Common Contract Clauses That Businesses Should Never Overlook

Every commercial contract carries a handful of clauses that determine what actually happens if something goes wrong — not the clauses about price and delivery, but the ones covering execution, liability, termination, confidentiality, dispute resolution and unfair contract terms. Businesses that skip legal review of these clauses often only discover a problem once a dispute, late payment or contract breach has already occurred. If your business is negotiating or signing a commercial agreement, our commercial contracts team can review it before you sign.

Jurisdiction

This article applies to commercial contracts governed by the law of New South Wales and the Commonwealth of Australia, including the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010 (Cth)) and the Corporations Act 2001 (Cth). Contract law principles are broadly similar across Australian states, but specific statutory protections and limitation periods can differ, so businesses operating outside NSW should confirm their own state or territory position.

Why These Clauses Matter

Most disputes between businesses do not arise from the price or delivery terms of a contract. They arise from the clauses nobody reads closely until something goes wrong: who can terminate and how, who bears liability, what happens to confidential information, and where a dispute must be resolved. Reviewing these clauses before signing, rather than after a problem arises, is one of the most cost-effective steps a business can take. If your business is about to sign a supply, services or franchise agreement, our commercial contracts team can review the agreement and flag anything that needs to be negotiated before you commit.

1. Parties and Execution Clauses

A contract needs to correctly identify the legal entity on each side, not just a trading name. For companies, execution should follow section 127 of the Corporations Act 2001 (Cth), which allows a company to validly execute a document without a common seal if it is signed by two directors, a director and a company secretary, or a sole director who is also the sole company secretary (or where no secretary is appointed). A document signed by the wrong person, or by an individual with no clear authority to bind the company, can leave a business unable to enforce the agreement it thought it had.

2. Payment Terms

Payment clauses should set out not just the price, but when payment is due, how invoices are to be issued, what interest or fees apply to late payment, and whether GST is included or added. Vague payment terms are one of the most common sources of disputes between businesses, particularly where a contract runs over an extended period or involves milestone payments.

3. Term, Renewal and Termination

A contract should clearly state its start date, duration, and how it ends. Termination clauses should distinguish between termination for convenience (either party can end the contract on notice), termination for cause (a breach triggers a right to terminate, usually after a notice and cure period), and automatic renewal terms, which can lock a business into a further term if a cancellation deadline is missed. Businesses should pay particular attention to notice periods and any auto-renewal clause, since these are frequently overlooked until a business finds itself bound for another term.

4. Limitation of Liability and Indemnity Clauses

A limitation of liability clause caps the amount one party can recover from the other if something goes wrong, while an indemnity clause shifts the cost of a specific type of loss from one party to the other, regardless of fault. These clauses can significantly change a business’s real-world exposure under a contract and should be reviewed with the same care as the commercial terms. Courts will also scrutinise clauses that operate as a penalty rather than a genuine pre-estimate of loss; the High Court’s decision in Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30 confirmed that the modern penalty doctrine can apply beyond traditional breach-of-contract scenarios, so fee and liquidated damages clauses should be drafted with this in mind.

5. Confidentiality and Intellectual Property

Confidentiality clauses should clearly define what counts as confidential information, how long the obligation lasts (including after the contract ends), and any carve-outs, such as information already public or independently developed. Intellectual property clauses should state who owns work created under the contract and what licence, if any, the other party receives to use it. This is particularly important in services, technology and marketing agreements, where ownership of deliverables is not always what a business assumes.

6. Dispute Resolution and Governing Law

A dispute resolution clause sets out the process for resolving disagreements, such as negotiation, mediation or arbitration, before (or instead of) court proceedings. A governing law and jurisdiction clause specifies which state’s law applies and where proceedings must be brought. Without a clear governing law clause, a dispute involving interstate or international parties can become more complex and costly to resolve than the underlying disagreement itself.

7. Unfair Contract Terms

Since 9 November 2023, proposing, using or relying on an unfair contract term in a standard form consumer or small business contract has been unlawful under the Australian Consumer Law, not merely voidable. From 28 March 2026, the Treasury Laws Amendment (Doubling Penalties for ACCC Enforcement) Act 2026 (Cth) doubled the maximum civil penalty for a body corporate from $50 million to $100 million per contravention (or, if higher, three times the benefit obtained, or 30 per cent of adjusted turnover during the breach period), with a maximum of $2.5 million for an individual. The small business protections apply to a standard form contract where at least one party employs fewer than 100 people or has annual turnover under $10 million, regardless of the contract’s value. Businesses using standard form templates, such as standard supply or service agreements, should have them reviewed against these provisions.

8. Force Majeure

A force majeure clause excuses a party from performing (or delays performance) where an event beyond its reasonable control makes performance impossible or impractical. These clauses vary widely in what events they cover, whether they require the affected party to give notice, and what happens if the event continues beyond a set period. A narrowly drafted or missing force majeure clause can leave a business without protection when it most needs it.

9. Entire Agreement, Variation and Notices Clauses

An entire agreement clause confirms that the written contract represents the whole deal, which can prevent a party from later relying on earlier verbal promises or side discussions. A variation clause sets out how the contract can be changed (usually requiring written agreement from both parties), and a notices clause specifies how formal communications, such as termination notices, must be given and to whom. These clauses are easy to treat as boilerplate, but they directly affect whether an informal email or conversation can later be relied on.

Clause-by-Clause Risk Summary

Clause	Risk if Overlooked
Execution	Contract may not bind the company
Payment terms	Disputes over timing and interest
Termination	Unwanted auto-renewal or no exit right
Liability and indemnity	Uncapped or one-sided exposure
Confidentiality and IP	Loss of ownership or leaked information

Document Checklist Before You Sign

Confirmation of the correct legal entity and ACN/ABN for each party
Evidence of authority to sign (director appointment, delegation, or power of attorney if relevant)
A copy of any earlier terms, quotes or side letters referred to in the contract
Details of any related contracts (leases, financing, supply agreements) that interact with this one
Internal sign-off from the relevant business owner on price, term and liability position

What Not to Do

Do not sign a standard form template without checking it against your specific transaction.
Do not assume a verbal variation or side agreement will be enforceable if the contract has an entire agreement clause.
Do not overlook automatic renewal clauses; calendar the cancellation deadline as soon as the contract is signed.
Do not accept an uncapped indemnity without understanding the realistic scope of the risk.
Do not rely on a dispute resolution clause you have not read; confirm where and how a dispute would actually be resolved.

Local Relevance for Hornsby and the Upper North Shore

We act for businesses across Hornsby and the Upper North Shore, including Waitara, Asquith, Wahroonga, Normanhurst, Thornleigh, Pennant Hills, Berowra and Mount Colah, reviewing and negotiating supply agreements, services contracts, franchise documents and commercial leases before they are signed.

What Happens at a First Consultation

At an initial consultation, we review your draft contract or template, identify any clauses that expose your business to unnecessary risk, explain the practical effect of key terms in plain English, and set out any changes worth negotiating before you sign.

Frequently Asked Questions

Do all these clauses need to be in every contract?

Not every clause is relevant to every transaction. A short-term supply arrangement may not need the same dispute resolution mechanism as a multi-year services agreement. What matters is that the clauses actually included match the risk profile of the transaction.

What makes a contract term “unfair” under the Australian Consumer Law?

Broadly, a term may be unfair if it causes a significant imbalance in the parties’ rights and obligations, is not reasonably necessary to protect the legitimate interests of the party who benefits from it, and would cause detriment if relied on. Whether a specific term is unfair depends on the contract as a whole, and businesses should obtain advice on their own templates rather than assume a term is or is not compliant.

Can a limitation of liability clause exclude liability completely?

Some liability cannot be excluded by contract, including certain consumer guarantees under the Australian Consumer Law. Whether a particular exclusion or cap is enforceable depends on the specific clause and the nature of the transaction, and should be checked before it is relied on.

Is a verbal agreement to change a contract enforceable?

It depends on the contract. Many commercial contracts include a variation clause requiring changes to be in writing and signed by both parties, which can prevent a party from relying on a later verbal change.

What should a business do if it has already signed a problematic contract?

Time limits may apply to some rights and remedies, including limitation periods under the Limitation Act 1969 (NSW), so businesses concerned about an existing contract should obtain advice promptly rather than wait.

Sources

If your business needs a contract reviewed or negotiated, our commercial contracts team can help before you sign. Visit our Google Business Profile to read reviews from other clients: g.page/r/CYig8LJ260Y7EB0/review

This article is general information only and is not legal advice. It does not take into account your individual circumstances. You should obtain independent legal advice before acting on anything in this article.

Caspian Legal Pty Ltd | Level 1, 22-28 Edgeworth David Avenue, Hornsby NSW 2077 | Phone: 02 7264 3200

Common Contract Clauses That Businesses Should Never Overlook

Jurisdiction