A commercial contract has landed in front of you. It might be a supplier's terms and conditions attached to a quote, a client's services agreement arriving with a "please sign" note, or the template your industry association downloaded for you. Someone needs to read it properly before you sign, and for most small and medium businesses that someone is the owner or manager who negotiated the deal, not a lawyer.
The document you are about to sign is the legal record of your deal. It sets out what each party must do, what each party gets, and what happens if something goes wrong. Australian law treats an oral agreement as capable of binding parties, although some contracts, such as contracts for the sale of land, must generally be in writing and signed. A written contract is what a court will actually enforce when the relationship sours, and most contracts contain a whole agreement clause that displaces everything said during negotiations. The document itself is the deal. The clauses below are the ones worth reading carefully, in roughly the order a lawyer would work through them.
The clauses that carry the risk
Who the parties are and who can sign
The parties clause names the legal entities bound by the contract, and it is where reviewers most often get tripped up. A contract with the wrong entity is enforceable against nobody. If you negotiated with "John's Plumbing" but John trades through a company, you need the company's full registered name, not the trading name, on the document.
- Trap: An ABN is not an ACN. A company is identified by its Australian Company Number, and the name on the contract should match the name on ASIC's register.
- Trap: A person signing for a company without authority. The signatory may be a director's spouse, a bookkeeper, or a manager who only handles procurement.
- Drafting minimum: The full registered name, the ACN, and confirmation of who actually signs and under what authority.
The Corporations Act 2001 (Cth) gives some protection. Under ss 128 and 129, a person dealing with a company may assume its officers are duly appointed and have the authority an officer of that kind usually has, so long as the person did not know or suspect otherwise. That means a quick check of who you are dealing with is worth more than a stack of boilerplate. If you suspect the signatory lacks authority, the statutory assumptions will not save you, and the contract may be unenforceable against the company you thought you were dealing with.
What each side must actually do
The scope clause, sometimes called the services or deliverables clause, is the engine room of the contract. It defines what each party must do, by when, and to what standard. The drafting choice that matters most is specificity. A clause that says the contractor will provide "all necessary services" gives a court almost nothing to enforce, while one that lists deliverables, milestones, timeframes, and acceptance criteria gives the contract real content.
- Trap: "Best endeavours" and "reasonable endeavours" sound similar but are not. "Best endeavours" has been read as requiring a party to exhaust practically all avenues, a much higher bar that can force a party to act against its own commercial interests.
- Trap: No exclusions from scope. If the contract does not say what is not included, scope creep is built in, and you will pay for it through variations.
- Drafting minimum: A statement of the standard of performance, whether that is a professional standard, an industry standard, or specific KPIs.
The scope clause is also where plain language earns its keep. If a clause cannot be read and understood by a reasonable business person in one pass, it is a source of future dispute, because the parties will disagree about what it means the first time it matters.
How the price is calculated and when it's paid
The payment clause sets the amount, the currency, whether GST is included or additional, the timing of invoices, and the consequences of late payment. It sounds simple, but it is a common source of disputes that could have been avoided by three lines of drafting.
- Trap: GST left unaddressed. Australian business-to-business contracts should state whether prices are inclusive or exclusive of GST, and whether adjustments for input tax credits apply.
- Trap: A set-off clause that lets the other party deduct disputed amounts from any invoice, which can effectively hand them the cash flow advantage in a dispute.
- Trap: No interest on late payments. Without a term, your remedy for a slow payer is a debt action, not compensation for the delay.
- Drafting minimum: Payment timing tied to milestones or acceptance, not to the other party's convenience.
If you supply goods on credit, the payment clause interacts with the Personal Property Securities Act 2009 (Cth). A retention of title clause that says the goods remain yours until paid is only as strong as your registration on the Personal Property Securities Register. An unregistered security interest can be lost if the buyer becomes insolvent, which is a lesson many suppliers learn after the liquidator's report arrives.
How long the deal runs and how it ends
The term and termination clauses determine how the contract starts, how long it runs, and how each side can get out. The most common drafting trap is automatic renewal. A contract that renews for another year unless notice is given 60 days before expiry has ended many business relationships by accident, simply because nobody diarised the date.
- Trap: Termination for convenience. If the other side can end the contract at any time on 14 days' notice, your investment in the relationship has no protection. If you want that right, the notice period should reflect the work you have committed.
- Trap: Termination only for material breach, with no definition of what "material" means.
- Drafting minimum: What happens on termination, including payment for work done to date, return of property, and which clauses survive the end of the contract.
A termination clause should also deal with the relationship between breach and termination. Many contracts require a notice period to remedy a breach before the innocent party can terminate, and getting the sequence wrong can turn a valid termination into a repudiation of the contract by the party seeking to exit.
Who carries the loss when something goes wrong
The liability clause is where the real risk allocation happens, and it is usually the most heavily negotiated part of a commercial contract. It sets who is liable for what, caps that liability, and excludes categories of loss such as consequential loss.
The Australian Consumer Law constrains this drafting. Schedule 2 of the Competition and Consumer Act 2010 (Cth) (the ACL) implies guarantees into consumer transactions, and s 64 of the ACL voids any term that purports to exclude, restrict or modify those guarantees. So a clause that says "no refunds, no warranties, no liability" is not worth the paper it is printed on where the buyer is a consumer under s 3 of the ACL.
The position is different in a genuine business-to-business deal. Under s 64A of the ACL, where goods or services are not of a kind ordinarily acquired for personal, domestic or household use, liability for failure to comply with a guarantee can be limited to repair, replacement, or re-supply, provided it is fair and reasonable to rely on the term. A court weighing that question looks at the relative bargaining power of the parties, whether the buyer had an alternative source of supply without the term, and whether the buyer knew of the term.
- Trap: An uncapped indemnity. Indemnities often carve out of the liability cap, which means a single indemnity clause can undo the protection the cap was meant to provide.
- Trap: A cap that is meaningless in context. A cap of $100,000 on a contract worth $2 million protects almost nobody.
- Trap: Waivers of consequential loss written so broadly that they swallow the core promise of the contract.
- Drafting minimum: A cap expressed as a multiple of the contract value, carve-outs for fraud, wilful misconduct, breach of confidentiality, and intellectual property infringement, and consistency with any consumer guarantees that apply.
Who gets to know what
A confidentiality clause protects the information each party discloses during the relationship. In most commercial relationships the sensible default is mutual obligations: each party keeps the other's information confidential and uses it only for the purpose of the contract.
- Trap: A one-way clause in a relationship where both sides share information.
- Trap: No exceptions. A confidentiality clause should carve out information that is already public, independently developed, or required to be disclosed by law, otherwise a party can be forced to choose between breaching the contract and breaching a statutory obligation.
- Trap: No survival. If the confidentiality obligation ends when the contract ends, the information you disclosed during the relationship is unprotected the day after termination.
- Drafting minimum: A definition of confidential information, a statement of permitted use, the exceptions, and an obligation to return or destroy information on termination.
How disputes get resolved
The dispute resolution clause sets out what happens when the relationship breaks down, and it is the clause that decides whether a dispute costs you $5,000 or $50,000. A well-drafted clause usually has an escalation ladder: written notice of the dispute, a period for senior representatives to negotiate, then mediation, and only then litigation or arbitration.
Australian courts have made clear that a clause requiring the parties to genuinely attempt to resolve a dispute is enforceable. In United Group Rail Services Ltd v Rail Corporation NSW [2009] NSWCA 177, the New South Wales Court of Appeal held that a clause requiring the parties to meet and genuinely attempt to resolve a dispute was sufficiently certain to bind them. The same case contains the trap in its other half: a mediation clause that named a dispute resolution centre which did not exist was void for uncertainty. Drafting matters.
- Trap: An "agreement to agree". A clause that says the parties "will negotiate in good faith" without any process can be unenforceable as an agreement to agree.
- Trap: Naming a mediator, centre, or process that does not exist or cannot be identified.
- Trap: No governing law and jurisdiction clause. If you contract with a party in another state or overseas, silence on governing law means the applicable law is decided by conflict of laws rules after the dispute starts, which is exactly when you least want that uncertainty.
- Drafting minimum: A named process with timeframes, a default mediator or mediation body, and an express choice of governing law and courts.
Optional clauses worth asking for
Most commercial contracts are offered on a take-it-or-leave-it basis, but where there is room to negotiate, the following clauses are worth asking for:
- Restraint of trade: Worth including where the deal gives one party access to your customers, staff, or know-how. A restraint is only enforceable to the extent it is reasonable, so it needs to be drafted to protect a legitimate interest rather than to punish.
- Force majeure: Worth including where performance can be interrupted by events outside either party's control, such as natural disasters, supply chain failures, or changes in law. The clause should define the events and what happens if the interruption continues.
- Survival clause: Worth including to state expressly which clauses continue after termination, such as confidentiality, indemnities, and warranties.
- Change of control and assignment: Worth including when you do not want the contract transferred to a competitor or to a new owner without your consent.
- Exclusivity: Worth including when you are committing resources, staff, or capacity on the strength of the relationship, so the other party cannot simply take the same deal elsewhere.
How Artificer Legal reviews your commercial contract
A lawyer's review of a commercial contract follows a different order from a reader's. We start with the parties and the authority of the signatories, because a contract against the wrong entity is worthless no matter how well every other clause is drafted. We then check that the commercial terms reflect the deal you actually negotiated, because the whole agreement clause will erase anything that is not in the document.
The order of negotiation matters too. We would usually settle the risk allocation first, because that is where the real money is: the liability cap, the indemnities, and the exclusions of loss. Then we would work through termination and dispute resolution, and finally the mechanical clauses such as notices, assignment, and survival. The clauses we push back on most often are uncapped indemnities, one-way liability structures, automatic renewal without adequate notice, and dispute resolution clauses that promise negotiation without a process that will actually work. If you have a contract in front of you and are unsure whether it protects you, an Artificer Legal lawyer can walk through it with you, identify the clauses that carry the risk, and negotiate the changes before you sign.
How the contract decides who carries the loss
Every commercial contract is, underneath the words, an agreement about who carries the risk. The clause that most often decides who wins when the deal goes wrong is the liability clause, because it is the one that determines what the losing party actually pays. A contract with careful scope, payment, and termination drafting but a sloppy liability clause can leave you exposed to losses the other party never promised to bear, or holding the other party to a cap so low it makes the contract's promises hollow.
Read the liability clause with the same care you gave the price. Check the cap against the value of the deal, check the carve-outs against the risks that matter to you, and check the drafting against the consumer guarantees that cannot be excluded. And if the contract is important enough to sign, it is important enough to have someone who does this daily read it first, because the cost of a poorly reviewed contract is paid in the dispute, not at the signing table.
In short, review the parties and their authority, make sure the scope and payment terms reflect the deal, check how the contract ends and what happens on termination, scrutinise the liability clause and its consumer law limits, protect confidential information, and agree on a dispute resolution process that will actually work. Each of those checks is cheap. Each of the failures they prevent is not.