How to Write Trade Business Contracts That Protect You
The Reality:
A Manchester plumber quoted £2,500 for "replace bathroom suite." Customer expected tiling, plastering, and painting included. Plumber said that's extra. Customer refused to pay. No written contract defining scope. Small claims court awarded customer £8,500 (refund + damages + legal costs). All preventable with one clear scope clause.
Plug this into the broader growth system outlined in From Van to Empire Scaling Guide, How to Scale from One Van to Three, and Service Business Pricing Mastery 2026.
Most trade businesses operate on handshakes, vague quotes, and hope. Here's how to write contracts that prevent scope creep, secure payment, and give you legal protection when customers don't pay or dispute work quality.
When You Need a Written Contract
Verbal agreements are legally binding in the UK, but proving what was agreed is impossible when it's your word against theirs. Here's when written contracts are non-negotiable:
Always Require Written Contracts For:
- Jobs over £500: Small claims court disputes cost £115-£455 to file. Protect anything worth disputing.
- Multi-day projects: Anything taking longer than one day has scope creep risk.
- Materials you purchase upfront: If you're buying £1,000+ materials before starting, get deposit + signed contract.
- Structural or complex work: Anything customer might claim is "not what I expected."
- Commercial clients: Businesses expect written agreements. No contract = not professional.
- New customers: You don't know their payment history. Protect yourself.
When Verbal/Email Is Acceptable:
- Repeat customers under £300: Established trust + small value = low risk
- Emergency callouts: Can't get signatures before fixing burst pipe. Send confirmation email immediately after.
- Standard maintenance: "Same as last month" cleaning/gardening with known scope
The Email Contract:
If you can't get a signature (emergency work, customer prefers email), send detailed email quote with: "This email serves as our contract. By proceeding with work or making payment, you accept these terms." Their reply "yes, go ahead" or deposit payment = binding acceptance.
Essential Contract Elements
Every trade business contract must include these 11 elements to be enforceable and protective:
Contract Checklist (All Must Be Present):
- 1. Parties: Your business name/address, customer name/address
- 2. Date: Contract date and expected start date
- 3. Scope of work: Detailed description of what you WILL do
- 4. Exclusions: Explicit list of what's NOT included
- 5. Price: Total price or hourly rate + estimated hours
- 6. Payment terms: Deposit amount, payment schedule, accepted methods
- 7. Timeline: Start date, estimated completion (or hourly booking)
- 8. Materials: Who supplies what, specifications/quality standards
- 9. Warranty period: Workmanship guarantee duration and scope
- 10. Variation clause: How additional work is priced and approved
- 11. Signatures: Both parties sign and date
Legal minimum: Technically only parties, scope, price, and acceptance are required for enforceability. But the other 7 elements protect you from disputes about what was agreed.
Payment Terms That Get You Paid
Payment terms aren't just "when" you get paid—they're "if" you get paid. Clear payment terms with consequences for late payment drastically reduce bad debt.
Deposit Strategy by Job Size
| Job Value | Recommended Deposit | When Final Payment Due |
|---|---|---|
| £0-£200 | None (payment on completion) | Same day, before leaving site |
| £200-£500 | 20-30% (£50-£150) | On completion or 7 days |
| £500-£2,000 | 50% | On completion or 7 days |
| £2,000-£10,000 | 40-50% upfront + 40% mid-project | 10% retention, 7 days after completion |
| £10,000+ | 30% upfront + milestone payments | 10% retention, 14 days after completion |
Sample Payment Terms Clause
PAYMENT TERMS
Total contract price: £2,850 (inc. VAT if applicable)
Payment schedule:
- • Deposit: £1,425 (50%) due upon contract signature before work commences
- • Balance: £1,425 due upon completion before Contractor leaves site
Accepted payment methods: Bank transfer (preferred), cash, card via payment link
Late payment: Invoices not paid within 7 days will incur interest charges at 8% per annum plus Bank of England base rate (currently 4.5% = 12.5% total) calculated daily, plus £40 administration fee for each reminder sent.
Non-payment: Contractor reserves the right to suspend work if payment terms are not met. Materials remain property of Contractor until final payment received in full.
The Retention Strategy (Stops "Find Faults to Avoid Payment")
Some customers look for minor issues to refuse final payment. Retention payments solve this:
- Hold back 5-10% of total price as "retention"
- Due 7-14 days after completion (gives customer time to spot genuine issues)
- Refundable only for legitimate defects (not "I changed my mind about color")
This gives customers recourse if there are genuine problems, but doesn't leave you with £5,000 unpaid because they claim a perfectly good job is "unsatisfactory."
Scope of Work Protection
The single biggest source of disputes: vague scope. "Install new boiler" means different things to you vs the customer. Here's how to eliminate ambiguity.
Bad Scope Descriptions (Cause Disputes)
- "Replace bathroom suite"—Does this include tiling? Plastering? Painting? Moving radiator?
- "Rewire house"—Every socket? New consumer unit? Outdoor sockets? Garden lights?
- "Landscape garden"—New turf? Remove old plants? Install irrigation? Fencing?
Good Scope Descriptions (Prevent Disputes)
SCOPE OF WORK: Bathroom Suite Replacement
INCLUDED IN PRICE:
- • Remove existing bath, toilet, sink, and taps (disposal included)
- • Supply and install new bathroom suite as per customer-supplied product links (Appendix A)
- • Connect new suite to existing pipework and waste connections
- • Silicon seal around bath, sink, and toilet base
- • Pressure test all connections for leaks
- • Remove all packaging and waste from site
EXPLICITLY EXCLUDED (Available as additional work at extra cost):
- • Tiling (walls or floor)
- • Plastering or plasterboard repair beyond minor filling around fixtures
- • Painting or decorating
- • Moving radiator position
- • Underfloor heating installation
- • Modification of existing pipework locations
- • Electrical work (existing lighting and extractor fan reused in current positions)
CUSTOMER RESPONSIBILITIES:
- • Purchase and delivery of bathroom suite to site before start date
- • Clear access to bathroom and allow water shutdown 8am-5pm during works
- • Arrange alternative bathroom facilities for 2-3 days while work completed
The magic words: "EXPLICITLY EXCLUDED" removes any argument that something was implied. Customer can't say "I assumed tiling was included" when contract explicitly excludes it.
Variation & Change Order Clause
Customers will ask for changes mid-job. "While you're here, can you also..." is the profit killer. A variation clause protects you.
Sample Variation Clause
VARIATIONS & ADDITIONAL WORK
Any work outside the scope defined above ("Additional Work") must be agreed in writing before commencement via signed Variation Order.
Additional Work will be charged at:
- • Labour: £45 per hour
- • Materials: Cost + 20% markup
- • Emergency callout (outside working hours): £90 per hour, 2-hour minimum
Customer acknowledges that Additional Work may delay the original completion date. Any delays resulting from Additional Work requests will not constitute a breach of contract by Contractor.
Discovery of unforeseen issues: If Contractor discovers hidden issues that prevent completion of Scope (e.g., asbestos, structural defects, non-compliant existing work), Contractor will notify Customer immediately. Customer may choose to authorize Additional Work to remedy the issue or terminate contract with payment for work completed to date.
How to Handle "While You're Here..." Requests
When customer asks for extras mid-job:
- Stop work and assess the request
- Price it immediately: "That will add £X to the total price and Y hours to timeline"
- Get written approval: Text/email: "Confirmed additional work: [description] for £X. Please reply to approve."
- Document everything: Save the approval message, add to final invoice as separate line item
Never Say "I'll Throw That In":
Even small extras add up. £30 here, £50 there = £500-£1,000/year in free work. Either charge for everything or explicitly say "I'm including [X] as a one-time courtesy this time, but normally that's an additional £Y." This sets expectations for future work.
Cancellation & Termination
Customers will cancel jobs. Sometimes legitimately, sometimes after you've bought materials. Protect yourself with clear cancellation terms.
Sample Cancellation Clause
CANCELLATION POLICY
Cancellation by Customer:
- • More than 7 days before start date: Full refund of deposit minus £50 administration fee
- • 3-7 days before start date: 50% of deposit retained to cover cancelled bookings and material orders
- • Less than 3 days before start date: Full deposit non-refundable
- • After work commenced: Customer liable for cost of all work completed plus materials purchased, plus 25% of remaining contract value to cover lost opportunity
Cancellation by Contractor:
- • Contractor may terminate if Customer breaches payment terms, denies site access, or creates unsafe working conditions
- • Full refund of any advance payment for work not yet performed
- • Customer liable for value of work completed to termination date
Force Majeure: Neither party liable for delays/cancellation due to events beyond reasonable control (severe weather preventing work, illness, supply chain issues beyond Contractor's control). Contract may be rescheduled or terminated by mutual agreement with deposits refunded.
The "Materials Already Ordered" Protection
If you've already purchased materials, customer owes you for them regardless of cancellation timing:
"Customer acknowledges that Contractor may order materials in advance of work commencement. If Customer cancels after materials have been ordered, Customer will be liable for cost of non-returnable materials regardless of cancellation notice period. Contractor will make reasonable efforts to return materials where possible and will refund any successful returns minus 15% restocking fee."
Late Payment Interest (Your Legal Right)
In the UK, you have a statutory right to charge interest on late commercial payments under the Late Payment of Commercial Debts (Interest) Act 1998. Most trades don't know this or enforce it.
What You Can Legally Charge
- Interest rate: 8% per annum + Bank of England base rate (currently 4.5% = 12.5% total)
- Calculated daily from the payment due date until paid
- Debt recovery fee: £40-£100 depending on invoice value (statutory fixed amounts)
| Invoice Amount | Statutory Recovery Fee |
|---|---|
| Up to £999.99 | £40 |
| £1,000 - £9,999.99 | £70 |
| £10,000+ | £100 |
Sample Late Payment Clause
LATE PAYMENT
Payment is due within 7 days of invoice date unless otherwise agreed in writing. Invoices not paid by the due date are subject to:
- • Interest charges at 8% per annum plus Bank of England base rate (currently 12.5% combined), calculated daily from due date until payment received
- • Statutory debt recovery fee: £40-£100 depending on invoice value
- • Reasonable costs of debt collection including legal fees if Contractor pursues recovery through small claims court
These charges are in addition to the outstanding invoice amount and are Contractor's statutory right under the Late Payment of Commercial Debts (Interest) Act 1998.
Enforcement Reality
Most customers pay immediately when they receive an invoice showing daily interest accruing. Example calculation on reminder:
PAYMENT REMINDER
Original invoice: £1,500
Due date: 15th January 2026
Days overdue: 28 days (as of 12th February)
Interest (12.5% per annum): £14.38
Debt recovery fee: £70.00
Total now due: £1,584.38
Interest continues to accrue at £0.51 per day until paid.
Collection rate: Adding interest + recovery fee to reminders increases payment rate from 70% to 92% within 60 days.
Limitation of Liability
You need to limit your liability for things beyond your control or unforeseeable consequences. Without this clause, you could be liable for unlimited damages.
Sample Limitation Clause
LIMITATION OF LIABILITY
Maximum liability: Contractor's total liability under this contract (whether in contract, tort, negligence, or otherwise) shall not exceed the total contract price of £[X].
Excluded liabilities: Contractor shall not be liable for:
- • Consequential or indirect losses (loss of profits, business interruption, loss of data)
- • Damage caused by Customer's failure to follow maintenance or usage instructions
- • Defects arising from customer-supplied materials or products
- • Damage from issues discovered but not within the contracted scope (e.g., existing structural defects, asbestos, non-compliant historic work)
- • Delays caused by factors beyond Contractor's reasonable control (supply shortages, extreme weather, third-party utility providers)
Insurance: Contractor maintains Public Liability Insurance of £[X]M covering claims arising from negligence in performance of this contract. Insurance details available on request.
Note: Nothing in this clause excludes or limits liability for death or personal injury resulting from negligence, fraud, or any liability which cannot be legally excluded.
Why This Matters:
Without limitation clause: You install a £1,200 boiler. It fails 6 months later (manufacturing defect). Customer's business loses £15,000 because no heating for 3 days. They sue you for £15,000 consequential loss.
With limitation clause: Your liability is capped at £1,200 (contract value). They claim against boiler manufacturer for consequential losses, not you.
Warranty & Guarantee Terms
Offering a warranty builds trust. But vague warranties create unlimited liability. Here's how to warranty your work while protecting yourself.
Sample Warranty Clause
WARRANTY & GUARANTEE
Workmanship guarantee: Contractor guarantees all work for 12 months from completion date against defects in workmanship.
Materials & products: Materials and products supplied by Contractor are covered by manufacturer warranties (typically 1-10 years depending on product). Contractor will assist Customer in claiming under manufacturer warranty where applicable.
Customer-supplied materials: No warranty provided for materials, products, or equipment supplied by Customer. Contractor warrants only the installation workmanship.
Warranty exclusions: This warranty does not cover:
- • Normal wear and tear
- • Damage from misuse, accident, or neglect
- • Failure to perform recommended maintenance
- • Modifications or repairs by third parties
- • Damage from events beyond Contractor's control (flood, fire, freezing temperatures where heating not maintained)
Warranty remedy: If defect in workmanship occurs within warranty period, Contractor will return to site and remedy the defect at no charge. Customer must notify Contractor in writing within 7 days of discovering defect. Contractor's sole obligation under this warranty is to re-perform defective work; no refunds or consequential damages.
Warranty Period by Trade
- Plumbing/Heating: 12 months workmanship, manufacturer warranty on boilers/products (1-10 years)
- Electrical: 12 months workmanship (but certifications last lifetime of installation if compliant)
- Building/Construction: 12 months defects liability period standard
- Decorating: 6-12 months (paint/wallpaper), excludes damage from damp/structural issues
- Landscaping: 12 months hardscaping, 6 months plants (customer must maintain watering)
Dispute Resolution
Even with perfect contracts, disputes happen. A dispute resolution clause can save you £3,000-£10,000 in legal fees by avoiding court.
Sample Dispute Resolution Clause
DISPUTE RESOLUTION
In the event of any dispute arising from this contract, both parties agree to the following escalation:
1. Direct negotiation: Parties will first attempt to resolve the dispute through good-faith direct discussion within 14 days of dispute arising.
2. Mediation: If direct negotiation fails, parties agree to mediation via a mutually agreed mediator or through the Civil Mediation Council before pursuing court action. Cost of mediation to be split equally.
3. Small claims court: If mediation fails or is not appropriate (e.g., non-payment with no genuine dispute), either party may pursue claim through Small Claims Court (England & Wales) for amounts up to £10,000.
Jurisdiction: This contract is governed by the laws of England and Wales. Any court proceedings must be brought in the courts of England and Wales.
Right to suspend work: If Customer fails to pay undisputed amounts, Contractor may suspend work until payment received without constituting breach of contract.
Small Claims Court Process (If You Need It)
For amounts up to £10,000, small claims is straightforward:
- Cost: £25-£455 court fee depending on claim value (recoverable if you win)
- Timeline: 3-6 months from filing to hearing
- Process: File online, serve papers to defendant, attend hearing (1-2 hours), judgment issued
- Win rate: If you have written contract + evidence of work completion, 85%+ win rate
- Enforcement: If they don't pay judgment, you can use bailiffs/attachment of earnings (extra fees)
Reality check: 70% of small claims settle before hearing once defendant receives court papers. Simply filing often triggers payment.
Contract Templates You Can Use
Here are two complete templates: one for small jobs (£500-£2,000), one for larger projects (£2,000+).
Template 1: Simple Works Contract (£500-£2,000)
SERVICE AGREEMENT
Date:
[Date]
Contractor:
[Your Business Name]
[Address]
Contact: [Phone/Email]
Customer:
[Customer Name]
[Property Address]
Contact: [Phone/Email]
Works:
[Detailed description of what you will do]
Excluded: [What's not included]
Price:
£[Amount] (inc. VAT if applicable)
Payment Terms:
Deposit: £[Amount] due on signing
Balance: £[Amount] due on completion
Timeline:
Start: [Date]
Estimated completion: [Date]
Warranty:
12 months workmanship guarantee from completion date
By signing below, both parties accept all terms. Additional work outside this scope requires separate written agreement. Late payment subject to interest at 12.5% p.a. plus £40 recovery fee.
Contractor signature:
_______________________
Date: __________
Customer signature:
_______________________
Date: __________
Template 2: Comprehensive Works Contract (£2,000+)
For larger projects, you need more detail. Download a comprehensive template that includes all clauses from this guide:
- Full scope of work with exclusions
- Milestone payment schedule
- Variation order process
- Detailed warranty terms
- Limitation of liability
- Dispute resolution
- Cancellation policy
Where to Get Full Templates:
- • Government resources: GOV.UK has basic contract templates (free)
- • Trade bodies: Federation of Master Builders, NICEIC, Gas Safe provide member templates
- • Legal template sites: Rocket Lawyer UK, Simply Docs (£10-£40 per template)
- • Accountant/solicitor: One-time £300-£600 investment for custom template you reuse forever
Note: Toolfy includes contract templates in quotes that you can customize per job, then send for electronic signature.
The Bottom Line
A £20 contract template or 20 minutes drafting your own standard agreement will save you from:
- £3,000-£8,000 disputes over scope ambiguity
- £1,500 average unpaid invoices per year from customers who "forgot" to pay
- £5,000+ materials costs when customer cancels after you've ordered
- Unlimited liability for consequential damages beyond your control
- Free extra work from customers claiming something was "included"
Non-Negotiable Contract Elements:
- 1. Explicit scope with "EXCLUDED" section - No ambiguity about what's included
- 2. 50% deposit on jobs over £500 - Customer commitment before you buy materials
- 3. Variation clause - Written approval required for any extras
- 4. Late payment interest (12.5% p.a. + £40 fee) - Your statutory right, use it
- 5. Limitation of liability (max = contract value) - Caps your exposure
- 6. 12-month workmanship warranty - Builds trust without unlimited liability
Most disputes aren't about bad work—they're about unclear expectations. A good contract sets clear expectations, prevents scope creep, and gives you legal protection when customers don't pay or make unreasonable demands.
Create your standard contract once. Use it on every job over £500. Adjust scope/price per job but keep the protective clauses identical. Over 10 years, this one document will save you £30,000-£100,000 in disputes, unpaid invoices, and free work.
Want contract templates built into your quotes?
Toolfy lets you add standard contract terms to every quote, send for electronic signature, and automatically create enforceable agreements before work starts. No separate contract document needed—it's all integrated with your quotes and invoices. £29/month.
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