Your business has just received a contract from a US customer, supplier or platform. The signatures look the same as any Australian contract, but the law underneath is not the law you know. Both countries inherited the common law, yet the two systems have drifted apart on a handful of points that decide who pays, which court hears a dispute and whether a win is worth anything at all.
The implied duties underneath the deal
The most practical difference sits in what the law adds to a contract without anyone writing it down.
In the United States, a duty of good faith and fair dealing is built into the performance of contracts. Section 1-304 of the Uniform Commercial Code imposes an obligation of good faith in the performance and enforcement of every contract within its scope, and the Restatement (Second) of Contracts states the same for contracts generally. A US party therefore assumes that neither side can act in bad faith during performance, and treats an express good faith clause as unnecessary paperwork.
Australia has never recognised a general implied duty of good faith in the performance of contracts. The High Court in Commonwealth Bank of Australia v Barker (2014) 253 CLR 169 declined to imply even a term of mutual trust and confidence into employment contracts, and intermediate courts have repeatedly been cautious about implying good faith obligations. An Australian party cannot assume the protection exists, which is exactly why Australian-drafted contracts so often include an express clause obliging the parties to act in good faith in their dealings. If the contract is governed by US law, expect the US side to push back on such a clause as redundant. If it is governed by Australian law, resist deleting it, because the courts will not supply it for you.
A second doctrinal difference concerns "best endeavours" and "reasonable endeavours". The source article you may have read suggested the two mean much the same thing in Australia but differ in the US. The safer way to put it is that Australian courts construe both expressions contextually, and the practical gap between them is often small. In Electricity Generation Corporation v Woodside Energy [2014] HCA 7, the High Court read a "reasonable endeavours" obligation in light of the party's own commercial, economic and operational circumstances, so that a party did not have to sacrifice its legitimate interests. In the US, "best efforts" has generated its own substantial body of case law and can be read as a demanding standard, so a US-drafted contract may bind you harder than you expect. If the contract is governed by US law, check what the clause actually requires, or define the standard expressly, for example as efforts consistent with ordinary commercial prudence without an obligation to spend capital.
The clauses that will read differently
Some clauses look the same on the page but carry different legal baggage on each side of the Pacific:
- Auto-renewal clauses: The claim that "evergreen" clauses, which roll a contract over automatically unless notice is given, are prohibited in the US is not accurate. They are heavily regulated instead. Many states require the seller to disclose the automatic renewal clearly and conspicuously. North Carolina's statute, for example, requires notice to the customer between 15 and 45 days before renewal where the renewal period exceeds 60 days, and New York and Virginia impose their own disclosure and consent requirements. The Federal Trade Commission's negative option rule, amended in 2024 and effective in 2025, goes further and now reaches business-to-business subscriptions, requiring clear disclosure, affirmative consent and simple cancellation. In Australia, auto-renewal clauses are common in standard form supplier contracts and are generally valid, but they can be challenged. A term of a standard form consumer or small business contract is void if it is unfair under s 23 of the Australian Consumer Law (the ACL), and penalties have applied to unfair terms since November 2023. An evergreen clause that quietly commits a small business to another year of payments is exactly the kind of term a court may find unfair.
- Who pays the legal costs: In Australia, costs generally follow the event: the losing party pays a substantial part of the winner's costs. That is the default under r 42.1 of the NSW Uniform Civil Procedure Rules 2005 and the general practice in other Australian courts. In the US, the "American rule" applies instead: each side pays its own legal fees unless a statute or the contract itself says otherwise, as confirmed in Alyeska Pipeline Service Co v Wilderness Society 421 US 240 (1975). A US party therefore tends to ask for express provisions dealing with costs, such as an indemnity that covers its legal fees or a clause giving the prevailing party its costs, and will usually place alternative dispute resolution high on its list of priorities because US litigation is so expensive.
- Indemnities: US-drafted contracts often seek broad indemnities in addition to the usual intellectual property and confidentiality protections. An indemnity can oblige you to pay even where you did not breach the contract and the loss was not reasonably foreseeable, because the obligation is triggered by the stated event rather than by breach. Read the trigger carefully, and check what it covers: third party claims, your own negligence, the other party's legal costs. In Australia, an overbroad indemnity in a standard form small business contract can itself be attacked as an unfair term under the ACL, so the width of the indemnity is both a commercial and a regulatory question.
- Enforcement across the Pacific: The dispute resolution clause can determine whether a favourable decision is worth anything. Foreign arbitral awards are enforceable in Australia under the International Arbitration Act 1974 (Cth), which gives effect to the New York Convention. US court judgments are a different story: the statutory registration scheme in the Foreign Judgments Act 1991 (Cth) applies only to prescribed countries, and the US is not one of them. A US judgment against a party with assets in Australia must instead be enforced by suing on the judgment at common law, which is slower and more expensive. Where assets sit on both sides of the Pacific, arbitration may be worth more than litigation.
Choosing the law and the forum
As the parties, you get to decide which law governs the contract and which courts or tribunals will hear a dispute. This is the clause worth spending the most time on.
Australian courts will generally give effect to an express choice of governing law, but they will not let a choice clause be used to sidestep mandatory Australian protections. In Akai Pty Ltd v People's Insurance Co Ltd [1996] HCA 39, the High Court refused to give effect to a choice of law clause where it would have displaced protections the Insurance Contracts Act 1984 (Cth) gave the insured. US courts likewise generally honour express choice of law clauses.
The practical question is not which law is "better" but which law you understand and can plan around. A US supplier's standard form may say the contract is governed by the law of Delaware or New York and that disputes go to a specified US court. That is not necessarily unreasonable, but it changes your position in real ways: the good faith duties that apply without being written down, the standard of "best efforts", whether you can recover your costs if you win, and how you enforce a judgment if you win. Choose the governing law and forum based on where the contract is performed and where the assets sit, not on what the party that drafted the contract happens to prefer.
Why the differences are here to stay
Do not expect these differences to converge. Contract law is largely judge-made in both countries, and each system's courts have developed their own reasoning traditions. Statutory overlay differs too: the US has the Uniform Commercial Code, the Federal Trade Commission Act and a patchwork of state consumer protection statutes, while Australia has the Competition and Consumer Act 2010 (Cth) and its ACL, not to mention different copyright and trade practices regimes. The differences will be managed, not eliminated, so the sensible approach is to plan for them in the contract rather than hope they disappear.
When to bring in an Australian contract lawyer
Before you sign a US-drafted contract, an Australian commercial lawyer can work through the points this article raises and the ones it cannot answer for you. That includes checking whether the governing law and forum clause leaves you with a realistic enforcement path, stress-testing indemnities and auto-renewal terms against the ACL unfair terms regime, and negotiating the express provisions you need, such as a good faith clause if Australian law applies, a defined endeavours standard, and a sensible dispute resolution mechanism. A lawyer can also tell you whether the contract is a standard form contract at all, because that determines whether the unfair terms protections apply. The cost of a review is small next to the cost of discovering, after a dispute starts, that the law on the contract is not the law you thought it was.
The clause that decides how a dispute is fought
If you take one thing from this article, make it the governing law and dispute resolution clause. It is the point where all the other differences converge: it decides whether good faith is implied, whether "best efforts" binds you harder than you expect, whether your costs are recoverable if you win, and whether the outcome can actually be enforced where the money is. Read that clause before you read any other. The other differences in US and Australian contract law, from implied good faith obligations to the treatment of auto-renewal clauses and indemnities, all matter, but they matter inside the framework that the governing law clause sets. If you are faced with a US contract or a US counterparty, get Australian legal advice on that framework early, while there is still room to negotiate.