Short answer

A business contract is legally binding once there is an offer, acceptance, something of value exchanged (known as consideration) and an intention by the parties to be bound. Written terms are not always required, but they prove what was agreed. Use a clear template for services, supply or confidentiality, and at the very least check payment, liability and termination clauses before signing.

Do you need a written contract for your business?

Most business contracts in England and Wales do not have to be in writing. An email exchange, a signed quote or even a phone call can create a binding contract. The problem is proof: if there is a dispute, a court decides what was agreed from whatever evidence exists.

A written contract lets you control the key terms instead of relying on the law's default rules. Some documents do have formal requirements. A deed must be signed in front of a witness, and a transfer of copyright must be in writing and signed. Electronic signatures are admissible as evidence under section 7 of the Electronic Communications Act 2000 and are widely used for ordinary commercial contracts.

Which contract template do you need?

Pick the template that matches what you are actually doing. Common ones for small businesses are:

• Service agreement: you provide or buy ongoing services. See the Libra services agreement.
• Consultancy or freelance contract: a self-employed person works on a project. See the consultant standard terms of business or consultant appointment letter.
• Supplier agreement: regular supply of goods. See the long term supply agreement or purchase order plus terms and conditions.
• Terms of sale: your standard terms for selling goods to other businesses. See the terms and conditions of sale.

A freelance or consultancy contract should say who owns the work produced. Under the Copyright, Designs and Patents Act 1988, section 90(3), copyright only passes to you if the assignment is in writing and signed by the freelancer.

What is an NDA and when should you use one?

A non-disclosure agreement (NDA), also called a confidentiality agreement, is a contract where one or both parties promise not to use or share confidential information except for an agreed purpose. Use one before you share pricing, customer lists, product plans or code with a potential partner, investor, supplier or contractor.

A one-way NDA protects only the party disclosing information. A mutual NDA protects both sides and suits joint ventures or deals where both parties share information. A good NDA defines what counts as confidential, states the permitted purpose, sets how long the duty lasts, and excludes information that is already public. Libra has an NDA template, a confidentiality agreement and a shorter non-disclosure agreement letter.

An NDA cannot lawfully stop a worker making a protected disclosure (whistleblowing) about wrongdoing.

What should you check in a contract before signing?

Read the whole document, including any terms it refers to. Check these points in particular:

1. Parties: the correct legal names, including company numbers.
2. Scope: exactly what is being supplied, by when and to what standard.
3. Price and payment: amounts, VAT, invoicing and payment terms.
4. Liability: caps, exclusions and indemnities.
5. Term and termination: how long it lasts, automatic renewal and notice periods.
6. Intellectual property and confidentiality: who owns what is created.
7. Disputes: governing law (England and Wales) and how disputes are handled.

If no payment date is agreed, the Late Payment of Commercial Debts (Interest) Act 1998 treats a business debt as late 30 days after delivery or invoice, whichever is later.

How does a limitation of liability clause work?

A limitation of liability clause caps how much one party can claim from the other if things go wrong, for example to the fees paid in the previous 12 months. It often also excludes indirect losses such as lost profits.

The Unfair Contract Terms Act 1977 limits what these clauses can do between businesses. You can never exclude liability for fraud or for death or personal injury caused by negligence (section 2). Other exclusions in standard terms must pass the reasonableness test in section 11, which looks at what the parties knew or should have known when the contract was made. A cap that is far lower than the realistic risk, or buried in small print, may be unenforceable. When you sell to consumers, the Consumer Rights Act 2015 gives stronger protection to consumers, including the right to return products in certain circumstances.

What do common contract clauses mean?

These clauses appear in most commercial contracts and are often misunderstood:

• Indemnity: a promise to cover the other party's losses from a specified event, such as a third-party claim. It can bypass the normal rules on proving loss, so check whether the liability cap applies to it.
• Warranty: a statement by a party that a certain situation exists or is true. This may include a promise that a product will perform in a certain way, for a certain amount of time, a statement that a director is allowed to sign and bind the company to a contract, or that a product or asset is owned by the company selling it and won’t be claimed by anyone else. This statement is a kind of promise and if it is broken or untrue, the other party will be able to claim against that warranty. Warranties are often tied to the indemnity clause and limitation of liability clause to manage each parties exposure to risk.
• Entire agreement: says the written contract replaces earlier discussions, so promises made in emails or meetings may not count unless they are included.
• Force majeure: suspends or ends obligations when events outside a party's control, such as natural disasters, prevent performance. It only applies if the contract includes it.
• Automatic renewal: the contract rolls over unless you give notice by a set date.
• Governing law and jurisdiction: which country's law applies and which courts hear disputes.

Can AI review a contract for you?

AI contract review tools can explain clauses in plain English, flag unusual or one-sided terms and compare a draft against a standard position. Libra can read a contract you upload, explain what each clause means for you and suggest questions to raise with the other side.

AI review works best as a first pass. For high-value deals, contracts with personal guarantees, or terms you do not understand, get a lawyer to check the final version. You can find a lawyer or clinic through Libra.

What are the key deadlines and time limits?

Contract rights are time limited, so keep signed copies and diary key dates.

• 6 years: time limit to bring a claim for breach of an ordinary contract, from the date of the breach (Limitation Act 1980, section 5). The limit is 12 years for a contract made as a deed.
• 30 days: default payment period for business-to-business contracts where no date is agreed, after which statutory interest can run.
• Notice periods: termination and renewal notice periods run from the date set in the contract. Missing a window can lock you in for another term.
• 14 days: cancellation period for most consumer contracts made online or away from business premises.

What should you do next?

1. Write down what you have agreed: parties, scope, price, timing and how either side can end the arrangement.
2. Choose a matching template, such as the services agreement or NDA template, and fill in the details.
3. Check the liability, payment and termination clauses against the checklist above before you sign.
4. Ask Libra to review the draft, explain any clause you are unsure about and suggest changes.
5. Sign using the correct legal names, keep a signed copy and put renewal and notice dates in your diary.
6. For high-value or unusual deals, find a lawyer or clinic through Libra to check the final version.

Frequently asked questions

Is a contract valid without a signature?

Usually yes. A contract can be formed by conduct, email or verbal agreement if there is an offer, acceptance, consideration and an intention to create legal relations. A signature is strong evidence that you agreed to the terms. Deeds, and some documents such as copyright assignments, must be signed to be effective.

What is the difference between a mutual NDA and a one-way NDA?

A one-way NDA protects information flowing from one party, for example when you show your business plan to a possible investor. A mutual NDA protects information shared by both parties, which suits joint ventures, partnerships and technology deals where each side reveals sensitive information.

How long should an NDA last?

There is no fixed legal period. Many NDAs protect information for two to five years after disclosure, while trade secrets are often protected for as long as they remain confidential. Choose a period that matches how long the information stays commercially valuable, and say so clearly in the agreement.

Can I use a free contract template from the internet?

You can, but check it is written for the law of England and Wales, reflects current legislation and fits your deal. Templates from other countries often use different rules on liability, consumer rights and late payment. Libra's templates are drafted by lawyers for use in England and Wales.

What is a service level agreement?

A service level agreement (SLA) sets measurable standards for a service, such as response times or system availability, and what happens if they are missed, often service credits. It is usually a schedule to a service agreement rather than a standalone contract, so check how it links to the main liability cap.

Can I get out of a contract I have already signed?

Only in limited cases: if the contract has a termination clause, if the other side commits a serious (repudiatory) breach, if you were misled by a false statement, or if both sides agree. Consumers have extra cancellation rights, but businesses generally do not have a cooling-off period.

Is a verbal agreement legally binding in business?

Yes, in most cases. A contract can be formed by words alone if there is an offer, acceptance, payment or something of value, and an intention to be legally bound. The difficulty is proof. Without writing, you may struggle to show what was agreed, so confirm key terms by email afterwards.

Can a supplier charge me interest if I pay an invoice late?

Yes. Under the Late Payment of Commercial Debts (Interest) Act 1998, a business supplying another business can claim statutory interest at 8% above the Bank of England base rate, plus a fixed sum of £40, £70 or £100 depending on the invoice size, unless the contract sets a substantial alternative remedy.

What happens if the other side breaks our contract?

You can usually claim damages to put you in the position you would have been in had the contract been performed. For a serious breach you may also be able to end the contract. Check the notice and termination clauses first, keep evidence, and write to the other side before taking further steps.

How long do I have to sue for breach of a business contract?

For an ordinary written or verbal contract, the normal limitation period is six years from the breach. If the contract was signed as a deed, it is 12 years. Do not leave it late, because evidence fades and other deadlines in the contract may be shorter.

Can I change a contract after both sides have signed it?

Only if both sides agree. A change is normally recorded in a written variation signed by both parties, and many contracts say variations must be in writing. One side cannot rewrite terms alone, unless the contract clearly gives that right and it is used fairly.

Is an email enough to make a contract?

It can be. Courts accept contracts formed by email exchange if the terms are clear and both sides show they agree. Phrases like subject to contract can stop an email becoming binding. Where the stakes are high, use a signed agreement or an electronic signature.

Do I need to sign a contract with a freelancer before they start work?

It is strongly advisable. Without one, disputes often arise over payment, deadlines and who owns the finished work, including any intellectual property rights created. When the property ownership passes from one party to the other can also be covered – for example, after payment. Copyright in commissioned work does not automatically pass to you. A short written agreement covering price, scope, ownership, what happens if something goes wrong and termination avoids most problems.

Ask Libra

• Is an email exchange enough to form a binding contract?
• Can I charge late payment interest on an unpaid business invoice?
• What can I do if a supplier breaches our contract?
• Can you review this service agreement and flag any risky clauses?
• Do I need a mutual NDA or a one-way NDA for talking to an investor?
• Draft a freelance contract for a web developer working on my site

Sources

• Unfair Contract Terms Act 1977
• Consumer Rights Act 2015
• Late Payment of Commercial Debts (Interest) Act 1998
• Limitation Act 1980, section 5
• Electronic Communications Act 2000, section 7
• Copyright, Designs and Patents Act 1988, section 90

This guide is general information about the law in England and Wales as at September 2026, not legal advice. For advice on your situation, ask Libra or find a lawyer through Libra.