How to Use This Checklist
Click each checkbox to mark items as complete. Your progress is automatically saved to your browser. Use this checklist to:
✅ Three Ways to Use This Tool
1. Draft new terms of business: Ensure you don't miss any essential legal requirements for UK service contracts
2. Review existing terms: Audit your current terms & conditions against all 54 compliance points
3. Prepare for client negotiations: Verify your terms are legally compliant and protect your business interests
⚠️ Why Proper Terms of Business Matter
📋 Legal Status: Terms of business are legally binding contracts that govern the relationship between service provider and client. Poorly drafted terms create disputes, payment delays, and liability exposure.
⚖️ Common Risks: Without proper terms: unlimited liability if something goes wrong, intellectual property disputes, payment disputes, no protection from late payment, no clear termination rights, GDPR compliance failures.
🎯 Essential Elements: Service description, payment terms, IP ownership, confidentiality, liability caps, termination rights, warranties, dispute resolution. Missing these creates serious business risk.
💼 Professional Standard: Professional service providers must have written terms that comply with UK contract law, consumer protection law (if B2C), Late Payment legislation, GDPR, and industry standards.
⚠️ Understanding Importance Levels
🔴 Critical: Must have - legal requirement or creates serious business risk if omitted
🟡 Important: Should have - recommended for proper legal protection and risk management
🔵 Recommended: Best practice - enhances protection and demonstrates professional standards
1. Service Provider Identification (5 items)
Full Legal Business Name
State your complete legal business name as registered with Companies House (if limited company) or your trading name (if sole trader/partnership). This identifies who the contract is with and establishes legal standing.
🔴 Critical
Company Registration Details
If limited company: include Companies House registration number and registered office address. Companies Act 2006 requires this on business documents. If sole trader: state that you're trading under your own name or a business name.
🔴 Critical
Business Address
Provide full registered address including postcode. This is where legal notices must be sent. For consumer contracts, this is a legal requirement under Consumer Contracts Regulations 2013. Use registered office for limited companies.
🔴 Critical
Contact Information
Include business email address and (optionally) phone number for official communications. Email is essential for contract formation and notices. Consumer Contracts Regulations require contact details.
🔴 Critical
VAT Registration Number (if applicable)
If VAT registered: state your VAT number. HMRC requires this on invoices. If not VAT registered, state "Not VAT registered" to avoid confusion. Turnover over £90,000 requires VAT registration.
🟡 Important
2. Service Description & Engagement (5 items)
⚠️ Clear Service Description is Essential
Vague service descriptions cause disputes: "What's included?", "Is this extra?". Be specific about what services you provide, how you'll deliver them, and what's excluded. This manages client expectations and prevents scope creep.
Services Definition
Provide clear description of services you offer: consulting, design, development, project management, etc. Be specific enough to set expectations but flexible enough to accommodate variations. Examples help clarify scope.
🔴 Critical
Engagement Model
Specify how services are engaged: retainer (ongoing monthly), project-based (per project), time & materials (hourly/daily), or hybrid. This affects payment terms, termination rights, and service obligations. Be clear about commitments.
🔴 Critical
Scope Documentation
State how specific project scope is documented: separate statement of work, formal proposal, or included in these terms. SOW approach is best for varying projects. Included scope works for standardized services. Prevents disputes about deliverables.
🟡 Important
Service Exclusions
Clearly state what's NOT included: specific tasks, deliverables, services outside your expertise. This manages expectations and prevents "but I thought you'd do X" disputes. Common exclusions: hosting, third-party costs, ongoing support (if not included).
🔵 Recommended
Client Dependencies
State what client must provide: information, access, approvals, resources, timely feedback. Delays caused by client not your responsibility. This protects you from missed deadlines due to client delays and justifies charging for delays.
🟡 Important
3. Payment Terms & Fees (8 items)
⚠️ Clear Payment Terms Prevent Cash Flow Problems
Late payment destroys businesses. Your terms must clearly state: how much, when due, what happens if late. Late Payment of Commercial Debts Act 1998 gives you rights to interest on overdue invoices, but only if your terms are clear.
Fee Structure
State how fees are calculated: fixed project fee, hourly/daily rate, monthly retainer, or value-based. Include rates/amounts where possible or state "as per proposal". For hourly: minimum billing increment (e.g., 15 minutes). For retainer: what's included.
🔴 Critical
Payment Schedule
Specify when invoices issued: monthly in advance (retainers), monthly in arrears (time & materials), per milestone (projects), upfront (deposits), on completion. For projects: consider staged payments (e.g., 50% upfront, 50% on delivery) to reduce risk.
🔴 Critical
Payment Terms (Days)
State payment due date: typically 30 days from invoice date (UK standard), or shorter (7-14 days) for better cashflow. Late Payment Act allows you to charge interest and debt recovery costs on overdue B2B invoices. For consumers: must be reasonable.
🔴 Critical
Late Payment Interest
Late Payment of Commercial Debts Act 1998: you can charge statutory interest (Bank of England base rate + 8%) on overdue B2B invoices. State this right in your terms. You can also claim reasonable debt recovery costs. Encourages on-time payment.
🔴 Critical
Expenses Policy
State whether expenses reimbursable: travel, accommodation, materials, third-party costs. Specify: pre-approval required? Receipts needed? Markup applied? Invoiced separately or included? Without clear expenses clause, you may not recover legitimate costs.
🟡 Important
VAT Treatment
State whether prices include or exclude VAT. Standard: "All fees are exclusive of VAT, which will be added at the prevailing rate." If not VAT registered, state "Not VAT registered - no VAT charged." Prevents disputes about final invoice amounts.
🟡 Important
Suspension for Non-Payment
State you can suspend services if payment overdue (e.g., 7+ days after due date). Include: written notice required, right to terminate if not paid within further period (e.g., 14 days). Protects you from working unpaid. Must be reasonable and proportionate.
🟡 Important
Fee Variations
State how fees may change: annual review with notice, scope changes require written variation, rate increases with 30+ days notice. For retainers: state review period (e.g., annually). Protects you from being locked into unprofitable rates long-term.
🔵 Recommended
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4. Intellectual Property Rights (6 items)
⚠️ IP Ownership Must Be Crystal Clear
Who owns the work you create? Without clear IP terms, disputes arise: "I paid, so I own it" vs "I created it, I own it". UK law: copyright belongs to creator unless contract assigns it. Be explicit about: what client gets, what you retain, when ownership transfers.
IP Ownership Model
State who owns intellectual property you create: (1) Full assignment to client (they own everything - standard for bespoke work), (2) License to client (you retain ownership, they get usage rights - standard for reusable components/templates), or (3) Hybrid (client owns final work, you retain pre-existing materials).
🔴 Critical
When IP Transfers
If assigning IP: state when ownership transfers. Options: (1) On full payment (protects you if not paid - most common), (2) On delivery (client owns immediately but must still pay), (3) On project completion (after acceptance testing). Until transfer, you own it.
🔴 Critical
License Scope (if licensing)
If licensing (not assigning): specify license scope - Exclusive or non-exclusive? Perpetual or term-limited? Territory (worldwide/UK only)? Usage restrictions? Sublicensing allowed? Transferable? License must be clear to avoid disputes about permitted use.
🔴 Critical
Pre-Existing Materials
State you retain ownership of pre-existing materials: frameworks, templates, methodologies, tools, code libraries you bring to projects. Client gets license to use as part of deliverables, but you retain underlying IP and can reuse. Protects your reusable assets.
🟡 Important
Portfolio & Marketing Rights
Can you use the work in your portfolio? Options: (1) Full rights - use client name, show work publicly, (2) Anonymous case study - show work but not client name, (3) No disclosure - complete confidentiality. Get client approval for sensitive work. Important for marketing your services.
🟡 Important
Moral Rights
Copyright, Designs and Patents Act 1988: creators have moral rights (right to be identified, object to derogatory treatment). For commercial work, standard to waive moral rights. For creative work (design, writing), consider retaining attribution rights. State whether waived or retained.
🔵 Recommended
5. Confidentiality & Data Protection (7 items)
Confidentiality Obligation
State that both parties will keep confidential information secret: business information, technical data, client lists, pricing, trade secrets. Protection is mutual - covers both your and client's sensitive information. Breach of confidence is actionable in UK courts.
🔴 Critical
What's Confidential
Define confidential information: information marked confidential, information that's obviously confidential by nature, or all business/technical information disclosed. Include: business plans, customer data, financial information, proprietary methods, technical specifications. Clarity prevents disputes.
🟡 Important
Confidentiality Exceptions
Standard exceptions: information that's public (not through breach), independently developed, already known, or required to be disclosed by law. These protect you from liability for information that's not genuinely confidential. Standard carve-outs in all NDAs.
🟡 Important
Confidentiality Duration
How long does confidentiality last? Options: (1) During contract + X years (3-5 years standard), (2) Indefinite (stronger protection for trade secrets), (3) During contract only (weaker). Balance: longer = better protection, but may be unreasonable for some information types.
🟡 Important
Standard of Care
What standard of protection required? Options: (1) Reasonable care (standard duty), (2) Same care as own confidential information (mutual standard), (3) Strict protection (highest duty - for sensitive data). Reasonable care is most common and balanced.
🔵 Recommended
GDPR Compliance
UK GDPR and Data Protection Act 2018 apply if you process personal data. State: (1) Your role - data controller (decide what data to process) or processor (process on instructions), (2) Compliance with data protection laws, (3) Security measures for personal data, (4) Breach notification obligations.
🔴 Critical
Data Processing Agreement
If you're a data processor (processing client's personal data): GDPR requires Data Processing Agreement with: processing details, data subject rights, security measures, sub-processor approval, breach notification, return/deletion of data. Can be included in terms or separate DPA.
🔴 Critical
6. Liability Limits & Indemnity (6 items)
⚠️ Unlimited Liability Can Destroy Your Business
Without liability caps, one mistake could cost you everything. UK law allows reasonable liability limitations (except for death/personal injury, fraud). Standard approach: cap liability at fees paid (typically last 12 months) and exclude consequential loss. Professional indemnity insurance provides additional protection.
Liability Cap
Cap your total liability: Common options: (1) Fees paid in last 12 months (standard for ongoing services), (2) 2x fees paid (for higher-risk work), (3) Specific project value (for fixed projects), (4) Fixed amount. Cap must be reasonable - courts may reject unreasonably low caps.
🔴 Critical
Exclude Consequential Loss
Consequential loss = indirect damages (lost profits, business interruption, lost opportunities, reputational damage). Standard to exclude these - otherwise exposure is unlimited and unpredictable. State clearly: "Not liable for any indirect, consequential, special or incidental damages."
🔴 Critical
Unlimited Liability Exceptions
Unfair Contract Terms Act 1977: cannot exclude liability for death/personal injury, fraud, or fraudulent misrepresentation. These exceptions must be stated. Also cannot exclude statutory rights in consumer contracts. State clearly what liability cannot be limited.
🔴 Critical
Professional Indemnity Insurance
State whether you have PI insurance and coverage level (if any). Many clients require minimum PI insurance (e.g., £1-5 million). If you have it, mentioning it increases client confidence. If you don't, consider getting it for high-value or high-risk work.
🟡 Important
Limitation Period
How long after work delivered can client claim? Options: (1) 12 months from delivery (standard), (2) 24 months (for complex projects), (3) Statutory period (6 years for contract claims under Limitation Act 1980). Shorter period reduces long-tail risk.
🟡 Important
Client Indemnity
Client should indemnify you for: claims arising from client's content/data, client's use of deliverables outside authorized scope, client's breach of law (e.g., GDPR), third-party claims related to information client provided. Protects you from liability for client's actions.
🔵 Recommended
7. Termination & Suspension (5 items)
Termination for Convenience
Can either party terminate without cause? For retainers: usually yes, with notice. For projects: typically no (must complete committed work) or project-specific. State clearly whether termination for convenience allowed and by whom. Balance: flexibility vs commitment.
🔴 Critical
Notice Period
For termination without cause: specify notice period. Common: 30 days for retainers, 60-90 days for longer-term contracts, none for project-based (project completion only). Notice gives you time to replace income and transition clients. Must be reasonable.
🔴 Critical
Immediate Termination Grounds
State when you can terminate immediately: material breach not remedied within X days (14 days typical), non-payment for 30+ days, insolvency/administration, fraud or illegal activity, repeated minor breaches. Protects you from problem clients. Must specify grounds clearly.
🔴 Critical
Payment on Termination
What's owed if contract ends? Options: (1) Pro-rata for work completed (standard and fair), (2) To last completed milestone (for milestone-based), (3) Time and materials incurred (for hourly/daily). Client pays for work done to termination date. No obligation to pay for future work.
🔴 Critical
Obligations on Termination
What happens at termination: return confidential information, deliver work in progress, final payment due, handover procedures, ongoing obligations (confidentiality, IP protection continue). Clear termination obligations ensure smooth exit and avoid disputes about final deliverables.
🟡 Important
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8. Service Standards & Warranties (5 items)
Service Standard
Supply of Goods and Services Act 1982: implied term that services provided with reasonable skill and care. This is minimum standard and cannot be excluded for consumers. For B2B: can set higher standard (industry best practice, to specification) or confirm statutory standard applies.
🔴 Critical
Fitness for Purpose
Sale of Goods Act 1979 / Consumer Rights Act 2015: if client relies on your expertise and makes purpose known, implied warranty that services fit for that purpose. For services: can exclude this warranty in B2B contracts. For consumers: cannot exclude. Be clear about scope of warranty.
🟡 Important
Warranty Period
How long do you warrant defect-free work? Common: 30-90 days from delivery for software/deliverables, no warranty for ongoing services (as delivered), 12 months for physical products. After warranty period, you're not obliged to fix issues. Must be reasonable.
🟡 Important
Defect Resolution
If defects found in warranty period: state your obligation - Re-perform services or correct defects at no charge (standard), or refund fees if cannot fix (fallback). This is your sole remedy obligation. Limits liability to fixing work rather than compensating damages.
🟡 Important
Warranty Exclusions
Exclude warranties for: defects caused by client misuse, unauthorized modifications, third-party components, force majeure events. Also exclude warranties you don't provide: no warranty of specific results/outcomes, no warranty services meet all client needs. Manages expectations.
🔵 Recommended
9. Legal Protections & Risk Management (4 items)
Force Majeure
Excuse for non-performance due to events beyond control: acts of God, natural disasters, war, terrorism, strikes, pandemics, government actions, cyber attacks. If force majeure event: obligations suspended (not breached). Consider expanded definition post-COVID. Protects both parties.
🟡 Important
Insurance Requirements
State what insurance each party must maintain: you - professional indemnity, public liability, cyber insurance (if handling data); client - any specific insurance for their operations. Specify minimum coverage levels. Provides financial protection if claims arise.
🔵 Recommended
Dispute Resolution
How to resolve disputes? Options: (1) Mediation first, then litigation (cost-effective, maintains relationship), (2) Direct to litigation (expensive, adversarial), (3) Arbitration (private, binding, expensive), (4) Expert determination (technical disputes). Mediation saves costs and time.
🟡 Important
Third-Party Rights Exclusion
Contracts (Rights of Third Parties) Act 1999: third parties can enforce contract terms unless excluded. Standard to exclude: "No third party has any right to enforce any term of this agreement." Prevents unexpected claims from people not party to contract.
🟡 Important
10. General Legal Provisions (5 items)
Assignment & Subcontracting
Can parties transfer the contract? Standard: neither party can assign without written consent (protects you from unknown entities). Exception: you may subcontract specific tasks (but remain responsible). Client typically cannot assign (unless group company). Prevents contract transfer to unsuitable parties.
🟡 Important
Variations & Amendments
How can terms be changed? Standard: written agreement only (both parties sign variation). Prevents: verbal variations, email variations, implied variations. Critical protection - without this clause, terms can be changed accidentally through conduct. Always require formal written amendment.
🔴 Critical
Entire Agreement
States this contract supersedes all prior negotiations, representations, agreements. Prevents client claiming "but you said X in our meeting" or "your sales rep promised Y". Essential protection against pre-contractual statements becoming binding terms. Standard clause in all commercial contracts.
🔴 Critical
Severability
If one clause is invalid/unenforceable, rest of contract remains valid. Without this: entire contract could fail if single clause is problematic. Courts will sever invalid clause and enforce remainder. Standard boilerplate - always include.
🟡 Important
Notices
How to send official notices (termination, breach notification, legal notices)? Specify: address for notices, acceptable methods (email, post, courier), when deemed received. Clear notice procedure prevents disputes about whether notice properly given. Essential for terminations and legal claims.
🟡 Important
11. Governing Law & Jurisdiction (2 items)
Governing Law
Which country's law applies to contract? UK has three jurisdictions: England and Wales, Scotland, Northern Ireland - each has different laws. State which applies (typically where your business is based). Determines how contract interpreted and what statutory rights apply. Essential clarity.
🔴 Critical
Exclusive Jurisdiction
Which courts can hear disputes? Options: (1) Exclusive jurisdiction (only specified courts), (2) Non-exclusive (either specified courts or client's local courts). Exclusive is stronger - forces disputes to your home courts. Non-exclusive gives flexibility. State "courts of England and Wales" (or Scotland/NI).
🟡 Important
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Next Steps
Now that you've reviewed the compliance checklist, you have three options:
✅ Use Our Ready-Made Template (Recommended)
Save hours of legal research and drafting. Our professionally-crafted terms of business cover all 54 compliance points with legally-sound wording. Available in both Interview Mode (guided questionnaire) and Editor Mode (direct editing) for just £10. Includes automatic legal clauses for payment, IP, liability, confidentiality, termination, and all UK legal requirements.
📝 Draft Your Own Terms
Use this checklist as your guide, but remember: getting the legal wording correct is complex. Payment terms, IP ownership, liability caps, confidentiality, termination provisions, and warranty clauses require precise language. A single poorly worded clause can expose you to unlimited liability, payment disputes, or loss of intellectual property rights.
⚖️ Book a Legal Consultation
For high-value contracts, complex IP arrangements, international clients, or risk-sensitive work, consider booking a consultation with our legal professionals for personalized advice tailored to your specific services and risk profile.