Standard terms and conditions, a clause-by-clause guide for Australian businesses

What standard terms are for

Picture the moment the document lands in front of you. It might be the terms of trade a customer has asked you to sign before your first job, the supplier terms sitting behind an online checkout, or the template you have just finished adapting and are about to send to every new client. In each case the question is the same: does this set of terms describe the deal you actually want to do, and will it hold up if a dispute starts?

Standard terms set the default deal for every transaction with that customer. They say what is supplied, what it costs, when payment is due, who carries the risk while goods are in transit, who owns the work product, and how either side can end the arrangement. They displace earlier quotes, emails and conversations only if the document says so, and only if the terms were actually incorporated into the contract. A clause buried in a document the customer never saw, or agreed to after the deal was struck, may not bind anyone. That is why the drafting choices in the clauses below, and the way the terms are presented, matter more than the length of the document.

The clauses that carry the deal

Most Australian commercial agreements, whether they are called terms of trade, customer terms or a services agreement, are built from the same set of clauses. Each one allocates risk between the parties, and the way each is drafted decides who pays when something goes wrong.

What you are actually supplying

The scope clause is the reference point for every dispute about whether work was done or goods delivered. If the contract does not define the deliverables, "done" means whatever the customer says it means.

• Deliverables and milestones: list the specific outputs, and for services the milestones and completion dates, rather than a general description of the work.
• What is not included: state the exclusions explicitly. Work outside scope is the most common source of scope creep in fixed-fee projects.
• How changes are requested and priced: a short clause requiring written variation requests, with a mechanism for pricing them, turns a "can you just also..." conversation into a paid change.

How the price is calculated and when payment is due

The price clause should cover the basis of charging (fixed fee, hourly rate or per unit), when invoices issue, when payment falls due, and any deposits or progress payments. Two drafting choices deserve particular care.

Late payment fees are a trap for the unwary. A fee designed to punish a customer, rather than to cover the real cost of late payment, may be unenforceable as a penalty. In Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525, the High Court upheld bank late payment fees and confirmed that a fee is a penalty only if it is out of all proportion to the legitimate interests of the party charging it. The practical lesson is to set a fee that reflects genuine administrative and credit costs, disclose it in the contract, and avoid a round number that looks punitive.

Deposits and progress payments should be tied to identifiable costs or milestones. A clause that lets the supplier keep all prepayments on termination is the kind of one-sided provision that attracts unfair contract term complaints, even if it is commercially convenient.

Delivery, risk and acceptance

For goods, the clause should state who pays for delivery, when risk passes to the buyer, and when title passes. A common structure is risk passing on delivery and title passing on full payment, which lets the seller reclaim goods from an unpaid buyer. For services, the equivalent question is when work is deemed complete, for example on written acceptance or after a defined period without objection.

Acceptance procedures stop the "done versus not done" argument. Give the customer a short inspection or review window, state what happens if they say nothing (deemed acceptance), and keep a separate procedure for genuine faults.

Warranties and the consumer guarantees you cannot exclude

Whatever the warranty section of your terms says, the consumer guarantees in the Competition and Consumer Act 2010 (Cth), Schedule 2 (the Australian Consumer Law) (the ACL) override it. Section 64 of the ACL makes void any term that purports to exclude, restrict or modify a consumer guarantee, and "consumer" is wider than most business owners assume.

• Do not exclude what you cannot exclude: a business that buys goods or services priced at $100,000 or less is a consumer under s 3 of the ACL, unless it buys for re-supply or to transform them in manufacture or repair. Your terms cannot disclaim the guarantees for those sales.
• Business customers can still be limited: for goods or services not of a kind ordinarily bought for personal use, s 64A allows a supplier to limit liability for a non-conforming supply to repair, replacement or re-supply, provided the limitation is fair and reasonable in the circumstances.
• Written warranties must comply with the ACL: a document evidencing a warranty against defects must meet the requirements prescribed under s 102, and giving a non-compliant document is an offence under s 192.

How much liability you can cap

The limitation of liability clause is where the commercial deal is really struck. It usually has three parts: a cap on total liability, an exclusion of indirect or consequential loss, and carve-outs for things neither side will give up, such as fraud, wilful misconduct or breach of confidentiality.

• The cap: tie the number to something real. A cap of the total fees is common; a cap that exceeds what your insurance would pay means you are self-insuring the difference.
• Consequential loss: the phrase means different things depending on how a court reads the clause, so define it. State expressly that lost profits, lost revenue and loss of goodwill are excluded, or say the opposite if that is the deal.
• Carve-outs: a cap that also swallows your indemnities or confidentiality obligations defeats the purpose of those clauses, so list what survives the cap.

A disproportionate cap also invites regulatory attention. Under s 24 of the ACL, a term is unfair if it causes a significant imbalance in the parties' rights, is not reasonably necessary to protect the legitimate interests of the party relying on it, and would cause detriment if relied on. A cap that bears no relationship to the risk the supplier actually carries is the kind of term a court or regulator will scrutinise.

Who owns the intellectual property

The IP clause should distinguish between IP each party brings to the deal and IP created during it. For services businesses, the common structure is that pre-existing IP stays with its owner, new IP vests in the client or the supplier depending on the deal, and the other party gets a licence to use what it needs. For product businesses, the mirror question is what the customer may do with your software, templates or designs. A confidentiality clause protects trade secrets and customer data during and after the term, and is usually paired with the IP clause rather than left to stand alone.

How long the deal runs and how it ends

The term clause states the duration and whether the contract auto-renews. Automatic renewal deserves scrutiny: a clause that rolls the contract over for another year unless the customer gives notice is a classic candidate for an unfair term, particularly where the notice window is short and buried in fine print. The same applies to a unilateral variation clause that lets one side change price or scope without consent.

Termination rights should be balanced. A typical structure is termination for material breach after a cure period, termination on insolvency, and termination for convenience on notice. Force majeure deserves a mention here because Australian law does not imply one: if you want relief from events outside either party's control, the clause must be drafted, and it should say what happens to payment obligations while the event continues.

Exit terms are part of the same bargain. If there is a minimum term, state the exit fee or early termination charge up front, and keep it proportionate, for the same reason late fees must be proportionate: a charge designed to lock a customer in can be attacked as a penalty.

What happens if the customer does not pay

A set-off clause lets each party net what it owes against what it is owed. A suspension clause gives the supplier the right to stop work or withhold delivery while invoices remain unpaid. Neither is implied, so if you want these rights they need to be written down, along with the trigger (for example, an invoice 14 days overdue) and the consequences (interest, suspension, termination).

Security is the third leg. A personal guarantee from the director of a small customer company can make the difference between collecting a debt and joining the queue of unsecured creditors. If you supply goods on credit with a retention of title clause, registering your interest on the Personal Property Securities Register protects your claim to the goods against other creditors, including a liquidator; an unregistered interest can be lost to them entirely.

How disputes get resolved

A staged dispute clause is cheap insurance. The usual shape is good faith discussions between senior people first, then mediation, then arbitration or court. The clause should also state the governing law and jurisdiction, so a dispute is not litigated in a forum that suits neither party. Keep the steps short and practical: a clause that promises endless negotiation rounds can create its own argument about whether the process was followed, and one that appoints an arbitrator without naming a process can generate a dispute about how to start.

Clauses to add when the deal calls for them

Not every contract needs every clause, but these earn their place in specific situations.

• Force majeure: include when performance depends on things outside your control, such as overseas supply chains, weather-dependent work or events like a pandemic, and state what happens to payment during the disruption.
• Change control: include for ongoing services, where scope creep is a real cost; a written variation process keeps fixed-fee work profitable.
• Survival of terms: include so that confidentiality, IP, indemnities and dispute clauses outlive the contract; without it, obligations can be read as ending when the agreement ends.
• Personal guarantees: include where a small company customer is a credit risk, and have the guarantor sign separately so the guarantee is enforceable.
• Restraint and non-solicitation: include where a contractor or distributor could walk away with your customer relationships; keep the restraint reasonable in scope and duration, or it will not be enforced.

How an Artificer Legal lawyer would review your standard terms

A lawyer reviewing standard terms works through them in a particular order, and there are clear moments when that review is worth the cost: before you roll a template out to all your customers, when a customer's terms arrive with a significant contract, and any time your standard terms have not been looked at for a couple of years.

First, incorporation. How do these terms actually reach the customer? A signature block, a clickwrap tick box before checkout, or a quote that refers to the terms all work, but terms hidden behind a link or delivered after the deal may not bind at all. Second, unfair contract term exposure. The ACL presumes a contract is a standard form contract if one party alleges it, under s 27, so the review looks for the classic problem terms: unilateral variation rights, automatic renewal without clear notice, disproportionate liability caps, and broad set-off or suspension rights. Since the reforms that took effect on 9 November 2023, proposing or relying on an unfair term in a standard form consumer or small business contract is itself a contravention. A contract is a small business contract where at least one party employs fewer than 100 people or has turnover under $10 million, and the maximum penalty for a body corporate is the greater of $100 million, three times the benefit obtained, or 30% of adjusted turnover.

Third, consumer guarantee compliance: that no term purports to exclude a guarantee under s 64, that any limitation for business customers fits within the s 64A carve-out, and that warranty documents comply with s 102. Fourth, the money clauses: the late fee against the penalty rule in Paciocco, the liability cap against your insurance, and the definition of consequential loss. The order matters because the incorporation and unfair term issues decide whether the document works at all, while the money clauses decide how much a win in a dispute is actually worth.

An Artificer Legal practitioner would push back on clauses that are one-sided for no commercial reason, insist on a defined consequential loss and carve-outs that keep indemnities alive, and negotiate the liability cap before anything else, because it is the number that determines the value of every other right in the document. If you are about to sign a customer's terms, we would mark up the clauses that transfer risk to you and tell you which ones are worth fighting for and which are standard.

The clause that decides who pays when things go wrong

If only one clause gets your attention in a review, make it the limitation of liability clause. It is the most misdrafted clause in standard terms: either it is copied from a template that does not match the deal, or it caps liability at a number no one has checked against insurance, or it excludes "consequential loss" without saying what that means. When a project fails and the customer is out of pocket, this is the clause a court reads first, and the one that decides whether the loss lands on your balance sheet or theirs. Every other clause, the scope, the price, the termination rights, determines whether a dispute happens; the liability clause determines who pays for it.

Getting the rest of the document right matters just as much in the day to day. Keep scope and acceptance criteria clear so disputes are less likely, set payment terms and late fees that comply with the penalty rule, respect the consumer guarantees that apply even in business sales, draft termination and renewal rights that are balanced, and make sure the terms are actually incorporated into each deal. Standard terms that are clear, fair and properly presented do more than reduce legal risk; they make the business easier to run.