Eight Contract Clauses Businesses Should Review Before Signing

Before signing a business contract, review the clauses that decide what must be delivered, who bears a loss, how the relationship can end and where a dispute will be determined. These are not decorative boilerplate. They distribute operational and financial risk. Their effect depends on the agreement read as a whole, the transaction and applicable Kenyan law; a significant or unusual deal should therefore receive transaction-specific legal review.

1. Scope, parties and joint liability

Start with the commercial bargain. The agreement should identify the correct contracting entities, the goods or services, price, performance standard, delivery point, acceptance process and records that prove completion. A broad statement of scope is not a substitute for measurable deliverables.

Confirm who has authority to sign and whether affiliates, guarantors or subcontractors have a role. If two parties undertake obligations jointly and severally, a claimant may pursue either liable party for the full obligation. That allocation should match credit assessment, control and any internal indemnity arrangement.

A useful review exercise is to translate each party’s principal promise into a dated operational task. If the business team cannot say who does what, by when, and what counts as satisfactory performance, the clause needs work before signature.

2. Duration, renewal and termination

A duration provision should state when the agreement begins, whether it has a fixed term and how renewal occurs. Conditions that must be satisfied before performance begins should be explicit, including approvals, licences, financing or mobilisation steps.

Termination needs separate thought. A party may seek an ordinary expiry, a negotiated convenience exit, a remedy for material breach, or a response to insolvency or extended force majeure. Each trigger needs a clear notice route, a realistic cure period where appropriate and a coherent interaction with the dispute clause.

Read the consequences clause with the termination right. Identify final invoices, return or retention of property, transfer of records, handover, confidentiality, accrued rights and provisions intended to survive. An exit right that cannot be operationalised often produces the very dispute it was meant to avoid.

3. Assignment, subcontracting and the relationship

Assignment can allow a party to transfer benefits or obligations to a purchaser, funder, affiliate or replacement provider. The clause should distinguish assignment from subcontracting and decide whether consent, notice or a change-of-control remedy is required.

A business may be content for a supplier to use subcontractors but still require responsibility to remain with the supplier. If consent is required, specify the standard and process; a bare prohibition can obstruct an ordinary restructuring or financing transaction.

A relationship-of-parties clause can record that the parties are independent contractors and that neither may bind the other. It is sensible housekeeping, but it should be checked against the commercial reality: exclusivity, control, authority, payment and regulatory obligations may matter more than a label.

4. Liability, indemnities and insurance

An indemnity is a promise to meet a defined category of loss or claim. It is not automatically a universal remedy. Review the triggering event, protected persons, recoverable loss, notice, conduct of third-party claims, settlement control and any exceptions.

Liability caps and exclusions should be read alongside the indemnity, not in isolation. A cap may exclude fraud, confidentiality, data claims or an indemnity; alternatively, it may apply to all claims. Neither outcome is inherently right. The commercial question is whether the remaining exposure is understood, insurable and proportionate to the return.

Insurance is evidence of one risk response, not a replacement for drafting. Check the policy type, limits, deductibles, territorial cover, duration and whether the promised protection actually responds to the agreed risk. Avoid a contractual insurance requirement that no party can realistically obtain.

5. Disputes, governing law and notices

A dispute-resolution clause should name the governing law and a forum that has jurisdiction. If arbitration, mediation or executive negotiation is chosen, identify the institution or process, seat where relevant, language, appointment method and the point at which a party may commence the next stage.

Escalation clauses work best when they set practical timelines and named levels of engagement. They become counterproductive when they require indefinite negotiation or leave unclear whether urgent interim relief remains available.

Notice clauses deserve a final factual check. Use current addresses, permitted electronic channels, deemed-receipt rules and the persons who can receive a serious contractual notice. A business should not discover an obsolete address only when attempting to terminate or enforce.

6. A pre-signing risk review

Do not review clauses in the order they appear alone. Prepare a short risk register: the event, likely consequence, financial exposure, owner, proposed control and whether the risk has been accepted at the correct management level. This makes the legal review useful to decision-makers.

Compare the final draft against the commercial approval and every schedule, statement of work, pricing table and referenced policy. Definitions, precedence clauses and cross-references frequently determine which document controls when descriptions differ.

Finally, preserve the negotiation record and the signed execution version. These are practical safeguards, not predictions of conflict. They enable the business to administer the agreement consistently and seek focused advice promptly if performance departs from the bargain.

Payment terms should also be read as a risk clause. Check the currency, tax treatment, invoice requirements, payment date, disputed-invoice mechanism, interest and any right to suspend. A supplier relying on cash flow may need a right to pause work; a customer may need a process that prevents minor invoice disagreement from interrupting a critical service.

Confidentiality provisions need a workable definition of confidential information, permitted recipients, security expectations, exclusions and duration. They should be aligned with intellectual-property ownership and data obligations. A party cannot sensibly promise confidentiality over material already public, independently developed or lawfully obtained from another source; equally, overly broad internal sharing can defeat the commercial protection sought.

Where intellectual property is created or adapted, establish whether it is assigned, licensed, pre-existing or jointly developed. The clause should address scope, territory, duration, sublicensing, moral rights where relevant, source materials and exit access. A short ownership sentence may be insufficient where software, branding, designs, data or ongoing improvements are central to the transaction.

Force majeure should identify the level of disruption required, notice, mitigation and the consequence of prolonged interruption. It should not be treated as a general escape from an uneconomic bargain. Consider whether payment, confidentiality, data security or return obligations remain possible even when a particular performance obligation is suspended.

Severability can preserve the balance of an agreement if one provision is unenforceable, but it does not solve a clause that carries the whole commercial bargain. If a restraint, limitation or allocation is fundamental, the review should consider the fallback position rather than assume the remainder will operate exactly as intended.

Entire-agreement and non-reliance wording should be examined against the documents and assurances that induced the deal. If a proposal, technical specification or representation is essential, incorporate it expressly or identify its contractual status. A last-minute promise that remains only in an email may not give either side the protection it expects.

Priority clauses are particularly important where there are master agreements, purchase orders, schedules, change requests and supplier terms. State which instrument controls on inconsistency and whether a later document can amend the agreement only through a defined process. This prevents an operational document from silently altering a negotiated risk position.

For regulated activity, add a focused compliance check. Licensing, sector-specific approvals, anti-bribery commitments, sanctions, record retention, audit rights and data requirements may be material. The agreement should allocate information, cooperation and remediation without making one party warrant matters that it cannot reasonably control.

There is no universal “best” liability cap or termination period. A low-margin supply arrangement, a property transaction, a technology implementation and a joint venture expose different risks. The drafting task is to make the allocation visible, deliberate and capable of administration by the people responsible after signature.

Once revisions are agreed, re-read the complete contract rather than only redlined clauses. A new definition can change several provisions; a revised date can alter notice, payment and renewal; and a negotiated exception can be lost through a standard precedence clause. That final integrated review is often where mismatches are found.

Consider the evidence the parties will need if performance is disputed. Delivery certificates, acceptance records, meeting minutes, change approvals, system logs and notice receipts should be capable of being created and retained in the ordinary course. A clause that requires evidence no operational team can produce is a poor control.

For a long-term agreement, build in governance without making every operational decision a formal amendment. A meeting cadence, escalation contacts, reporting format and change-control route can manage ordinary adjustment. Material changes to scope, price, risk or term should still require properly authorised written variation.

Tax wording should match the pricing model. Identify whether amounts include applicable taxes, who issues compliant documentation, whether withholding may apply and who bears a changed treatment. The agreement should not turn a commercial price into an accidental tax assumption.

Execution is the final control: use the agreed legal names, approved signatories and correct signature method, with every schedule attached. If the deal is conditional, record what must occur, who confirms it and whether the agreement may lapse or be waived. A negotiated draft is not complete until it has been validly executed.

A disciplined review is both legal and commercial. It asks whether the document records the intended bargain, identifies the risks that cannot be eliminated and allocates them to the party best able to manage them. The conclusion should be clear enough for the authorised signatory to make a fully informed, authorised, recorded and commercially sound decision.

Official source: Interpretation and General Provisions Act.