Bilateral agreements in Australia — what they are and what to put in them

Every time you lock in a supplier, engage a contractor, or sign up a new client, you are almost certainly entering a bilateral agreement. These are the workhorses of commercial life — and getting the structure right from the start protects you far more than any dispute clause ever will.

A bilateral agreement is a contract in which both parties exchange promises: you do X, they do Y. That exchange is what distinguishes it from a unilateral contract, where only one party makes a promise that the other activates by performing an act (a reward offer is the classic example). Because each side is taking on obligations, bilateral agreements are the standard form for virtually every B2B deal: services engagements, supply arrangements, distribution relationships, joint projects.

Before the clauses, the contract needs to exist. Under Australian common law, a binding agreement requires an offer, unambiguous acceptance, consideration (value moving in both directions), intention to create legal relations, and sufficient certainty of terms. A bilateral agreement satisfies the consideration requirement structurally — each party's promise is the consideration for the other's — but the remaining elements still need to be present before any of the clause-level drafting below matters.

How the scope of work or goods is defined

The scope clause is where most disputes are born. If what you are supplying is not precisely described, the other side will fill in the gaps with their own expectations.

For a services contract, the scope should include:

A description of the deliverables (what you will produce or perform, not just what category of work it is).
Milestones or phases, with dates.
Assumptions — the things outside your control that the timeline depends on (client approvals, third-party access, data quality).
What is expressly excluded.

For a goods contract, the scope should specify product descriptions, quantities, quality standards and any applicable specifications or testing criteria.

The trap most often seen here is a vague statement of work in the body of the contract with the detail left to an email chain or a quote. If the quote contradicts the contract, you will spend the first hour of any dispute arguing about which document controls.

How the price is set and when payment falls due

State the price, the currency (AUD), when invoices are issued, the payment due date, and what happens if payment is late. Late payment provisions can include interest, suspension of services, or a right to terminate — choose what matches your actual leverage.

Points to nail down:

Whether the price is fixed or subject to variation (time-and-materials, CPI escalation, change orders).
GST treatment — whether the stated price is inclusive or exclusive of GST.
Invoicing trigger — on milestone completion, on delivery, monthly in arrears, or upfront.
Payment method and any bank details confirmation process (to reduce invoice redirection fraud).

The variant the other side often pushes for is extended payment terms (60 or 90 days). If you accept that, make sure your cash flow model reflects it — the contract will enforce it.

Who bears the risk if things go wrong — liability and indemnities

This is usually the most commercially significant clause in any bilateral agreement. The question it answers is: if something goes wrong, who pays, and how much?

The standard structure is:

A mutual indemnity for losses caused by a party's own breach or negligence.
A cap on total liability (often set at the contract value, or 12 months' fees).
Exclusions for certain categories of loss (indirect losses, loss of revenue, loss of data).

The trap here is a mismatch between the liability cap and the real exposure. If you are supplying a service that, if it fails, could cost your client far more than your annual fee, a cap equal to fees paid may be commercially reasonable but you should understand what you are agreeing to. Equally, if you are the client, an uncapped indemnity in your favour is not always enforceable in full — courts can and do limit recoveries that seem disproportionate.

The exclusion of consequential loss deserves separate attention. The term "consequential loss" is not defined in legislation; its meaning has been shaped by case law and can vary depending on the drafting context. If you want to exclude specific categories (lost profits, loss of opportunity, cost of procuring substitute services), name them explicitly rather than relying on the general phrase.

How delivery and acceptance are handled

For goods, the delivery clause should cover lead times, shipping terms, who bears risk of loss in transit, and the point at which title passes. For services, it should set out the process for the client to review and accept a deliverable — what acceptance looks like, the timeframe for raising objections, and what silence means (deemed acceptance or not).

Acceptance provisions matter because they define when your payment obligation crystallises and when the risk of defects shifts. A contract that is silent on acceptance usually means the client can raise defects indefinitely, which is not a position you want.

Intellectual property ownership and licensing

Who owns IP created under the contract needs to be answered before the contract is signed, not after delivery.

The default position under Australian law is that the creator of copyright material owns it unless the contract says otherwise. For employment, that default reverses in favour of the employer — but contractors are not employees, so a contractor who builds something for you owns it until the contract transfers ownership.

Standard positions to document:

Who owns pre-existing IP each party brings to the project (the answer is almost always: each party retains what it owned before).
Who owns newly created IP (if you are the client paying for bespoke deliverables, you will usually want ownership assigned to you; if you are the supplier, you may prefer to license).
The scope of any licence (exclusive or non-exclusive, sublicensable, perpetual or for the contract term, what purposes it covers).
What happens to IP if the contract is terminated early.

Confidentiality obligations

A confidentiality clause restricts each party from disclosing the other's information to third parties or using it for purposes outside the contract. The key drafting choices are:

What is "confidential information" — broadly defined (anything disclosed in connection with the contract) or narrowly (marked confidential only)?
What are the carve-outs — information already public, information the receiving party already held, information disclosed by compulsion of law.
What is the duration — for the term of the contract only, or for a period after termination?

If the agreement will involve handling personal information about individuals, the confidentiality clause does not substitute for privacy compliance. The Privacy Act 1988 (Cth) imposes separate obligations that sit alongside the contract.

How the contract ends — term, renewal and termination

A contract without a clear end date and a clear exit path can bind you to an arrangement long after it has stopped working.

Term: State whether the contract runs for a fixed period, until completion of the project, or on a rolling basis.
Renewal: If the contract auto-renews, include a notice period for opting out (and make sure someone in your business actually tracks renewal dates).
Termination for convenience: The right to end the contract without needing to establish a breach, usually with a notice period. This is worth fighting for if you are the client.
Termination for cause: The right to terminate immediately (or after a cure period) if the other party breaches. Define what constitutes a material breach, and specify whether a cure period applies.
Consequences of termination: What happens to fees already paid, work in progress, confidential information, and IP? These need to be spelled out, not left to inference.

How changes are made — variation mechanism

Every long-running contract will need to change. Without a formal variation mechanism, changes negotiated by email become legally ambiguous — and courts have to decide whether a string of emails amounts to a binding variation or just preliminary discussions.

A simple mechanism: changes must be in writing, must set out the scope change and any adjustment to price or timeline, and must be signed (or electronically accepted) by both parties. A change order template in a schedule makes this frictionless in practice.

Dispute resolution steps

Include an escalation path before either party can go to court: written notice of the dispute, then a period for good-faith negotiation between senior representatives, then mediation if negotiation fails. This does not prevent litigation, but it reduces the chance that a manageable disagreement escalates directly to costly proceedings.

Choose a governing law and jurisdiction (for example, New South Wales or Victoria) and state it expressly, especially if the parties are in different states.

Optional and situational clauses

These are worth considering depending on the deal:

Assignment and novation: If you might sell your business or restructure, you need either a right to assign the contract or a process for novating it (substituting a new party with the other side's consent).
Set-off: If amounts may flow in both directions (for example, credits for short delivery against invoices), an express set-off clause keeps the accounting clean.
Exclusivity: If you are granting territorial or category exclusivity, attach performance thresholds and a termination trigger if those thresholds are not met.
Warranties and service levels: Express warranties limit what you are liable for; measured service levels (with defined credits for failure) make the standard enforceable.
Counterparts clause: If the parties sign separate copies, include a counterparts clause confirming that the copies together form one agreement.

Signing the contract — making it enforceable

A bilateral agreement is only enforceable if it is properly executed. Two practical points matter most.

Authority to sign. If the other party is a company, check that the person signing has authority to bind it. One reliable method is execution under s 127 of the Corporations Act 2001 (Cth): a company may execute a document without its common seal if it is signed by two directors, or a director and a company secretary, or (for a proprietary company with a single director who is also the sole company secretary) that director alone. A counterparty signed by a person without authority may not be binding on the company.

Electronic signatures. For most commercial contracts, electronic signatures are valid in Australia. Under s 10 of the Electronic Transactions Act 1999 (Cth), an electronic signature satisfies a signature requirement if it uses a method that identifies the signatory and indicates their intention, and that method is as reliable as is appropriate in the circumstances. Some document types are excluded from the Act (certain deeds and statutory declarations, depending on the jurisdiction), so if you are signing something outside a standard services or supply agreement, confirm whether e-signing applies.

How Artificer Legal can help with your bilateral agreement

Drafting or reviewing a bilateral agreement involves more than assembling standard clauses. The commercial weight of each provision — and whether it actually protects you — depends on the specific deal, the relationship, and the risks you are taking on.

When Artificer Legal works on a bilateral agreement, we typically:

Review the allocation of risk in the liability, indemnity and consequential loss clauses to make sure the cap and exclusions reflect the real exposure on both sides.
Identify clauses that are unenforceable or that courts have consistently read down — an aggressive liability exclusion that looks protective may provide no protection at all if it is not drafted carefully.
Push back on unfavourable defaults (supplier-friendly IP clauses, automatic renewal with short opt-out windows, unlimited indemnities for minor breaches) and propose commercially balanced alternatives.
Ensure the scope, acceptance and variation clauses work together so that changes are captured formally and payment obligations are unambiguous.
Advise on execution — who should sign, whether a deed is required, and whether e-signing is appropriate for the document type.

If you want a contract reviewed before signing, or a template drafted for your standard engagements, contact Artificer Legal for a consultation.

Getting the foundations right

The drafting of individual clauses matters less than getting the overall structure right: a scope the parties actually understand, a payment mechanism that works in practice, a liability position that reflects the real risk, and an exit path that does not trap either party unnecessarily.

Key points to carry forward:

A bilateral agreement binds both parties to their respective promises — the exchange of obligations is both the commercial purpose and the legal foundation.
The scope, price and liability clauses carry the most commercial weight and deserve the most drafting attention.
IP ownership must be addressed before work begins, not negotiated at delivery.
Electronic signatures are valid for most commercial contracts under the Electronic Transactions Act 1999 (Cth), but confirm this for any unusual document type.
Company execution under s 127 of the Corporations Act 2001 (Cth) is the standard reliable method — check that the person signing for the other side has authority.
A variation mechanism in writing prevents informal changes from creating ambiguity about what was actually agreed.