Terms of trade for SMEs, a clause-by-clause guide

You are about to send a quote, or a customer has asked for "your standard terms", and the document in front of you is a template you downloaded two years ago, half finished, with a clause about something called a PPSR that you have never looked up. This is the moment most Australian SMEs first confront their terms of trade: not when they are drafted, but when a deal is waiting on them.

Terms of trade are your standard supply contract. They set the rules that apply to every sale of your goods or services: price, payment timing, delivery, warranties, liability and termination. They bind your customer to those rules, and they replace the assumption that the deal is whatever happened to be written in the emails. What they cannot do is displace the mandatory consumer guarantees in the Australian Consumer Law (ACL), which sits in Schedule 2 of the Competition and Consumer Act 2010 (Cth), or the protections for small businesses against unfair terms in standard form contracts. This guide walks through the clauses that matter, what each one does, and where the traps are.

The clauses that do the work

The order below roughly follows the life of a sale, from quote to after-sales support. Not every clause will matter to every business, but most SMEs will need most of them.

What you are actually supplying

The scope clause defines the product or service, the key specifications, the deliverables, and what is included and excluded. Its job is to make the work measurable, because almost every later dispute about scope creep, variations and "that's not what I asked for" traces back to this clause.

The drafting choice that matters most is precision. Say what is included, what is not, and what happens when the customer asks for more. A simple variation mechanism, where changes are confirmed in writing with a price and a timeframe before the work starts, prevents the most common SME complaint: doing extra work for free. Watch for vague phrases such as "and any related services", which read as a promise you may not intend.

What you charge and when you get paid

This clause sets the price structure (fixed fee, hourly rate or unit price), when you invoice, and when payment falls due. If you take deposits or progress payments, state the amounts and what triggers each instalment. If you supply on credit, say so, and consider what happens if the customer does not pay.

Late fees and interest: you can charge them only if the contract provides for it, and the amount must not be out of all proportion to the loss you are protecting. In Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525, the High Court upheld late payment fees that went beyond a genuine pre-estimate of loss because they protected the bank's legitimate interests, but a fee that is extravagant or exorbitant risks being struck down as a penalty.
GST and taxes: state whether prices are inclusive or exclusive of GST, and make sure your invoice wording matches your tax settings. Whether you are registered for GST and how you issue tax invoices are questions for your accountant, not for the contract alone.
Set-off: decide whether the customer can deduct amounts they claim are owed from what they owe you. Many businesses allow this by silence, and it is a common source of cash flow pain.

When and how you deliver

The delivery clause covers how and when the goods or services are provided, what you need from the customer to do your job, and what happens if a delay is outside your control. For physical goods, it also covers shipping terms and who pays freight.

Two traps sit here. The first is promising an absolute date: a fixed delivery date that you miss exposes you to claims you could have avoided with a clause that commits to a timeframe and requires the customer's inputs before the clock starts. The second is ignoring the consumer guarantee that services be supplied with due care and skill (s 60 of the ACL). No clause can override that guarantee for consumer transactions, so do not promise more than you can deliver.

Who owns the goods until they are paid for

If you sell goods on credit, this is the clause that separates a secured creditor from an unsecured one. Risk (who bears loss or damage) and title (who owns the goods) are different things. A retention of title clause says ownership stays with you until the customer pays in full, even though the goods are in their possession.

A retention of title clause creates a security interest under the Personal Property Securities Act 2009 (Cth), and that interest is only protected if it is registered on the Personal Property Securities Register (PPSR). The timing rules matter:

Non-inventory goods: a purchase money security interest over goods other than inventory must be registered within 15 business days after the customer takes possession to keep priority over other secured creditors (s 62(3) of the PPSA).
Inventory: for goods you supply as stock for resale, the interest must generally be registered before the customer takes possession.
Insolvency: if the customer goes under and your interest was never registered, or was registered late, you can find yourself unsecured against the liquidator. Registration is cheap; the loss of the goods is not.

Registrations lapse, so note the renewal date in your calendar rather than discovering the lapse after a default.

What happens when something goes wrong

The returns, repairs and refunds clause sets your process: how a customer reports a problem, what you will do, and in what timeframe. It must sit alongside the consumer guarantees, because those rights cannot be excluded.

Goods: the ACL guarantees that goods are of acceptable quality and reasonably fit for any disclosed purpose (s 55).
Services: services must be supplied with due care and skill (s 60) and reasonably fit for the purpose the customer made known (s 61).
No exclusion: any term that purports to exclude, restrict or modify these guarantees is void (s 64 of the ACL). A "no refunds" statement is not just unenforceable; it can itself be a false or misleading representation about the existence or effect of a right (s 29(1)(m)).
The business-to-business carve-out: for goods or services not ordinarily acquired for personal, domestic or household use, you can limit your liability for a failure to comply with a guarantee to re-supplying the goods or services, or paying the cost of doing so, provided the limitation is fair and reasonable in the circumstances (s 64A). This is one of the most useful drafting tools for SME suppliers, and one of the most commonly missed.

How far your liability goes

The limitation of liability clause caps what you can be required to pay if things go wrong. The drafting choices that matter are the cap itself and what it does not cover.

A common structure caps total liability at the fees paid under the contract, excludes liability for consequential or indirect loss, and carves out the things that cannot be capped: fraud, wilful misconduct, breach of confidentiality, infringement of intellectual property, and the consumer guarantees that s 64 protects. A blanket "we accept no liability" clause is worse than useless, because a court will strike it out and you lose the protection you thought you had.

If you use a standard form contract, test the clause against the unfair contract terms regime. A term in a consumer or small business standard form contract is void if it creates a significant imbalance, is not reasonably necessary to protect your legitimate interests, and would cause detriment (s 24 of the ACL). Since 9 November 2023, proposing or relying on an unfair term in a standard form contract is itself a contravention, and the penalties for a corporation can reach $100 million (ss 23 and 224). Liability caps are a common target, so keep yours proportionate and transparent.

Who owns the work

The intellectual property clause states who owns the deliverables, who owns the pre-existing material each side brings to the deal, and what licence the customer receives. If you are a services business, silence here is a dispute waiting to happen: ownership of a website, a design or a piece of software is not obviously yours just because you built it.

Consider tying ownership, or the licence, to payment in full, in the same way a retention of title clause protects goods. If you grant a limited licence, say what the customer can and cannot do with the work, and keep the rights you need to reuse your own material for other clients.

What happens to their information

If you collect personal information from customers, the Privacy Act 1988 (Cth) applies to APP entities. In general terms, a business is covered if its annual turnover is more than $3 million, and certain smaller businesses are covered regardless, including health service providers (s 6D of the Privacy Act). Many SMEs sit below the threshold, but the exemption is under review as privacy reform is phased in, and customers increasingly expect a clear privacy policy regardless of the legal position. The clause itself should point to your privacy policy and set out what information you collect and why.

How disputes get resolved

A simple dispute clause sets an escalation path: a written notice of the problem, a period for the parties to discuss it in good faith, then mediation before either side starts court proceedings. Courts will generally hold parties to an agreed dispute resolution process, so the clause can genuinely keep a disagreement out of litigation.

Keep it proportionate. A clause that requires a full mediation before any dispute, including unpaid invoices, can slow down the one thing you actually want to be fast. Consider carving out debt recovery and urgent injunctions from the process.

When you can stop supplying

The suspension and termination clause reserves your right to stop work if the customer does not pay, and sets out when either party can end the agreement, for breach or for convenience, and on what notice. It should also deal with consequences: final invoices, return of materials and confidential information, and which clauses survive termination. Confidentiality, intellectual property, limitation of liability and dispute resolution should all survive.

Watch automatic renewal and unilateral variation terms. A term that lets you change prices or terms without giving the customer a way out is a classic unfair contract term, and one-sided termination rights are another favourite target of regulators.

Clauses to add when the situation calls for them

These are situational, but they come up often enough that they are worth knowing:

Personal guarantee: when your customer is a newly incorporated company with no credit history, a director's guarantee turns an unsecured sale into a debt backed by a person.
Minimum order quantities or exclusivity: when your economics depend on volume, such as manufacturing runs or distribution arrangements.
Service levels: when you provide ongoing or premium support, a service level agreement sets response times and what the customer gets if you miss them.
Non-solicitation: when your team works closely with the customer's staff or clients and you want protection against poaching.
Security deposit or prepayment: for high-value, bespoke or first-time orders, a deposit funds your costs and filters out customers who were never going to pay.

How an Artificer Legal review would run

A commercial lawyer reviewing your terms of trade would start with payment and security, because cash flow problems hurt SMEs first. We would check that your payment terms are enforceable, that any late fees survive scrutiny, and that goods sold on credit are protected by a registered security interest.

Then we would work through the liability side: the cap, the exclusions and the carve-outs, testing each against the consumer guarantees and the unfair contract terms regime. We would push back on unilateral variation clauses, automatic renewal without adequate notice, and indemnities with no cap. We would insist on the drafting minimums: a cap tied to something real, carve-outs for the guarantees that cannot be excluded, survival clauses for confidentiality and intellectual property, and a dispute clause that does not slow down debt recovery.

Finally, we would check how the terms get accepted, because a beautifully drafted contract that never reaches the customer is worth nothing. If you would like an Artificer Legal practitioner to review, redraft or negotiate your terms of trade, that is where the value shows up in practice.

The step that decides whether any of it bites

The thing that most often decides who wins a dispute is not a clause at all. It is the mechanism that gets your terms into the contract in the first place. If your terms sit in a link buried in an invoice sent after the work is done, or behind an "accept" screen no one reads, a court may find they were never part of the deal, and every carefully drafted protection falls away. The businesses that win disputes are the ones whose terms were presented before the deal, accepted by the customer, and referenced on every quote and invoice that follows.

The rest is discipline. Cover the clauses above in plain language, keep them aligned with the Australian Consumer Law and the unfair contract terms regime, register your security interests on the PPSR if you sell goods on credit, and review the document whenever your products, pricing or risk profile change. Terms of trade are not a one-off document; they are the operating system of every sale you make.