Signing a commercial agreement is more than a formality. The agreement defines the relationship between the parties, the scope of their obligations, the allocation of risk, and how future disputes will be resolved.
Before signing an agreement, it is important to understand not only what it says, but also the practical implications of its key clauses: what you are committing to do, what the other party is committing to provide, what happens if things do not go as planned, and what risks you may face later.
The following are several key clauses to review before signing an agreement:
1. Defining the Services or Product
One of the most important clauses in any agreement is the one that defines exactly what is required of each party. Overly general wording can create disputes later over the scope of service, timelines, deliverables, professional responsibility, or expectations that were never explicitly defined.
The agreement should clearly specify what will be provided, when it will be provided, the scope of the services or product, what is excluded, and which changes will require further approval.
2. Consideration and Payment Terms
Payment clauses should be clear and precise: the amount payable, when payment is due, whether it depends on milestones, what happens in the event of late payment, whether there are additional expenses, and whether prices include VAT or related costs.
Unclear payment terms can lead to financial disputes, delays, and cash flow problems.
3. Liability and Limitation of Liability
The liability clause sets out what happens if one of the parties fails to meet its obligations under the agreement — for example, in the event of damage, breach, delay, or failure to provide the service.
Many agreements also include a limitation of liability clause. This is intended to define each party's potential liability in advance — for example, whether liability is capped at a certain amount, whether it applies only to direct damages, and whether there are circumstances in which the limitation will not apply.
Before signing, it is important to check whether the allocation of liability is reasonable and appropriate for the arrangement, and whether the agreement makes you responsible for more than you can actually control.
4. Confidentiality, Information, and Intellectual Property
Many agreements involve the exchange of sensitive business, professional, technological, or commercial information. It is therefore important to ensure that the confidentiality clauses define what information is confidential, who may use it, for what purpose, for how long, and what happens when the agreement ends.
When deliverables, documents, code, designs, content, or professional know-how are created under the agreement, it is also important to address intellectual property rights: who owns the deliverables, whether any right to use them is granted, and what may or may not be done with them.
5. Term of the Agreement and Termination
The termination clause is one of the provisions worth examining carefully before signing. It is important to understand the term of the agreement, whether it renews automatically, under what conditions it can be terminated, the required notice period, and what happens in the event of a breach.
It is also worth considering what happens after the agreement ends — for example, whether information must be returned or deleted, whether confidentiality obligations continue, and what other post-termination duties apply.
6. Governing Law and Jurisdiction
Clauses that appear at the end of an agreement can look technical, but they may have significant consequences in the event of a dispute. Governing law and jurisdiction determine which law governs the interpretation of the agreement and where disputes will be resolved.
When the agreement involves a foreign party, an international supplier, or a client outside Israel, it is especially important to understand the implications of these clauses before signing.
The Bottom Line
A good commercial agreement is not just a legal document — it is a tool for managing risk, aligning expectations, and protecting the business relationship.
Before signing an agreement, it is worth making sure that the key clauses are clear, balanced, and suited to the way the parties will operate in practice. An early legal review can help identify risks, support effective negotiation, and avoid costly mistakes later on.