And how to get one without paying law-firm rates.
Contracts have a reputation problem. They are seen as a thing you call lawyers about, get back two weeks later, do not really understand, and then put in a drawer until something goes wrong. By the time it does, the contract you should have had, but did not, is usually the difference between sorting the problem out in a phone call and sorting it out in court.
Here is what every experienced business owner eventually learns: a contract is not a hedge against worst-case scenarios. It is a tool for daily clarity. It tells you and the other side what you have agreed, what happens if things change, and what happens if things go wrong. It saves arguments. It speeds up decisions. It protects relationships, more than it ends them.
These are the five moments in a UK business where a proper contract is not optional, and where the absence of one will almost certainly cost you more than the contract itself.
Whether you are taking on an employee, a freelancer, or a long-term contractor, you need a written agreement that covers the basics: what the role is, what they are being paid, what the notice period is, what the working hours are, what happens to any work they produce, and what they are allowed to take with them when they leave.
A common mistake is assuming a verbal agreement is enough because the person is “fine,” or because they are family, or because it is “only a small thing.” HMRC, the tribunals, and the courts have no interest in those reasons. The day there is a dispute about what was agreed, the version that is in writing is the one that wins.
You both have ideas. You both have skills. You both have time. So you shake hands and start. Six months later, one of you is doing the bulk of the work. Or one of you wants to bring in another partner. Or one of you wants to leave. Or the business needs more money and only one of you can put it in.
A Shareholders’ Agreement (for a limited company) or a Partnership Agreement (for a partnership) tells you in advance how these moments will be handled. It is the legal version of pre-marital counselling. Nobody wants to do it. Everyone is grateful they did.
If you sell a service, you need Terms and Conditions, a Service Agreement, or a Master Services Agreement. If you sell a product, you need Sale of Goods terms. If you collect any personal data (and almost every business does), you need a Privacy Policy that complies with UK GDPR.
The reason is not just legal cover. It is operational. Clear contracts mean clear invoices, clear scope, clear payment terms, clear cancellation rules. The biggest cause of cash-flow problems in small UK businesses is not bad customers. It is unclear paperwork.
When money is going out, you need just as much protection as when money is coming in. Who owns the work? When are payments due? What happens if the work is late, or below standard, or never delivered? Can you cancel? Can they sub-contract the work to someone else without telling you?
These are not paranoid questions. They are the questions that come up in every supplier dispute that ever lands on our desk.
Most of the contract problems we see do not come from the original agreement. They come from the changes that happened afterwards. A new piece of work was added, but the original contract was never updated. The supplier was replaced, but the contract was not assigned. The price was renegotiated by email, but the formal agreement was never changed.
A proper contract has a mechanism for handling changes. A short variation letter, a fresh statement of work, an addendum. Without that, every change creates ambiguity. And ambiguity is what disputes are made of.
Option A: Pull a template off the internet. Cheap, fast, and almost always wrong for the specific situation you are in. Templates are a starting point, not a finishing one. They miss the things that actually matter to your business.
Option B: Hire a law firm to draft a bespoke contract. The contract will be good. The bill will be substantial. For a one-off, high-stakes contract (selling your business, an investment round, a property transaction), this is the right answer.
Option C: Use a legal consultancy that drafts, reviews, and adapts contracts for the situation you are actually in. This is what we do. We work from your specifics, not from a template. We make sure the contract fits the deal, not the other way around. And the price reflects the fact that you are paying for sensible commercial drafting, not for a partner’s overheads.
If you have a contract you need drafted, reviewed, or updated, the first 20 minutes are on us. Book a consultation at www.lexaroxlegal.co.uk and we will tell you honestly what you need, what you do not need, and what it will cost to get it right.