Kelvin Balmont, Chairman at national law firm Clarke Willmott joins Amy Peacey, partner in the firm’s commercial team, to look at contractual arrangements and how legal professionals can manage risks.
In today’s complex legal and regulatory environment, law firms are increasingly reliant on third-party providers to deliver services ranging from IT support and document management to expert consultancy and outsourced legal functions. These relationships, while essential for operational efficiency, introduce a host of contractual risks that must be carefully managed to protect client interests, regulatory compliance, and firm reputation.
Third-party arrangements are no longer peripheral they are central to how law firms operate. Whether engaging with cloud service providers, legal tech platforms, or external consultants, firms must ensure that contracts are robust, transparent, and aligned with their strategic and ethical obligations. Effective contracts provide clarity on roles, responsibilities, and liabilities, and serve as a critical tool for mitigating operational and reputational risk
One of the most pressing challenges is data protection. Law firms handle highly sensitive client information, and any breach whether through a third-party’s negligence or system failure can have severe consequences. Contracts must therefore include stringent data privacy clauses, aligned with UK GDPR and the Data Protection Act 2018, covering data handling, breach notification, and audit rights
To navigate these challenges, law firms should adopt a proactive and strategic approach to third-party contracting:
- Conduct thorough due diligence on all third-party providers, assessing financial stability, regulatory compliance, and cybersecurity posture.
- Define clear service levels and key performance indicators “KPIs”, with mechanisms for monitoring performance and resolving disputes.
- Include indemnity and liability clauses that protect the firm in case of breach or negligence by the third party.
- Ensure flexibility for contract variation, especially in response to regulatory changes or evolving client needs.
- Regularly review and update contracts, particularly in light of evolving data protection standards.
Third-party contractual arrangements are indispensable to modern law firm operations, but they must be managed with precision and foresight. By embedding strong contractual protections and aligning with regulatory obligations, law firms can safeguard their interests while delivering consistent, high-quality service to clients.
Speak to our experts
Kelvin Balmont heads up the corporate team at Clarke Willmott’s Southampton office and advises companies and individuals on all types of corporate and financial transactions including mergers, acquisitions, disposals, investments, finance and shareholder arrangements. Amy Peacy is a partner in the commercial team and advises businesses on all commercial contract matters.
Posted:
