Representations, Warranties and Indemnities in Australian Commercial Contracts: A Complete Guide

Representations, warranties and indemnities are the principal devices by which commercial parties allocate the risk that things are not as they were said to be. They are frequently run together in drafting and in conversation, but they are not interchangeable. Each engages a different cause of action, a different measure of recovery, a different limitation analysis, and a different relationship with the Australian Consumer Law. This guide explains how each works in Australia, what the drafting choices actually do, and where the outcome turns on construction rather than on the label used. It states the position as at the review date shown above.

For the surrounding transaction mechanics, see our companion guides on commercial contracts, due diligence, share sale versus asset sale and business sale agreements. This article stays with the clauses themselves.

The three instruments

At the level of function rather than label:

• A representation is something said (or conveyed by conduct) to induce the other party to contract. If it is wrong, the claim lies outside the promise: rescission in equity, damages in deceit or for negligent misstatement, or statutory relief for misleading or deceptive conduct.
• A warranty in a commercial agreement is a term — a contractual assurance about a state of affairs. If it is wrong, the claim is for damages for breach of contract, together with any remedy the contract expressly provides.
• An indemnity is a promise to make good a defined loss on a defined trigger. Whether it produces a debt claim, when that claim accrues, and what limits apply are questions of construction of the clause.

Labelling a clause “represents and warrants” does not create or remove causes of action by itself. What matters is what was said, in what circumstances, whether it became a term, and what the contract expressly provides about remedies.

Representations and their categories

Not every actionable statement is a bare assertion of present or past fact, and treating representations that way is the most common conceptual error in this area. Australian law distinguishes several different things that can be conveyed:

• Statements of fact — assertions about what is or was the case. These are the paradigm case of a representation.
• Opinions — an honestly held opinion is not actionable merely because it proves wrong, but expressing an opinion may convey that it is genuinely held, or that there is a reasonable basis for it, particularly where the speaker has special knowledge.
• Predictions and other future matters — a statement about a future matter is dealt with by section 4 of the Australian Consumer Law. It is taken to be misleading unless the maker adduces evidence of reasonable grounds for making it. The section allocates an evidential burden; it does not make every disappointed forecast a contravention.
• Statements of present intention — a statement about what a party intends to do is a statement about a present state of mind, and it is false if that intention was not in fact held.

A representation is not a promise. That is why the remedial route differs: a promise is enforced, a representation is undone or compensated. Where the parties want a statement to be enforced as a promise, it must be made a term.

Misrepresentation and statutory liability

The traditional labels — fraudulent, negligent and innocent — describe states of mind, not a single self-contained damages regime. In Australia the practical causes of action are these, and they need to be pleaded distinctly:

• Deceit — damages in tort where the statement was made knowing it was false, without belief in its truth, or recklessly indifferent to its truth (Derry v Peek (1889) 14 App Cas 337). Deceit carries a more generous measure than contract damages and limitation may be postponed where the fraud was concealed.
• Negligent misstatement — damages in negligence, which require a duty of care in the circumstances, reasonable reliance by the plaintiff and a failure by the defendant to exercise reasonable care (Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465; San Sebastian Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 (1986) 162 CLR 340). It is not enough to say the speaker lacked reasonable grounds; the duty and reliance elements do real work, and pure economic loss between commercial parties is not always recoverable.
• Equitable rescission — available for an actionable misrepresentation regardless of the representor’s state of mind, subject to the bars discussed below. Rescission restores the parties rather than compensating for loss.
• Misleading or deceptive conduct — ACL section 18 — conduct in trade or commerce that is misleading or deceptive, or likely to mislead or deceive. Intention and carelessness are irrelevant. Damages are available under section 236, subject to proof of causation and to a six-year limitation period running from the accrual of the cause of action, and section 237 empowers the court to make a wide range of discretionary compensatory orders, including varying or refusing to enforce the contract.

Section 18 is not itself a civil penalty provision — a contravention gives rise to compensation and other relief, not to a pecuniary penalty. Other provisions are different: false or misleading representations about goods or services under sections 29 and 151, for example, are subject to penalties.

Bars to rescission. Rescission may be lost through affirmation once the representee knows the truth, through lapse of time in the circumstances, through the intervention of third-party rights, or where substantial restitutio in integrum can no longer be achieved. Equity is flexible about restoration and can adjust for benefits, deterioration and use rather than simply refusing relief. “Substantial performance” is not one of the conventional bars, and it should not be treated as such.

Silence and disclosure

At general law, parties dealing at arm’s length owe no general duty of disclosure, and silence alone is not a misrepresentation. Silence nevertheless becomes significant in recognisable situations:

• Half-truths — a literally accurate statement rendered misleading by what is left out.
• Continuing representations — a statement made during negotiations may be treated as continuing until execution, so that a change of facts calls for correction.
• Fiduciary and analogous relationships — positive disclosure duties arise from the relationship itself.
• Statutory disclosure regimes — vendor statements under the Sale of Land Act 1962 (Vic), franchise disclosure under the Franchising Code, and product disclosure under Chapter 7 of the Corporations Act 2001 (Cth). Each regime has its own consequences for breach; they are not uniform, and a breach does not automatically give rise to a damages claim.
• Section 18 and reasonable expectation — silence may be misleading conduct where the circumstances give rise to a reasonable expectation that the fact would be disclosed (Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31).

Warranties, conditions and termination

“Warranty” is used in two different senses and conflating them causes real errors. In a sale agreement it means a contractual assurance that supports a damages claim and any expressly agreed remedy. In the classical condition/warranty analysis it means a non-essential term, breach of which does not permit termination.

Whether breach permits termination in Australia depends on:

• Essentiality — whether, objectively, the parties intended that any breach of the term would entitle the innocent party to terminate.
• Express drafting — many commercial contracts specify their own termination triggers, cure periods and notice mechanics, which may displace or supplement the general law.
• Seriousness of breach of an intermediate term — for a term that is neither essential nor merely collateral, the question is whether the breach and its consequences are sufficiently serious to deprive the innocent party of substantially the whole benefit intended. This is the framework set out in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115, which also addressed repudiation as a separate basis for termination.

In practice, most M&A warranty regimes exclude post-completion termination entirely and confine the buyer to damages and any agreed indemnity. That is a drafting choice, not a rule of law, and it needs to be checked rather than assumed.

What warranties usually cover

A warranty schedule is a risk map. The categories recur, and their depth varies with the transaction:

• Capacity and authority — power to enter and perform, internal approvals, authority of the signatory.
• Title and ownership — ownership of the shares or assets, free of undisclosed encumbrances, with power to transfer.
• Accounts and financial position — preparation basis, accuracy, disclosure of liabilities and position since the accounts date.
• Tax — returns lodged, liabilities paid or provided for, no current audit or dispute, PAYG, GST, payroll tax and superannuation guarantee compliance.
• Employment — terms and entitlements, classification of workers, award and enterprise agreement compliance, current claims or investigations.
• Contracts and customers — material contracts disclosed, no breaches, no change-of-control or termination triggers other than as disclosed.
• Assets, security and PPSR — no undisclosed security interests. See PPSR explained.
• Intellectual property, data and privacy — ownership and licensing, no infringement, Privacy Act 1988 (Cth) compliance and notifiable data breaches.
• Regulatory, environment and safety — licences and permits current, no regulator notices, no known contamination, work health and safety compliance.
• Litigation — no current, pending or threatened proceedings or investigations.

Where goods or services are supplied, contractual quality warranties sit alongside the statutory consumer guarantees, which use the concept of acceptable quality. Those guarantees are statutory rights, not contractual or statutory “warranties”, and they operate whether or not the contract mentions them.

Knowledge, materiality and disclosure

Three devices do most of the work in narrowing a warranty package.

Knowledge qualifiers limit a warranty to what the warrantor knows. “Actual knowledge” is narrower than “knowledge after reasonable enquiry”. A buyer’s usual position is to name the individuals whose knowledge is imputed and to require that they have made reasonable enquiry; a seller’s usual position is to keep the group small and the enquiry obligation modest. Undefined knowledge qualifiers are a frequent source of dispute.

Materiality qualifiers confine warranties to matters above a threshold of significance, whether expressed as “in all material respects”, by reference to a defined material adverse effect, or by a dollar figure. Defining the threshold in money is usually easier to apply than an abstract standard, and fundamental warranties are commonly left unqualified.

Disclosure qualifies warranties by identifying exceptions. Specific disclosure sets out particular matters against particular warranties. General disclosure deems whole categories disclosed — public registers, searches, or the contents of a data room as at a cut-off. The standard of disclosure matters: a “fairly disclosed” standard, requiring enough detail for the buyer to identify the nature and significance of the matter, is materially different from deeming a large data room disclosed in bulk. Whether disclosure also qualifies an indemnity, and whether it affects reliance for the purposes of a section 18 claim, should be dealt with expressly.

Indemnities and how they operate

An indemnity promises to make good a defined loss on a defined trigger. Beyond that, very little is automatic. Australian courts construe indemnities like any other contractual provision, and the consequences that are popularly attributed to indemnities all depend on construction:

• Debt or damages — whether the clause creates a liability to pay a sum on the trigger event, or a promise to hold harmless sounding in damages, affects pleading, set-off and interest, and turns on the words used.
• Accrual — the cause of action may accrue when liability is established, when loss is incurred, or when a demand is made. This drives the limitation analysis and is often left unaddressed.
• Covered loss and causation — the defined heads of loss and the causal connector (“arising out of”, “in connection with”, “caused by”) determine scope.
• Remoteness and mitigation — these are not displaced automatically by the word “indemnify”. Whether they apply depends on the clause read in context (Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; Andar Transport Pty Ltd v Brambles Ltd (2004) 217 CLR 424).
• Own negligence — an indemnity extending to loss caused by the indemnified party’s own negligence requires sufficiently clear language; general words are unlikely to achieve it.

Buyers commonly seek indemnities rather than warranties for identified, quantifiable exposures — a known tax position, a specific piece of litigation, an identified contamination issue — because the trigger and the covered loss can be defined precisely. That precision, not the label, is the source of the advantage.

Drafting and negotiating indemnities

The following matters should be addressed expressly rather than left to construction:

• Trigger and covered loss — define both, and say whether legal costs, internal costs, interest and penalties are included.
• Notice — state whether notice within a period is a condition precedent to liability or a procedural obligation, because otherwise it is a question of construction with expensive consequences.
• Third-party claim conduct — who defends, on what terms, with what consent rights over admissions and settlement, and with what protection for the buyer’s customer relationships.
• Fines and penalties — do not assume these can be indemnified. Statute or public policy may prohibit it depending on the penalty and the jurisdiction; take advice on the specific provision.
• Recovery and double recovery — deal expressly with insurance proceeds, recoveries from third parties, amounts already provided for in completion accounts, and overlap between the warranties and the indemnity.
• Proportionate liability — the proportionate liability regimes differ between jurisdictions, and whether and how parties can contract out of them is jurisdiction-specific. This needs deliberate, jurisdiction-aware drafting.
• Beneficiaries who are not parties — an indemnity in favour of affiliates, directors or employees generally needs express trustee or agency machinery, or another enforceable mechanism, before those persons can benefit from it.
• Exclusive remedy, releases and carve-outs — where the agreement makes the indemnity the sole remedy, consider carve-outs for fraud and wilful misconduct, and be conscious that the Australian Consumer Law cannot be excluded.

A short illustration, offered only to show the structural elements and not as drafting suitable for adoption: “The Seller indemnifies the Buyer against any Loss suffered or incurred by the Buyer arising out of or in connection with any Tax Liability of the Company relating to a period ending on or before Completion, subject to clauses [notice], [conduct of claims], [limitations] and [recoveries].” Whether such a clause works depends entirely on the defined terms and the surrounding limitation regime, and it should not be used without advice.

Damages, remoteness and consequential loss

Contract damages put the innocent party in the position they would have occupied had the contract been performed, subject to causation, remoteness and mitigation. Under Hadley v Baxendale (1854) 9 Ex 341 the first limb covers loss arising naturally from the breach, and the second covers loss within the contemplation of both parties at formation because of special knowledge.

It is wrong to assume that loss of profits, loss of opportunity or “consequential loss” belong to the second limb. Lost profit is frequently the very thing the contract was made to secure and falls within the first limb. More importantly, “consequential loss” has no fixed, self-executing meaning in Australian law. Courts construe the actual expression the parties used, defined or undefined, in its commercial context, and different formulations have produced different results.

The practical consequence is straightforward. If specific heads of loss are to be excluded, name them — loss of profit, loss of revenue, loss of anticipated savings, loss of data, loss of goodwill, business interruption — rather than relying on a label. And keep the controls separate: causation, remoteness, mitigation, agreed liability caps and exclusion clauses each do different work and each can fail independently.

Exclusion clauses are construed by the ordinary process of construction — the words in their commercial context. It is not correct that they are always read strictly or that any ambiguity is automatically resolved against the party relying on them. Contra proferentem remains available as a residual principle where genuine ambiguity survives ordinary construction. Statutory controls operate regardless.

Caps, baskets and survival

The financial limits in a warranty regime are commercial settings, not legal defaults:

• Cap — the maximum aggregate liability, often tiered so that fundamental warranties and the tax indemnity carry a higher cap than general business warranties.
• Basket — the aggregate threshold before any recovery, drafted either as a tipping basket (recovery from the first dollar once exceeded) or as a true deductible (recovery of the excess only).
• De minimis — a floor below which individual claims are disregarded, including for the purpose of counting toward the basket.
• Survival — the contractual window in which claims may be brought, usually longer for tax and fundamental warranties than for general warranties.

There is no reliable single Australian benchmark for any of these figures. They move with deal value, sector, the risk profile revealed by diligence, competitive tension in the process, whether warranty and indemnity insurance is in place, and market conditions. Anyone quoting fixed percentages as market standard should be asked for the evidence and the sample. What is generalisable is the logic: limits should be tested against the exposures the diligence actually found, and survival should be set against the period in which the underlying liability can realistically emerge.

Limitation periods and claim mechanics

Four different clocks operate, and confusing them is a recurring source of lost claims.

• Statutory limitation periods — set by the limitation legislation of the governing jurisdiction. Simple contract claims are commonly subject to a six-year period; claims on a deed attract a longer period in a number of jurisdictions. Statutory claims have their own periods, including six years for damages under ACL section 236.
• Contractual survival periods — a private time limit agreed between the parties. It shortens the practical window but does not rewrite the statute for claims that fall outside the contract.
• Notification deadlines — a requirement to give notice of a claim, often in a specified form and with specified particulars, within a defined time.
• Conditions precedent — whether a notification requirement is a condition precedent to liability, or an obligation whose breach sounds only in damages, is a question of construction. Clear words that make compliance a precondition of any liability are generally given effect; loose wording is not.

Accrual differs by cause of action. Contract damages generally accrue on breach, whether or not loss is yet apparent. A debt-style indemnity may accrue only when the indemnified liability is established or the loss incurred. Fraud and deliberate concealment can postpone the running of time under limitation legislation. And contractual drafting cannot be assumed to bar every statutory claim: a survival period in a sale agreement does not, of itself, extinguish a section 18 claim brought within the statutory period, though the contractual matrix may bear on reliance, causation and loss.

Entire agreement and no-reliance clauses

An entire agreement clause records that the written contract is the whole agreement. A no-reliance clause records that neither party relied on statements outside it. Both are useful and both are widely misdescribed.

They do not prevent all claims based on extra-contractual statements, and they do not simply fail against the Australian Consumer Law either. The accurate position is:

• Parties cannot contract out of section 18. An agreement cannot make misleading conduct lawful or bargain away the statutory cause of action.
• The clauses may nonetheless be relevant evidence concerning what was conveyed, whether reliance in fact occurred, causation, loss, and the objective commercial context in which sophisticated parties dealt.
• Their private-law operation — including contractual estoppel and the exclusion of pre-contractual statements as terms — is a separate question from the statutory prohibition and should be analysed separately.
• Their effect depends on the drafting and the facts. Henville v Walker (2001) 206 CLR 459 and Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 are the cases most often cited in this area; they repay reading for what they actually decide about causation, loss and the significance of contractual context, rather than being used as one-line propositions.
• In a standard-form consumer or small business contract, a broad no-reliance or exclusion clause may itself be reviewable under the unfair contract terms regime.

Consumer guarantees and section 64

The consumer guarantees in Part 3-2 Division 1 of the Australian Consumer Law are statutory rights that attach to supplies to a “consumer”. Under section 3 a person acquires as a consumer where:

• the amount paid or payable does not exceed $100,000; or
• the goods or services are of a kind ordinarily acquired for personal, domestic or household use or consumption; or
• the goods are a commercial road vehicle or trailer acquired for use principally in transporting goods on public roads.

A person does not acquire as a consumer where the goods are acquired for re-supply, or for use or transformation in trade or commerce in the course of production or manufacture, or in repairing or treating other goods or fixtures on land. Businesses buying under the threshold can and often do have the benefit of the guarantees.

Section 64 makes any term void to the extent it purports to exclude, restrict or modify a guarantee, the exercise of a right conferred by one, or liability for failure to comply. Section 64A is narrower than the shorthand “repair, replacement or refund” suggests. For goods or services not of a kind ordinarily acquired for personal, domestic or household use or consumption, a term may limit liability to specified options — for goods, replacing the goods or supplying equivalent goods, repairing the goods, or paying the cost of doing either; for services, supplying the services again or paying the cost of having them supplied again — and the supplier cannot rely on the term if the person to whom the goods or services were supplied establishes that reliance would not be fair and reasonable.

The guarantee of acceptable quality replaced the old “merchantable quality” concept when the Australian Consumer Law commenced, and the current terminology should be used in contracts and in correspondence.

Unfair contract terms and penalties

Part 2-3 of the Australian Consumer Law applies to standard-form consumer contracts and standard-form small business contracts. A small business contract is one where at least one party is a business employing fewer than 100 people or with annual turnover under $10 million. The expanded threshold and the penalty regime apply to contracts made, renewed or varied on or after 9 November 2023; where an existing contract is varied, the regime can apply to the varied term.

A term is unfair if it would cause a 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 applied or relied on. The court considers the transparency of the term and the contract as a whole. Whether a contract is standard form turns on the statutory factors, including bargaining power, whether the contract was prepared before discussion and whether there was any effective opportunity to negotiate. The regime does not apply to every term or every contract: terms defining the main subject matter, the upfront price and terms required or permitted by law are excluded, as are certain contract types.

Unfair terms are void. Proposing, applying or relying on an unfair term is a contravention attracting civil pecuniary penalties. Only a court can impose a penalty, and the figures below are maxima per contravention, not expected outcomes. For acts or omissions occurring on or after 28 March 2026, the maximum penalty under section 224 for a body corporate is the greater of:

• $100 million;
• three times the value of the benefit reasonably attributable to the conduct, if the court can determine it; or
• if it cannot, 30% of adjusted turnover during the breach turnover period.

The maximum for an individual is $2.5 million. The increase to the $100 million figure was made by the Treasury Laws Amendment (Doubling Penalties for ACCC Enforcement) Act 2026 (Cth), which commenced on 28 March 2026 and applies to contraventions, acts or omissions occurring on or after that day. Conduct before that date remains subject to the earlier maximum.

For businesses using standard terms, the practical exposure lies in broad indemnities, unilateral variation rights, automatic renewals, one-sided termination rights and sweeping limitation clauses. Those are exactly the clauses this article is about, and in a standard-form context they warrant review against the regime rather than reuse.

Material adverse change clauses

A material adverse change clause allows a party — usually the buyer — to decline to complete if a defined adverse change occurs between signing and completion. There is no universal Australian test for what qualifies. In particular, it is not the law that a change must have been unforeseeable, or that it must be more than a short-term downturn; those formulations come from particular clauses and particular judgments, including foreign ones, and they are not transplantable as general rules.

What determines the outcome is the clause. The matters to settle in drafting are:

• the definition of the change and what it must affect — the business, the assets, the financial position, prospects;
• the materiality threshold, whether quantitative (a stated fall in earnings or net assets) or qualitative;
• any duration language requiring the effect to be durable rather than momentary;
• exclusions and carve-outs for market-wide, industry-wide, economic, regulatory or pandemic events, and whether disproportionate impact on the target reverses the carve-out;
• causation, knowledge and notice — whether the change must be unknown at signing and what notice the invoking party must give; and
• the governing law and the consequences of invoking the clause wrongly, which can amount to repudiation.

Quantitative thresholds are easier to litigate than adjectives. A clause that says what fall in EBITDA, over what period, measured how, is far more useful than one that recites “material adverse effect” and leaves the rest to argument.

Warranty and indemnity insurance

Warranty and indemnity insurance is used on Australian transactions to transfer warranty risk from the seller to the insurance market. A buyer-side policy responds to loss from breach of insured warranties, and often the tax indemnity, above a retention and up to the policy limit, usually with no recourse to the seller except for fraud.

The features to understand before relying on it:

• Underwriting follows diligence — the insurer reviews the diligence reports and the disclosure material and will price and scope cover accordingly. Thin diligence produces thin cover.
• Known matters are excluded — anything identified in diligence or disclosed is typically excluded, along with categories the market commonly declines. Specific risk insurance is a separate product.
• Attachment and retention — the policy attaches above a retention, which may reduce over time, and the seller may or may not bear part of it.
• Subrogation — buyer-side policies typically waive subrogation against the seller other than for fraud, which is what enables a clean exit.
• Two claim processes — the policy has its own notification, cooperation and proof requirements, which run alongside the notice and conduct provisions in the sale agreement. Both must be complied with.

Cover levels, retentions and premiums vary by transaction value, sector, risk and market conditions and should be quoted for the specific deal. Insurance is a complement to diligence and drafting, not a substitute for either.

Tax, GST and superannuation guarantee

There is no general rule that fixes the tax character of every warranty or indemnity payment. The treatment depends on the transaction and the drafting, and the questions to work through include:

• whether the payment is properly characterised as an adjustment to the consideration for the acquisition or disposal;
• how the cost base and capital proceeds rules in the Income Tax Assessment Act 1997 (Cth) apply to the relevant asset and the relevant party;
• whether recoupment or other assessing provisions apply to the recipient;
• whether the payment relates to a revenue or capital item in the hands of each party; and
• how the settlement or claim documentation actually describes and allocates the payment.

GST. A payment is not outside the GST system merely because it is described as compensation, damages or an indemnity. The analysis is whether the payment is consideration for an earlier supply, a current supply or a discontinuance supply, whether it gives rise to an adjustment to the consideration for an earlier supply, or whether it is purely compensatory with no relevant supply. The Commissioner’s guidance in GSTR 2001/4 sets out that framework for court orders and out-of-court settlements, and settlement deeds should be drafted with it in mind, including whether amounts are stated inclusive or exclusive of GST and whether a tax invoice is required.

Amendment periods and superannuation guarantee. Contractual survival periods and the Commissioner’s assessment and amendment powers are different things and should be presented separately. Income tax amendment periods are set by the assessment legislation and vary with the taxpayer’s circumstances. The superannuation guarantee charge regime has its own assessment and recovery framework, and unpaid superannuation exposure can extend well beyond a short survival window. It follows that a negotiated survival period is a commercial allocation of risk, not a statement of how long the exposure can last, and it is inconsistent to describe an exposure as effectively open-ended while treating a fixed period as universally adequate. Where historical superannuation or worker classification issues appear in diligence, they usually warrant a specific indemnity rather than reliance on a general warranty. Take tax advice from a registered tax agent or Chartered Accountant on the specific transaction.

Franchising, leasing and statutory disclosure

Some sectors overlay statutory disclosure on the contractual regime. The interaction, not the sector detail, is what matters here.

Franchising. Franchising is regulated by the Competition and Consumer (Industry Codes—Franchising) Regulations 2024 (Cth), which set out disclosure document requirements, timing, updating obligations, the treatment of materially relevant facts, constraints around earnings information, and the obligation to act in good faith. The Code’s disclosure obligations are compliance obligations enforced under the Competition and Consumer Act regime; they should not be described as a general warranty by the franchisor that the disclosure document is accurate. Whether a particular breach gives rise to damages, and to whom, depends on the provision engaged and on any parallel section 18 claim. See our Franchising Code guide.

Commercial and retail leasing. In a lease, the assurances usually sought concern title and capacity, permitted use and planning, the condition and compliance of the premises, essential safety measures, and outgoings. For leases to which the Retail Leases Act 2003 (Vic) applies, the Act imposes disclosure statement and other statutory obligations on landlords and regulates a range of lease terms; the accurate description is of statutory obligations and prescribed disclosure, not of generic “statutory warranties”. Whether the Act applies at all is a threshold question — see when the Retail Leases Act applies.

Statutory disclosure generally. Different disclosure regimes have different consequences: some create rescission or avoidance rights, some create offences, some found civil penalty proceedings, and some support compensation. It is not correct that every breach of a statutory disclosure obligation sounds in damages. Identify the provision and the remedy it actually provides.

Practical checklist

Before signing — buyer or recipient of warranties. Map each diligence finding to a warranty, an indemnity, a price adjustment, a condition precedent or an accepted risk. Test the knowledge and materiality qualifiers against the exposures actually found. Check what has been generally disclosed and on what standard. Confirm the survival period against the period in which each exposure can emerge. Confirm whether notice is a condition precedent. Check whether the agreement purports to make the contract the exclusive remedy, and whether fraud and Australian Consumer Law claims are carved out.

Before signing — seller or warrantor. Read every warranty against what you actually know, and disclose properly rather than relying on general disclosure. Confirm who is giving the warranties and in what capacity. Check the cap, basket and survival settings and whether liability is joint or several. Confirm that statements made in the information memorandum, the data room and management presentations are consistent with the warranties — section 18 does not stop at the contract boundary.

After a problem emerges. Identify every available cause of action, contractual and statutory, and the clock applying to each. Give contractual notice within time and in the required form, even where the merits are still being assessed. Preserve documents. Notify any relevant insurer. Take advice before making admissions or settling a third-party claim that the indemnifier has a right to conduct.

How Parke Lawyers helps

Parke Lawyers acts for buyers, sellers, investors and businesses on the drafting and negotiation of representation, warranty and indemnity packages — in share and asset sales, shareholders’ agreements, supply, distribution and services contracts, franchising and leasing — and on claims when a warranty or indemnity is called on. The commercial practice is led by Jim Parke, a lawyer and Chartered Accountant, working with the Commercial & Business Law team. The value of pre-signing review lies in the fact that these clauses are difficult to improve once executed.

Official sources

• Competition and Consumer Act 2010 (Cth), including Schedule 2 — the Australian Consumer Law — sections 3, 4, 18, 64, 64A, 224, 236 and 237 and Parts 2-3 and 3-2.
• ACCC — unfair contract terms — the small business threshold, standard form and unfairness tests.
• ACCC — fines and penalties — how maximum penalties are set and applied.
• Treasury Laws Amendment (Doubling Penalties for ACCC Enforcement) Act 2026 (Cth), No. 19, 2026 — the increase to $100 million, commencing 28 March 2026.
• Competition and Consumer (Industry Codes—Franchising) Regulations 2024 (Cth) — disclosure, updating and good faith obligations.
• ATO — GSTR 2001/4 — GST consequences of court orders and out-of-court settlements.
• Retail Leases Act 2003 (Vic) — disclosure statements and landlord obligations.
• Henville v Walker [2001] HCA 52 — causation and damages for misleading conduct.
• Campbell v Backoffice Investments Pty Ltd [2009] HCA 25 — reliance and the effect of contractual acknowledgements.
• Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61 — classification of terms and termination for breach.
• Wilkie v Gordian Runoff Limited [2005] HCA 17 — construction of indemnity provisions.
• Andar Transport Pty Ltd v Brambles Limited [2004] HCA 28 — construction of indemnities, including whether an indemnity extends to loss caused by the indemnified party’s own negligence.

Frequently asked questions