given. © Jonathan Lea Limited.