A risk lawyers often see materialise is that when things go wrong, many contracts simply don’t deliver the protection the business expects, and that is usually the point that is stressed to clients with a view to prompt them to carry out a review.
In 2026 however, a further case needs to be made, which is the environment in which business contracts need to operate is changing around you — from recently updated procurement legislation which is already in force, to a potentially major shift in how business to business payment practices are likely to be regulated.
And the changes do have a bearing on how the contracts should be drawn.
Payment terms are no longer just a commercial issue
Late payment has always been a problem for business. What is changing is how exposed businesses are when it happens. In many cases, contracts still include:
- Extended payment terms agreed years ago
- Weak or unclear interest provisions
- No meaningful leverage if payment is delayed
In practice, that often means businesses end up acting as an unpaid lender to their customers.
The issue becomes not whether you can pursue payment, rather what leverage your contract provides you to do so quickly and effectively.
Termination rights are often weaker than you may think they are
A common assumption is if a customer doesn’t pay properly, the contract can be terminated. In reality, that depends on the contract.
Across many SME contracts, termination provisions are often vague and tied to complicated ‘breach’ definitions and notice requirements.
The result is that when payment problems arise, termination then becomes slower and more complex than expected, or worse, isn’t an available remedy.
At that point, your commercial position is weakened.
Procurement contracts are raising the bar
The Procurement Act 2023, now in force, is changing how many businesses contract—particularly those:
- Supplying to the public sector, or
- Sitting within public sector supply chains
Public sector contracts typically include:
- Mandatory 30‑day payment terms
- Detailed invoicing and notice requirements
- Structured performance and compliance obligations
- Requirements that ‘must’ be cascaded down to sub-contractors
While this creates opportunities, it also means getting paid depends not just on doing the work, but also on following the contractual process. Invoices may be rejected or payments delayed on procedural/technical grounds.
It also needs to be fully understood that obligations in those upstream contracts are likely to have much more of a bearing on contracts you have (or should have) in place with your downstream supply chain, than you might think.
The real issue: contracts that don’t reflect how business is done today
Across many SMEs, contract terms tend to fall into one of three categories:
- Templates that have not been updated for several years
- Documents adapted from larger organisations, without tailoring
- Agreements negotiated under commercial pressure, without revisiting the detail
That creates a disconnect between how the business expects the contract to operate, and how it will actually operate, when tested.
In a dispute, that could be critical, especially if the contract determines the outcome.
The direction of travel: tighter control over payment practices
Alongside these developments, in May of this year the Government has introduced proposed legislation aimed at reforming late payment practices. While still at an early stage, the direction of travel is clear:
- Greater limits on extended payment terms
- Reduced flexibility to contract out of statutory protections
- More active enforcement of payment behaviour
SME’s should be reading into this that payment terms are likely to become an increasingly regulated issue.
Why this is something for “now”
The risk here is not a single future change—it is the combination of:
- More structured and process-driven contracts
- Greater reliance on technical compliance to secure payment
- Increasing scrutiny of payment practices
That means contracts that were “good enough” a few years ago, may no longer be.
A practical next step
A focused contract review can quickly identify:
- Where payment terms are weak or outdated
- Whether termination rights are practically usable
- Which customer relationships create disproportionate risk
In many cases, relatively small changes can significantly reduce risk and improve outcomes.
Take this away
If your contracts haven’t been reviewed in the last few years, there is a real risk they won’t deliver when you need them most, or worse, they may cause you to be in breach of contract with one or more of your larger customers.
Get in touch
Neil Malone, Commercial Solicitor at QualitySolicitors Parkinson Wright can help you review your existing contracts to identify unnecessary commercial risk, ensure your internal processes support compliance with customer contract requirements, and to strengthen payment and termination provisions where appropriate.
This article is intended as a general overview and does not constitute legal advice.