Commercial Contracts in Australia: A Complete Legal Guide

What Is a Commercial Contract?

A commercial contract is a legally enforceable agreement between two or more parties acting in trade or commerce. It records the bargain — what each side will do, what each side will pay or receive, what happens if performance fails, and how disputes will be resolved. In Australia commercial contracts are governed by the common law of contract, the Australian Consumer Law in the Competition and Consumer Act 2010 (Cth), the Sale of Goods Act 1958 (Vic) and analogues in other States, the Personal Property Securities Act 2009 (Cth), the Privacy Act 1988 (Cth) and (since 2023) the strengthened unfair contract terms regime that now applies to most small-business standard form contracts.

The term "commercial contract" is generic. It covers every contract entered into by a business in the course of trade: supply agreements, distribution agreements, services agreements, software-as-a-service agreements, employment contracts, contractor agreements, agency agreements, franchise agreements, leases, finance documents, security documents, joint venture and shareholders' agreements, confidentiality deeds, settlement deeds, deeds of release, licence agreements, terms of trade, and the myriad specialist contracts that pepper the modern economy. The principles in this guide apply across the field; the industry-specific overlays are addressed at the end.

The Essential Elements of a Legally Binding Contract

Five elements are required to form a binding contract at common law:

1. Offer. A clear statement by one party of the terms on which it is prepared to be bound, capable of acceptance. Offers must be distinguished from "invitations to treat" (such as advertising, price lists and tender invitations), which are simply invitations to the other party to make an offer.
2. Acceptance. Unqualified agreement to the offer on its terms. Acceptance must be communicated to the offeror and is generally only effective when received. A purported acceptance that varies the offer is a counter-offer, which kills the original offer.
3. Consideration. Something of value moving from each party — money, goods, services, a promise to act or refrain from acting. Past consideration is not good consideration. A document executed as a deed does not require consideration (see below).
4. Intention to create legal relations. The parties must intend their agreement to be legally enforceable. In commercial dealings between businesses this intention is presumed; in social and domestic dealings it is presumed not to exist. The presumption can be displaced by clear words such as "subject to contract" or "binding in honour only".
5. Certainty. The essential terms must be sufficiently certain to be capable of enforcement. A contract that leaves the price, the subject matter or other essential terms to be agreed later is generally unenforceable as an "agreement to agree".

Two further requirements operate as overlays: capacity (the parties must have legal capacity — minors, persons of unsound mind and unincorporated entities have particular rules) and legality (the contract must not be illegal or contrary to public policy).

Written Versus Oral Agreements

Most commercial contracts in Australia do not have to be in writing to be binding. Oral contracts are enforceable, as are contracts recorded in emails, SMS messages, signed quotes, purchase orders, online checkout flows and conduct evidencing acceptance. However, certain contracts must be in writing (or evidenced in writing) to be enforceable, including:

• contracts for the sale or disposition of land, under section 126 of the Instruments Act 1958 (Vic);
• certain guarantees (Statute of Frauds (Vic) provisions);
• security interests under the PPSA (a written security agreement is required to perfect a non-purchase money security interest);
• franchise disclosure documents under the Franchising Code of Conduct;
• certain financial services disclosures under the Corporations Act 2001 (Cth);
• retail lease disclosure statements under the Retail Leases Act 2003 (Vic);
• credit contracts regulated by the National Consumer Credit Protection Act 2009 (Cth);
• most powers of attorney; and
• any contract the parties have agreed must be in writing to bind them.

Even where writing is not legally required, it is commercially essential. Oral contracts are notoriously difficult to prove; the evidentiary cost of running a simple breach case on an oral agreement routinely exceeds the substantive claim. The discipline of putting an agreement in writing also forces both parties to think through the terms that informal arrangements always leave unsaid — price escalation, payment terms, termination, dispute resolution, IP ownership.

Standard Form Contracts

A standard form contract is a contract prepared by one party and offered to the other on a take-it-or-leave-it basis with little or no opportunity to negotiate. Terms and conditions on a website, supplier credit applications, equipment hire contracts, most subscription agreements, cloud services agreements and small-business supply arrangements are standard form contracts. They are efficient — both sides save the cost of bespoke negotiation — but they have always carried the risk that the party drafting them inserts disproportionately advantageous terms.

Since 9 November 2023 the unfair contract terms regime in Part 2-3 of the Australian Consumer Law has imposed substantial civil penalties on businesses that propose, apply or rely on unfair terms in standard form contracts with consumers and most small businesses. The penalty framework was previously limited to a court declaration that the term was void; it now carries penalties up to the greater of $50 million, three times the value of the benefit obtained, or 30% of adjusted turnover during the breach period. The reform has materially changed the risk profile of standard form contracts and means every standard form template in active use needs to be re-reviewed against the unfair terms criteria.

Negotiated Agreements

Negotiated agreements are contracts where both parties participate in setting the terms — long-term supply contracts, joint ventures, IT implementations, M&A documents, financing arrangements. The unfair contract terms regime does not apply to negotiated agreements (because by definition there is no standard form), but the broader doctrines of unconscionability under sections 20 and 21 of the ACL, misleading or deceptive conduct under section 18 and equitable doctrines (duress, undue influence) continue to apply.

The art of negotiating commercial contracts is partly commercial and partly legal. The principal commercial terms — price, scope, timing — are set by the parties. The legal terms — warranties, indemnities, liability caps, termination, dispute resolution, IP, confidentiality, assignment, governing law — are typically the negotiation territory of the lawyers. The discipline of using a single redlined working document, tracking changes turn by turn, and agreeing each open point at each iteration prevents the recurring failure mode of two parallel versions diverging without the parties realising.

Heads of Agreement, Letters of Intent, Term Sheets

Pre-contractual documents are common in commercial transactions. They go by various names — Heads of Agreement, Letter of Intent, Memorandum of Understanding, Term Sheet — but the legal questions are the same: which parts are binding, which parts are not, and what happens if the parties never sign the long-form contract?

The Australian authorities classify pre-contractual documents into the four Masters v Cameron categories: (1) parties have reached final agreement and intend to be immediately bound, with the formal document to follow as a record; (2) parties have reached final agreement but intend not to be bound until the formal document is executed; (3) the parties have not reached final agreement and are merely negotiating; or (4) parties intend to be immediately bound but contemplate a further formal document that may add to the existing terms. Categories 1 and 4 are binding; category 2 is not (although the binding clauses inside it are); category 3 is not.

The practical drafting rule is to make the binding / non-binding distinction explicit clause by clause. The binding parts of a Heads of Agreement typically include confidentiality, exclusivity, costs allocation, governing law and dispute resolution; the non-binding part is the commercial deal itself, expressed as "subject to contract" and "subject to satisfactory due diligence". For deeper treatment of pre-contractual documents in business acquisitions see our complete guide to buying a business in Victoria.

Contract Review Before Signing

Every commercial contract should be read in full before it is signed. That obvious rule is broken constantly: executives sign supplier terms without reading them, sales staff sign credit applications without reading them, founders sign investment documents without reading them. The cost is invariably paid later, in disputes over clauses that nobody noticed at the time.

Material contracts — those of long duration, high value, with indemnities, restraints, IP issues, security interests, automatic renewal or unusual termination mechanics — should be reviewed by a commercial lawyer before signing. The cost of legal review is typically 1% to 5% of the cost of disputing the same clause after the relationship has soured. Pre-signing review is the single highest-value legal expenditure most SMEs make.

Due Diligence

Due diligence is the disciplined process of verifying what is being bought, sold or agreed before the contract is signed. The scope depends on the transaction: an asset purchase requires legal, financial and operational due diligence on the target business; a long-term supply contract requires due diligence on the supplier's financial position and performance history; a software-as-a-service contract requires due diligence on data security and uptime.

For business acquisitions and major transactions, due diligence is set out in detail in our complete guide to buying a business in Victoria and our guide to business sale agreements in Victoria. The output of due diligence becomes the disclosure letter (limiting warranty exposure), the specific indemnities (covering known issues) and the conditions precedent (matters that must be resolved before completion).

Key Commercial Clauses

Every commercial contract should address the following clause families. The depth depends on the value and duration of the contract, but the headings are essentially constant.

Payment Provisions

The price (or formula for calculating it), the GST treatment, the currency, the timing of payment, the method of payment, the invoice mechanics, interest on overdue amounts (typically 2% above the RBA cash rate or a benchmark), the consequences of non-payment (suspension of supply, termination, set-off), security for payment (deposits, bank guarantees, parent company guarantees) and conditions to payment (acceptance, completion of milestones, delivery). Payment provisions are the single most common source of commercial disputes and deserve disproportionate drafting attention.

For construction contracts the Building and Construction Industry Security of Payment Act 2002 (Vic) imposes a mandatory progress payment regime with statutory adjudication. The Act cannot be contracted out of. Payment provisions in construction contracts must align with the Act or risk being unenforceable.

Deliverables and Scope

The contract should specify exactly what is being delivered — goods, services, work, software, data, licences — to what standard, in what quantities, to what specifications, in what location, by what deadline, and by what acceptance mechanism. Vague scope clauses are the single largest source of implementation disputes in IT and construction contracts. The cost of writing a tight scope statement is small; the cost of arguing about it later is enormous.

Time Obligations

Time obligations cover the start date, the milestones, the completion date and the consequences of delay (extensions of time, liquidated damages, termination). Whether time is "of the essence" — a common-law concept that elevates a time obligation to a condition the breach of which entitles termination — depends on the contract. The phrase should be used deliberately and only where the parties intend the consequences.

Warranties

A warranty is a contractual statement of fact about a particular matter — that the goods are fit for purpose, that the seller owns what it is selling, that there is no pending litigation, that the financial statements are accurate. Breach of warranty gives rise to a claim for damages but does not, by itself, entitle the innocent party to terminate (unlike breach of a condition). Warranties are commonly limited by time (typically 12 to 24 months after completion for general warranties, 7 years for tax warranties), by amount (capped at the price or a percentage of it), by de minimis thresholds (small claims excluded), by basket thresholds (claims must aggregate above a threshold before payable) and by a disclosure letter that lists the matters the buyer has accepted.

Indemnities

An indemnity is a contractual promise to compensate another party on a dollar-for-dollar basis for a defined loss, on demand, without proof of breach and without the common-law rules on causation, remoteness, mitigation or quantum that apply to damages. Indemnities are more powerful than damages claims and are commonly given by sellers for tax liabilities, regulatory penalties and known third-party claims. They should always be carefully scoped: the trigger (the event that activates the indemnity), the loss covered (direct loss only, or also consequential), the cap (the maximum payable) and the time limit (the period during which a claim can be made).

Uncapped, broad indemnities — particularly in standard form supplier terms — are one of the most dangerous clauses for unwary signatories. We routinely strike out or cap broad indemnities at the pre-signing review.

Limitation of Liability

A limitation of liability clause caps a party's liability under the contract, often by reference to a dollar figure, the price paid, insurance proceeds or fees received in a defined period. Liability clauses also commonly exclude indirect, consequential, special and loss-of-profit damages, and exclude liability for specified events (force majeure, third-party acts, customer's own breach). Liability caps are enforceable in Australia, subject to the unfair contract terms regime, statutory non-excludable consumer guarantees under the Australian Consumer Law, and (in some cases) the doctrine of fundamental breach.

The interaction between liability caps and indemnities deserves particular attention: an uncapped indemnity coupled with a capped liability clause can produce unintended results. The two should be drafted together so the relationship is clear.

Force Majeure

Force majeure is a contractual mechanism that suspends or excuses performance when an event beyond the affected party's reasonable control prevents performance. Australian law does not recognise a general doctrine of force majeure — without an express clause, a party affected by a pandemic, war, natural disaster or government order generally has to rely on the much narrower doctrine of frustration. A well-drafted force majeure clause defines the triggering events, the notice requirements, the consequences (suspension, extension of time, mitigation, termination after a long stop date) and the obligation to use reasonable endeavours to overcome the event.

The Covid-19 pandemic exposed the inadequacy of many force majeure clauses that did not contemplate pandemics, government orders or supply chain disruption. Modern clauses expressly include these categories.

Confidentiality

A confidentiality clause defines the confidential information (broader than "commercially sensitive" — usually anything one party learns from the other during the contract), the permitted uses, the permitted disclosees (employees, professional advisers, lenders) under flow-down obligations, the exceptions (information already known, in the public domain, independently developed, required to be disclosed by law), the duration (often a defined period after the contract ends, perpetual for trade secrets), the consequences of breach (including the right to seek injunctive relief without proof of damage), and the return or destruction of confidential information on termination.

Intellectual Property Ownership

By default the creator of IP owns it. A commercial contract should expressly assign or licence the IP needed for the recipient to use what they have paid for. Common arrangements include (1) full assignment of all IP created in performance of the contract to the customer, (2) retention of background IP by the supplier with a licence to the customer for project use, (3) joint ownership (rarely a good idea — joint owners cannot deal independently without each other's consent), and (4) licence-only models with the supplier retaining ownership. Moral rights of individual authors under the Copyright Act 1968 (Cth) should be expressly addressed by consent.

Privacy Obligations

Where a contract involves the handling of personal information about identifiable individuals, the Privacy Act 1988 (Cth) and the Australian Privacy Principles apply to any party with annual turnover above the threshold. Privacy Act reforms are progressively removing the small-business exemption, extending the regime to almost every Australian business in the medium term. Contracts should impose flow-down APP obligations on service providers, address cross-border disclosure under APP 8, notification of eligible data breaches under Part IIIC, security obligations, retention and destruction obligations, and audit rights. Health information and Tax File Numbers attract additional regimes.

Personal Property Securities (PPSR)

The Personal Property Securities Register is the national online register of security interests in personal property (everything except real estate) established by the Personal Property Securities Act 2009 (Cth). Any contract that creates a security interest — retention of title supply, leases of goods for more than two years, consignments, lease-back arrangements, charges over receivables — must be registered on the PPSR within the statutory timeframes or the security interest is at serious risk of vesting in the grantor on insolvency. Suppliers selling on credit, equipment lessors, consignors and financiers all need PPSR registrations in place for every covered transaction.

For the full treatment of when and how to register see our PPSR explained guide.

Assignment

Assignment is the transfer of one party's rights under a contract to a third party. The benefit of a contract is generally assignable unless prohibited, but the burden cannot be assigned — it can only be transferred by novation. Most commercial contracts restrict assignment without consent because the parties want to know who they are dealing with, in particular for service contracts, exclusive distributorships and contracts involving the use of confidential information or IP. Standard practice is to permit assignment to related entities and to require consent (not to be unreasonably withheld) for any other assignment.

Novation

Novation is the substitution of a new party for an existing party to a contract by the agreement of all three (the outgoing party, the incoming party and the counterparty). The original contract is discharged and replaced by a new contract on the same terms. Novation is the standard mechanism used on sale of a business to transfer customer contracts, supply contracts and leases from the seller's entity to the buyer's entity. Novation requires landlord consent for leases and counterparty consent for every other contract — see our guide to business sale agreements in Victoria.

Termination Rights

Termination rights commonly include termination for convenience (with notice, for long-term contracts only), termination for cause (material breach not remedied within a defined cure period), termination for insolvency events, termination on change of control, termination on prolonged force majeure, and termination on defined trigger events. The contract should also address the consequences of termination: surviving clauses (confidentiality, IP, indemnities, dispute resolution), payment for work performed to termination, return of property and information, and any wind-down or transition assistance period.

Default Provisions and Liquidated Damages

Default provisions identify the events that constitute a default (non-payment, failure to perform, insolvency, breach of warranty, change of control), the cure period (typically 14 to 30 days), the notice requirements, and the consequences (acceleration of payments, termination, enforcement of security, drawdown on bank guarantees).

Liquidated damages clauses specify the amount payable on a defined breach — typically delay in completion of a construction or implementation contract — as a pre-estimate of loss. To be enforceable in Australia the amount must be a genuine pre-estimate of loss at the time of contracting and not be "out of all proportion" to the legitimate interests of the innocent party — otherwise the clause is unenforceable as a penalty. The High Court's decisions in Andrews v ANZ and Paciocco v ANZ refined the test from the older "genuine pre-estimate" formulation to a broader legitimate-interests analysis. Practically: keep the rate moderate, document the rationale, and do not stack penalties.

Dispute Resolution Clauses

A well-drafted commercial contract specifies how disputes will be resolved before they arise. The standard tiered clause provides for: (1) good-faith negotiation between nominated senior individuals; (2) if unresolved within a defined period, structured mediation under the rules of a recognised body (the Resolution Institute, ACICA or LEADR); and (3) if still unresolved, either binding arbitration or litigation in the agreed jurisdiction. The clause should also include carve-outs for urgent injunctive relief — restraint enforcement, freezing orders and search orders are typically litigated immediately in court rather than going through mediation.

For the practical workflow of pre-litigation dispute resolution see our guide to resolving a business dispute before court and our guide to letters of demand.

Mediation

Mediation is a facilitated negotiation with a neutral third party. It is non-binding (the parties settle only if they agree), confidential (without prejudice protections apply), fast (typically resolved in one or two days) and cheap relative to litigation. Mediation settles the majority of commercial disputes that reach it because the mediator can test each party's case and broker commercial outcomes that a court cannot.

Arbitration

Arbitration is a private adjudication by an agreed arbitrator under agreed rules — ACICA, the Resolution Institute, the ICC or the SIAC. The arbitrator's decision is binding and enforceable internationally under the New York Convention. The principal advantages of arbitration are privacy, choice of arbitrator (frequently a specialist), international enforceability and procedural flexibility. The principal disadvantages are cost (parties pay for the arbitrator and the venue), limited appeal rights and procedural formality that sometimes mirrors litigation.

Court Proceedings

Court proceedings are the default if no other mechanism is specified. In Victoria the principal courts for commercial disputes are the Magistrates' Court (claims up to $100,000), the County Court (claims up to $1,000,000) and the Supreme Court (unlimited jurisdiction, including the Commercial Court list). The Federal Court has parallel jurisdiction in matters arising under federal legislation — Corporations Act, Competition and Consumer Act, Fair Work Act, intellectual property and corporate insolvency.

Electronic Execution and Digital Signatures

Electronic signatures have full legal effect in Australia. The Electronic Transactions Act 1999 (Cth) and the State equivalents (in Victoria, the Electronic Transactions (Victoria) Act 2000) provide that an electronic signature satisfies any general legal requirement for a written signature, provided a method is used to identify the signatory and to indicate the signatory's intention, and the method is appropriate or proved to have indicated the signatory's intention.

Companies execute documents electronically under section 110A of the Corporations Act 2001 (Cth), which permits electronic execution of contracts and deeds by companies and removes the requirement that two directors sign the same physical document. The Victorian Electronic Transactions (Victoria) Act 2000, as amended, also permits electronic execution of deeds. Specialist platforms — DocuSign, Adobe Sign, PEXA — build the technical compliance into the signing process and provide an audit trail that evidences who signed, when, and on what document.

Deeds Versus Contracts

A deed does not require consideration, must be signed in a more formal way and (in Victoria) is subject to a 15-year limitation period under section 5(3) of the Limitation of Actions Act 1958 (Vic) for actions on a deed compared with 6 years for actions on a simple contract. Deeds are used for guarantees, releases, restraints of trade given without separate payment, deeds of variation, and any document where consideration is uncertain or where the parties want the longer limitation period. Section 73 of the Property Law Act 1958 (Vic) governs execution of deeds by individuals; section 127 of the Corporations Act 2001 (Cth) governs execution of deeds by companies.

Common Drafting Mistakes

The recurring drafting mistakes we see in practice are almost always preventable. They include:

• ambiguous defined terms (a single term used inconsistently across the document);
• inconsistent terminology (the same concept named differently in different clauses);
• uncapped indemnities;
• missing limitation of liability clauses;
• vague payment terms (no due date, no interest, no consequences of non-payment);
• missing GST treatment;
• absent or unworkable termination clauses;
• absent dispute resolution clauses, defaulting to expensive litigation;
• IP ownership left unsaid;
• restraints of trade that are too broad to be enforceable;
• auto-renewal without notice;
• annexures referenced but never executed;
• using verbs like "endeavour" and "best efforts" without defining them;
• signing on behalf of the wrong entity (a recurring mistake when groups of companies share trading names); and
• failure to attach schedules and exhibits, leaving the contract internally inconsistent on execution.

Unfair Contract Terms and Australian Consumer Law

The Australian Consumer Law in Schedule 2 to the Competition and Consumer Act 2010 (Cth) overlays every commercial contract with consumer-protection obligations. The two principal areas of overlap are:

• Unfair contract terms. A term in a standard form consumer or small-business contract is unfair if it would cause significant imbalance in the parties' rights and obligations, is not reasonably necessary to protect the legitimate interests of the party advantaged, and would cause detriment if relied on. Unfair terms are void; the business proposing, applying or relying on them is exposed to civil penalties up to the greater of $50 million, three times the benefit or 30% of adjusted turnover during the breach period.
• Consumer guarantees. Suppliers of goods and services to consumers (and to small businesses for goods or services of certain kinds) are bound by statutory consumer guarantees that cannot be excluded by contract — acceptable quality, fitness for purpose, due care and skill, and the like. Standard exclusion clauses are ineffective to the extent they purport to exclude the statutory guarantees.

Misleading or deceptive conduct under section 18 and unconscionable conduct under sections 20 and 21 of the ACL operate as further overlays on every commercial dealing.

When Contracts Should Be Reviewed by a Lawyer

The pragmatic SME rule: any contract of more than six months in duration, more than $50,000 in value, with indemnities, warranties, restraints, security interests, IP terms, personal-information handling, or unusual termination mechanics should be reviewed before signing. Standard form templates the business issues to its customers and suppliers should be reviewed at least every two years and on any material change in the law (the 2023 unfair contract terms reform being the most recent example forcing a wholesale review of standard templates across the Australian SME sector).

Industry-Specific Contracts

Several industries have specific statutory overlays that change the analysis materially:

• Construction. Building and Construction Industry Security of Payment Act 2002 (Vic) — mandatory progress payment regime, statutory adjudication, no contracting out; Domestic Building Contracts Act 1995 (Vic) for residential building work.
• Franchising. The Franchising Code of Conduct — disclosure document, cooling-off rights, restrictions on restraints, marketing fund accounting.
• Retail leases. Retail Leases Act 2003 (Vic) — disclosure statements, mandatory minimum terms, prohibited clauses.
• Financial services. Corporations Act 2001 (Cth) — AFSL holders, product disclosure statements, design and distribution obligations.
• Telecommunications and energy. Telecommunications Consumer Protections Code; National Energy Retail Law.
• Commonwealth procurement. Commonwealth Procurement Rules; specific contract templates required for government dealings.
• Commercial property. See our guide to buying commercial property in Victoria for the property-law overlay.
• Employment. Fair Work Act 2009 (Cth), modern awards, enterprise agreements — see our workplace investigations guide for the procedural overlay.

Practical Contract Checklist

Before signing any commercial contract, check that each of the following has been considered and documented:

1. the correct legal name and ACN/ABN of each party;
2. the authority of each signatory to bind the entity;
3. the price, payment terms, GST treatment and interest on overdue amounts;
4. the scope of work, deliverables and acceptance criteria;
5. the timing obligations and consequences of delay;
6. the warranties given and their limits;
7. any indemnities given or received and their caps;
8. the overall liability cap and exclusions;
9. force majeure and the events covered;
10. confidentiality and the duration of the obligation;
11. IP ownership and licensing;
12. privacy obligations and APP flow-down;
13. PPSR registration where security interests are created;
14. assignment and novation restrictions;
15. termination rights, notice periods and surviving clauses;
16. dispute resolution mechanism and governing law;
17. execution method (deed or contract) and witnessing requirements;
18. annexures and schedules attached and consistent; and
19. insurance and security required of the counterparty.

Common Myths

"A contract is not binding until both parties sign." Wrong — an oral contract or email exchange can bind the parties before any formal document is signed. The Masters v Cameron categories determine when the parties intend to be bound.

"Standard terms protect me." Wrong — standard form contracts with consumers and most small businesses are subject to the unfair contract terms regime, and exclusion clauses cannot exclude the statutory consumer guarantees.

"Signing 'subject to contract' means I'm not bound." Sometimes — depending on the Masters v Cameron category. The phrase has to be used in context and in combination with consistent drafting; isolated use can be ineffective.

"I can always rely on the implied duty of good faith." Wrong — Australian law has not yet conclusively recognised an implied general duty of good faith in commercial contracts. The position varies between State courts. If good faith matters, write it in.

"Electronic signatures are not as good as wet-ink signatures." Wrong — the Electronic Transactions legislation and section 110A of the Corporations Act give electronic signatures the same legal effect, including for deeds.

Frequently Overlooked Risks

• uncapped indemnities buried in supplier terms;
• auto-renewal clauses with short opt-out windows;
• change-of-control clauses triggering termination on a corporate restructure;
• exclusive jurisdiction clauses requiring litigation overseas;
• flow-down obligations requiring back-to-back terms with sub-suppliers;
• retention of title clauses without PPSR registration;
• broad assignment clauses allowing the counterparty to assign to a competitor;
• step-in rights of financiers under tripartite agreements;
• moral rights consents not obtained from individual creators of IP;
• cross-default clauses linking unrelated contracts; and
• survival clauses keeping obligations alive long after the contract ends.

Practical Examples

Supplier credit application. A Victorian retailer signs the standard credit application of a national wholesaler. The application contains a director's personal guarantee in the small print, an uncapped indemnity for any loss the supplier suffers in collecting overdue amounts, and a retention of title clause registered on the PPSR. When the retailer subsequently enters voluntary administration the director is exposed personally for the trading account, and the supplier recovers its stock under the PPSR. Each clause was enforceable; none was negotiated.

IT implementation contract. A mid-sized Victorian services firm signs a standard-form software implementation contract without legal review. The scope clause is vague ("the system will meet the customer's reasonable requirements"); the acceptance criteria are undefined; the liability cap is the fees paid in the prior 12 months ($0 because the project has never delivered). When the implementation fails the customer has paid the supplier $400,000 for nothing and recovers $0 in damages.

Sale of business. A Melbourne family business is sold for $2.5 million. The Heads of Agreement provides for a 6-month negotiation period for the long-form sale agreement but contains binding confidentiality and exclusivity. During the exclusivity period the buyer discovers a regulatory issue and walks away. The seller has been kept out of the market for 6 months and the binding exclusivity clause prevents any claim. Pre-signing review would have negotiated a shorter exclusivity, a break fee, or both. For the deeper workflow on business sales see our guide to business sale agreements in Victoria and our guide to buying a business in Victoria.

Death of a director-shareholder. A Victorian private company has two equal shareholders. There is no shareholders' agreement and no buy-sell mechanism. One shareholder dies. The deceased shareholder's shares vest in the executor, who has no interest in the business. The surviving shareholder cannot agree a price with the executor and the company drifts for two years before the parties resolve the position through mediation. A properly drafted shareholders' agreement with an insurance-funded buy-sell would have resolved the position within 60 days. See our shareholders' agreements guide, buy-sell agreements explained and our guide to what happens to a company on the death of a director or shareholder.

Related Parke Lawyers Guides

This cornerstone guide is the starting point. For specific commercial-contract topics see the companion guides:

• Buying a Business in Victoria: A Complete Legal Guide
• Business Sale Agreements in Victoria
• Shareholders' Agreements in Australia
• Business Succession Planning
• Business Exit Strategy
• Business Valuation in Australia
• Buy-Sell Agreements Explained
• Company Director or Shareholder Death
• Business Owner Death in Victoria
• PPSR Explained
• Resolving a Business Dispute Before Court
• Letter of Demand: What to Do
• Buying Commercial Property in Victoria
• Workplace Investigations in Victoria