What contract has more legal risk, a £20K deal or a £2M deal?

There’s a common, yet dangerous, perception that larger deals involve higher risk than smaller ones.

However, risk in a contract is rarely determined by its value. Here are just a few reasons why your £20K business deal could cost you as much as your £2 million deal.

1. Even low value projects can be complex

   The level of complexity in an IT project plays a significant role in determining its risk, regardless of the contract value. Even a comparatively small-scale IT project can involve intricate technical requirements, customisation, integration challenges, and potential scope creep. These complexities can lead to cost overruns, delays, and unsatisfactory outcomes, all of which could cost you.

2. Intellectual Property (IP)

   Inadequate protection of IP can bankrupt a business. Did you know that some people unwittingly hand over the rights to their own IP by not understanding the contracts they have signed? What a nightmare! It's hard to believe it's possible to give away your IP to another business without any rights to reuse it, but this is why the contract is essential. Even a small deal, handled poorly, can kill your business.

3. Data Protection

   If you are managing any type of personal data, the risk is the same and the potential for legal issues isn’t affected by the value of the deal. A smaller contract opens you to the same liability as a big contract.

4. Resources

   While it’s often true that smaller value deals need fewer resources, there are also cases where a £20K IT deal might require the same level of attention, expertise, and effort as a £2m deal. Risk can arise if you fail to allocate sufficient resources. Inadequate resource allocation can lead to project bottlenecks, quality issues, missed deadlines, and ultimately, unsatisfied clients.

5. Compliance

   Failure to address contractual obligations, intellectual property rights, confidentiality, data protection, and other regulatory requirements can result in legal disputes, financial penalties, reputational damage, and project disruptions.

   Note: The level of risk associated with legal and compliance issues remains consistent, regardless of the contract value.

6. Reputational loss

   A business owner prioritises their high value deals over the smaller deals at their peril – they risk losing much more than money, they risk their reputation! Start off ALL your business relationships with a robust contract and get off on the right foot. Your £20K customer today could be your £2million customer in years to come.

Further reading

• 4 reasons to protect you IP in your contracts
• 4 social media risks employers face
• Data Protection and GDPR policy
• Contract liabilities for beginners