Reviewing a business contract before signing: 10 points that are often overlooked
Most contracts are signed while both sides are still on good terms, so nobody wants to ask about things that could go wrong. But when a dispute does arise, the wording of the contract is the only thing that defines each party's rights and duties. This article brings together 10 points a business should check every time before signing.
1. The parties and signing authority
Check that the company name, registration number and address match the latest company affidavit, and that the signatory is an authorised director under the signing conditions on the register. If the signatory has been delegated authority, a valid power of attorney is required.
2. Scope of work and acceptance criteria
Specify what must be delivered, the timeframe and acceptance criteria that can genuinely be measured. A vague scope of work is one of the leading causes of disputes over extra work and billing.
3. Price, payment and tax
State whether the price includes or excludes VAT, the payment instalments, the documents required for billing and any withholding tax. If the price may be adjusted, there should be a clear formula or clear conditions.
4. Default and penalties
Set out the consequences of late delivery or late payment, such as default interest or a contractual penalty. Penalties should be reasonable, because if a penalty is disproportionately high, the court may reduce it.
5. Termination
Set out the grounds for termination, the notice period and what must happen after termination, such as payment for work already done and the return of property and data.
6. Limitation of liability and indemnities
Check whether there is a cap on liability, which types of loss it covers, and who must compensate if a third party makes a claim. This clause usually has the biggest financial impact when problems arise.
7. Intellectual property
State clearly who owns the deliverables, software or documents created under the contract, and to what extent the other party may use them. If this is not specified, problems may arise when you want to reuse or adapt the work.
8. Confidentiality and personal data
Set out the duty of confidentiality and how long it continues after the contract ends. If the other party will process personal data on the business's behalf, there should be a data processing agreement in line with the personal data protection law.
9. Governing law and dispute resolution
Specify the governing law, the court with jurisdiction or the use of arbitration, and, where the contract exists in more than one language, which language version is used for interpretation if the texts differ.
10. Stamp duty and electronic signing
Some types of instrument are subject to stamp duty. Common examples include:
| Type of contract | Duty rate |
|---|---|
| Hire-of-work contract | 1 baht per THB 1,000 of the remuneration, or part thereof |
| Lease of land or a building | 1 baht per THB 1,000, or part thereof, of the rent for the whole term |
| Loan agreement | 1 baht per THB 2,000, or part thereof, up to a maximum of THB 10,000 |
An instrument that has not been fully stamped may not be admissible as evidence in a civil case until the duty and the surcharge have been paid. For contracts made electronically, the duty can be paid through the Revenue Department's e-Stamp Duty system, and electronic signatures are legally effective under the law on electronic transactions when the conditions are met.
Make contract review a process
- Prepare the business's own standard contract templates for work you do often
- Decide which contract values or levels of risk require a legal review
- Keep signed contracts in one place, together with their expiry and renewal dates
Frequently asked questions
Is an agreement made by email or chat binding?
An agreement made electronically can be binding, but its terms are harder to prove. For important transactions, prepare a contract that sets out all the terms in full and is clearly signed.
Do we need to review every contract the other side drafts?
At the very least, review the key points in the checklist above, especially for contracts that are high in value, long term or carry unlimited liability.
How do we amend a contract after it has been signed?
Make an amendment agreement that refers to the original contract and is signed by the authorised signatories of both parties. Do not make changes on the original contract itself without evidence that both sides agreed to them.
Let us review your contracts
Kerwin & Vance reviews contracts and agreements, points out risks before you sign and helps keep your operations in line with the regulations that apply. Find out more about our Law & Intellectual Property services, or book a consultation with us.
This article provides general information only and is not legal advice on any specific case. Stamp duty rates and conditions may change with the law, so consult a specialist before taking action.