Sample Report
Commercial Services Agreement — risk analysis
Illustrative — generated from a specimen contract64Risk / 100
Conditional — proceed with amendments.
Enforceable in substance, but three clauses carry material, correctable risk.
Confidence: High — every quotation verified against the source; every authority checked before delivery.
Executive warning
- HighUncapped penalty clause. Daily penalty with no aggregate limit — exposure could reach roughly 3× annual fees.
- HighOverbroad restraint of trade. Five years, nationwide, no defined protectable interest.
- MediumAutomatic 24-month renewal. Long lock-in with a 90-day cancellation window.
- Positive: governing law and dispute forum are clearly defined; deliverables are specific and measurable.
Deep legal audit
Clause (verbatim)
“The Supplier shall pay a penalty of R50,000 for each day of delay, without limitation.”
Issue
A penalty untethered from actual loss and uncapped may be reduced by a court if out of proportion to the prejudice suffered.
Applicable statute
Conventional Penalties Act 15 of 1962 — a court may reduce a penalty that is out of proportion to the prejudice.
Suggested fix
Cap aggregate penalties (e.g. at total fees) and tie the daily figure to a genuine pre-estimate of loss.
✓ Quote verbatim✓ Statute verified
Clause (verbatim)
“The Supplier shall not, for a period of five years, engage in any similar business anywhere in the Republic.”
Issue
A restraint is enforceable only so far as it is reasonable. Five years and nationwide scope, with no identified protectable interest, is vulnerable.
Authority
Basson v Chilwan 1993 (3) SA 742 (A) — the reasonableness enquiry for restraints of trade.
Suggested fix
Narrow to 12 months and a defined territory, expressly linked to a protectable interest (confidential information, client connections).
✓ Quote verbatim✓ Citation verified
Clause (verbatim)
“This agreement renews automatically for successive 24-month terms unless cancelled 90 days before renewal.”
Issue
A long automatic lock-in with a wide notice window favours the counterparty and can trap the client into an unintended term.
Suggested fix
Reduce to 12-month renewals with a 30-day notice period, or require positive opt-in to renew.
✓ Quote verbatim
Representative response
Dear Counterparty,
Thank you for the draft. We are broadly comfortable to proceed, subject to three amendments: (1) the penalty at clause 8 to be capped in aggregate and tied to demonstrable loss; (2) the restraint at clause 12 to be narrowed to twelve months and a defined territory; and (3) the renewal at clause 3 to move to twelve-month terms on thirty days’ notice.
Subject to these, we are content to sign. A marked-up version follows.
Kind regards,