1. Scope and deliverables
Start with the commercial bargain. Identify exactly what is being supplied, in what quantity or form, by when, and which party is responsible for inputs, approvals, access and dependencies. Many contract disputes begin because the document describes the relationship at a high level but does not define the actual work.
For project or services arrangements, consider milestones, change-control procedures, assumptions, excluded work and who bears the consequence of delay caused by the other party.
2. Price, payment and timing
State how the price is calculated, when invoices may be issued, the payment period, whether GST is included or additional, and what happens if an invoice is disputed. Where rates may change, the mechanism should be objective rather than leaving one party with an unrestricted right to vary the price.
3. Acceptance and performance standards
If a deliverable needs to meet a specification, describe the acceptance process. Specify how defects are notified, whether there is a cure period and what happens if the supplier does not rectify. Service levels, response times and objective quality standards can be more useful than broad promises to use “best endeavours”.
4. Warranties and promises
Warranties allocate risk about facts, capability and future performance. They might address authority to enter the agreement, compliance with law, ownership of intellectual property, licences, quality standards or the accuracy of specified information. Avoid warranties that are wider than the party can reasonably verify or control.
5. Indemnities
An indemnity can shift loss from one party to another and may operate differently from an ordinary damages claim. Define the losses covered, the events that trigger the indemnity, any exclusions, the process for third-party claims and whether the indemnity is subject to an agreed liability cap.
6. Limitation of liability
Commercial parties often negotiate a cap on liability and exclusions for categories of loss. The drafting should deal with the claims intended to be capped, any carve-outs, whether multiple claims share one aggregate cap, and whether insurance arrangements support the allocation of risk.
7. Intellectual property
Distinguish pre-existing intellectual property from material created during the engagement. State who owns new material, what licences are granted, whether third-party material may be used and what happens to access rights when the contract ends.
8. Confidentiality and data
Identify confidential information, permitted use, disclosure exceptions, security expectations and obligations on termination. Technology and services contracts may also need detailed provisions for personal information, cybersecurity, data access and return or deletion of data.
9. Term, renewal and termination
Set the contract term, renewal process and rights to terminate. Consider termination for material breach, insolvency events, prolonged force majeure, convenience where commercially appropriate, and whether a defaulting party receives time to remedy a breach. The notice mechanics should be practical and consistent with the rest of the agreement.
10. Restraints, exclusivity and non-solicitation
If the arrangement restricts competition, customers, staff or dealing with others, the restriction should be tied to a legitimate commercial objective and drafted carefully. A very broad restraint can create enforceability and competition-law issues.
11. Dispute resolution and evidence
A useful dispute clause sets an escalation path without preventing urgent relief where necessary. Also consider practical evidence: notices, variation approvals, purchase orders, statements of work, meeting records and which communications are contractually effective.
12. Governing law, entire agreement and other boilerplate
Boilerplate can materially affect rights. Governing law, jurisdiction, assignment, subcontracting, variation, waiver, severability, notices and entire-agreement clauses should match the transaction rather than being copied automatically from another contract.
Small-business standard form contracts need an extra check
The Australian Consumer Law protects consumers and qualifying small businesses against unfair terms in standard form contracts. Since 9 November 2023, proposing, using or relying on an unfair term can attract penalties. Businesses using standard terms should therefore review one-sided variation, termination, indemnity and penalty-style provisions rather than assuming a signed contract is automatically safe to enforce.
Official resources
- ACCC — Contracts and unfair contract terms
- Federal Register — Competition and Consumer Act 2010 (including the Australian Consumer Law)