Jurisdiction, penalties running only one way, a right of withdrawal with no deadline, and payment conditional on unilateral approval. These are clauses that look technical at signing and turn out to be expensive in a dispute.
A contract sent over by the other side is rarely neutral. It usually protects, above all, the interests of the party that drafted it. That does not mean it has to be rejected. It means it has to be examined in the places that later most often decide what a dispute will cost.
Not every unfavourable clause is an immediate problem. The problem starts when you sign a contract without knowing where the risk has been shifted onto you.
- The subject of the contract
First I check whether the contract makes clear exactly what you have to do, or what you are to receive. In a dispute, general wording usually works against the party who has to prove that the contract was performed.
The details matter: the scope of the service, the standard of performance, the deadlines, the stages, the annexes, the specifications, the approval procedure and the person authorised to accept the work. If the subject of the contract is described too generally, the other side may later claim it expected something more.
- Remuneration and payment deadline
The second thing is money. The amount alone is not enough. You have to check when the obligation to pay arises, what the issuing of the invoice depends on, and whether the other side has made payment conditional on things outside your control.
Particularly risky are provisions such as: payment after approval by the other side, after handover with no objections, after the investor has paid, or after additional activities that the contract does not describe precisely. In practice such clauses can push payment back by many weeks, or become a pretext for withholding it.
- Contractual penalties
Provisions on contractual penalties have to be read with particular care. First, whether they are stipulated only in the other side’s favour. Second, whether they concern real breaches, or every delay, including delay you have no control over. Third, whether they are capped.
A contractual penalty may relate to the non-performance or improper performance of a non-monetary obligation. It should not take the place of interest for late payment of remuneration. That follows from Article 483 § 1 of the Civil Code.
It is also worth checking whether the contract provides for penalties running only “one way”. If you pay a penalty for every day of delay while the other side bears no comparable liability for delay in supplying materials, decisions or system access, the risk is unevenly distributed.
A grossly excessive penalty may be lowered by the court, especially where the obligation has been performed in substantial part. Such an application must, however, be made and justified. The basis is Article 484 § 2 of the Civil Code.
- Withdrawal and termination
The next place is the provisions on bringing the contract to an end. In practice withdrawal has to be distinguished from termination, because the effects are not the same.
With a contractual right of withdrawal the deadline matters. Article 395 § 1 of the Civil Code allows the parties to stipulate that one or both of them will have the right to withdraw from the contract within a specified period. If the contract gives one side a right of withdrawal but does not say by when it may be exercised, such a clause calls for particular caution.
It is also worth checking whether the other side can end the contract on a very general ground - for example “in the event of loss of trust” or “in the event of a breach of obligations” - without first calling for the breach to be remedied and without an additional deadline. Clauses like these often give one party far too much freedom.
- Handover, complaints and objections
In many contracts the dispute begins not with the invoice but with the handover. So I check who carries out the handover, within what deadline, in what form, and what happens if the other side stays silent.
A well-drafted contract should set out a clear procedure: notification of readiness for handover, a deadline for raising objections, a way of remedying defects, and the consequence of no reply. Without that, the other side can go for a long time without accepting the work while simultaneously blocking payment.
- Liability, set-off and withholding payment
Separately, you have to check when the other side may withhold payment or set its own claims off against your remuneration. These are clauses that act very quickly in a dispute.
Risky are provisions letting the other side unilaterally reduce the remuneration, charge a penalty and immediately set it off against the invoice, without first clarifying the matter. It is also worth checking whether the contract limits your liability or, on the contrary, extends it to lost profits, indirect damage, the acts of subcontractors, or events you have no real influence over.
- Jurisdiction
Last I check where any dispute would be heard. This is not a minor technical clause. If you run a business in Gdańsk and the contract designates the court for the other side’s registered office at the far end of Poland, every dispute will be more expensive and less convenient for you.
The parties may agree in writing that a dispute will go to a first-instance court which under the statute would not have territorial jurisdiction. This does not apply, however, where the regulations provide for exclusive jurisdiction. That follows from Article 46 of the Code of Civil Procedure.
So the jurisdiction clause is worth negotiating before the contract is signed. Once a dispute has arisen it is usually too late.
What to do before signing
You do not have to negotiate every sentence. It is worth knowing, though, which provisions are merely inconvenient and which may genuinely decide the outcome of a dispute, or whether you get paid at all.
Before signing, gather the draft, the annexes, the offer, the negotiation correspondence and the earlier commercial arrangements. Often the problem does not come from a single clause but from the contract, the offer and the annex each saying something different about the same thing.
In short
In a contract sent over by the other side I check seven places first: the subject of the contract, payment, contractual penalties, withdrawal and termination, handover, liability, and jurisdiction.
These are the provisions that look like a formality while the cooperation is calm and turn out to be expensive in a dispute. A carefully examined contract does not guarantee there will be no dispute. It can, however, mean you do not walk into one holding a document written entirely for the other side.
This article is for information only and does not constitute legal advice. Assessing a specific case requires reviewing the documents.