In the world of commercial property, a poorly drafted contract can turn a lucrative deal into a legal and financial headache. Consider the case of a shopping centre seller who, after a buyer defaulted mid-payment, accepted a second offer – only to discover an unusual clause in the original agreement relating to ‘consequences of termination’ that could potentially cost them millions.
READ: Important red flags in property deals to look out for
“Everything looked above board - until we read the fine print,” says PJ Veldhuizen, Managing Director of Gillan & Veldhuizen Inc. “The contract stated that if the deal was cancelled due to the purchaser’s default, the seller still had to refund the buyer. And deductions for losses were only permitted if the property was resold via public auction. That didn’t happen -it was resold by private treaty - so now the client may have to refund money that’s already been spent, and which should have represented their damages.”
It’s a cautionary tale about the power of precise wording. In commercial property transactions, contractual clauses aren’t just formalities – they’re often the first, and sometimes the only, line of defence.
Beyond the standard terms like Escalation, Force Majeure, Indemnification clauses and such- , several lesser-known clauses can make or break your deal:
Survival Clauses
These ensure that key terms – such as dispute resolution or confidentiality – remain in effect even after a contract is terminated. “If your agreement gets cancelled but you still want to mediate or arbitrate, that clause must survive,” says Veldhuizen.
Dispute Resolution and Mediation Clauses
Specifying mediation or arbitration can drastically reduce legal costs and timelines. “A mediation clause is one of the smartest inclusions in a property contract,” Veldhuizen explains. “It’s cost-effective, confidential, and often preserves business relationships that litigation would destroy.”
No Representation Clauses
These prevent disputes based on informal promises or verbal side agreements not captured in writing. “People often forget that what’s not written down, doesn’t count,” says Veldhuizen.
Independent Legal Advice Clauses
These confirm that both parties had access to counsel. These clauses help to limit later claims of unfairness, coercion, or misunderstanding.
For property owners, developers and brokers the takeaway is clear: your contract is more than a formality – it’s your insurance policy. A well-drafted agreement does more than record intentions, it anticipates problems, protects relationships and keeps deals on solid legal ground.
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