Key clauses to review in a commercial contract

A supplier sends you a 15-page services agreement and asks for a signature by end of week. A new client wants you to sign their standard terms before the project kicks off. You have read contracts before, but this one looks longer than usual and the clauses on liability run to three pages on their own.

Commercial contracts govern nearly every business relationship — who gets paid, what happens when something goes wrong, who owns the work product, and how either party can exit. A well-structured contract distributes risk fairly and gives both sides clarity. A poorly reviewed one can leave you exposed to costs you never anticipated or locked into obligations you cannot meet. What follows is a guide to the clauses that matter most, what each one does, and where the traps tend to appear.

How liability is allocated

Liability provisions define which party bears financial responsibility when something goes wrong. At their broadest, they cover any loss, damage, or expense arising from the contract — and without limits, that exposure can be open-ended.

When reviewing a liability clause, look for three things:

Who is responsible for what. Each party's liability should be clearly scoped to the things within their control. Vague language like "any loss arising in connection with the agreement" can sweep in losses that have nothing to do with your actual performance.
Limitation of liability. A cap limits the total amount one party can recover from the other. A common drafting choice is to set the cap at the fees paid under the contract, though whether that is commercially appropriate depends on the deal. If you are a software provider and your platform outage causes a client to lose trade, a cap tied to your monthly fee may be far below the client's actual loss.
Exclusion clauses. These remove certain categories of liability altogether — for example, consequential loss, loss of profit, or loss caused by scheduled downtime. Not all exclusion clauses are enforceable. Courts have found them void in standard-form contracts offered on a take-it-or-leave-it basis, and the unfair contract terms regime under the Competition and Consumer Act 2010 (Cth) prohibits terms that cause a significant imbalance in the parties' rights in contracts with businesses employing fewer than 100 people or turning over less than $10 million annually.

Traps to watch for:

A cap that is too low relative to the risk you are actually taking on (for example, an IP indemnity capped at a nominal fee when you are doing high-value development work)
Mutual-looking clauses that are actually asymmetric in their practical effect
Exclusions that carve out the only scenarios where you would actually need the protection

What the indemnity requires of you

An indemnity is a promise by one party to compensate the other for specified losses, whether or not the indemnifying party caused the loss directly. This is broader than a standard breach of contract claim — you can be required to pay even where fault is not established.

If you are giving an indemnity, consider:

The types of loss it covers — loss, damage, liability, costs, and legal expenses each carry different weight
Whether the trigger events are within your control
Whether your professional indemnity or public liability insurance would respond to a claim under this indemnity
Whether the indemnity survives termination of the contract (it commonly does)

If you are receiving an indemnity, look at:

Whether the indemnity is broad enough to cover your actual exposure, including third-party claims
Any conditions attached (such as notice requirements that could defeat a claim if not followed precisely)
Carve-outs that exclude the scenarios most likely to arise

A common drafting variant the other side will push for: limiting the indemnity to losses caused by the indemnifying party's "negligence or wilful misconduct." This narrows the scope significantly. Whether to accept it depends on what risk you are trying to shift.

How long the contract runs and how it ends

The term clause sets the duration of the parties' obligations, and the termination clause defines the conditions under which either side can exit.

Common term structures include:

Fixed term (for example, 12 months), after which the contract expires unless renewed
Fixed term with automatic renewal, which rolls over unless notice is given within a specified window — easy to miss
Ongoing, with no fixed end date, requiring positive action to terminate

Check whether obligations survive termination. Confidentiality, non-solicitation, and liability provisions routinely continue after the contract ends, sometimes for several years. If these are not clearly flagged, you may not realise you remain bound.

Termination rights matter most when a relationship breaks down. Look for:

Termination for convenience. Does either party have a right to exit without cause? If so, how much notice is required, and is that notice period workable for your business?
Termination for cause. What triggers a right to terminate? Material breach is standard, but check whether there is a right to cure the breach before termination takes effect.
Consequences of termination. These may include early termination fees, obligations to return confidential information or equipment, accrued payment obligations, and restrictions on soliciting the other party's staff or clients.

One trap that catches businesses out: a contract that is terminable for convenience by one party but not the other, or where the notice period is so long that you are effectively locked in even after giving notice.

How payment is structured

A contract that is silent or vague on payment terms creates disputes. Every commercial agreement should specify:

The price or the basis on which the price is calculated (hourly rate, fixed fee, milestone-based)
When invoices are issued and when payment falls due
The consequences of late payment — whether interest accrues and at what rate, and whether you can suspend services for non-payment
Acceptable payment methods and currencies (AUD should be stated expressly in any domestic contract)
Whether GST is included or added to quoted amounts

If you are the party receiving payment, consider requiring a deposit before work begins, with the balance due on delivery or at specified milestones. This reduces the risk of completing work and not being paid.

Traps to watch for:

Payment terms that are asymmetric — for example, you must invoice within seven days but the counterparty has 60 days to pay
No right to suspend for non-payment, which means you continue performing even while unpaid
Price variation clauses that allow the other side to adjust fees unilaterally

What each party is obliged to do and warranted

Obligations set out what each party must do — the deliverables, the standards of performance, the timelines. Warranties are promises about the state of the world: that a party has authority to enter the contract, that the services will meet a specified standard, or that no insolvency event is on foot.

Under Schedule 2 of the Competition and Consumer Act 2010 (Cth), the Australian Consumer Law (ACL) implies certain consumer guarantees into contracts for the supply of goods and services to consumers. These include guarantees that goods are of acceptable quality, that goods match their description, and that services are provided with due care and skill. These guarantees cannot be excluded by contract. If your contract purports to exclude them, that clause will not be enforceable — but the rest of the contract may survive.

This matters when reviewing a warranty clause that attempts to exclude all implied conditions and warranties. For business-to-business contracts where the ACL guarantees do not apply, such exclusions may be valid. For consumer-facing contracts, they are not.

When reviewing this section, check:

Whether the obligation clause is specific enough to hold a counterparty to account (vague language like "use reasonable endeavours" gives the other side considerable flexibility)
Whether performance standards are measurable
Whether there is a warranty that the work product will be original and will not infringe third-party intellectual property rights — this matters in any contract involving creative, technical, or software output

Who owns the intellectual property

IP ownership is one of the most frequently misunderstood provisions in commercial contracts, and one of the most expensive to get wrong.

The default position under Australian law is that the creator owns the intellectual property in what they make — unless a contract provides otherwise. This has practical consequences: if you engage a designer to create your brand assets or a developer to build your website, and the contract is silent on IP ownership, the contractor may retain rights in the work, and you may hold only an implied licence to use it for the original purpose.

Common structures to look for:

Assignment on creation. All IP in the work product vests in the client as it is created. This is typical where the client is paying for bespoke deliverables.
Licence. The contractor retains ownership but grants the client a licence to use the IP. The scope of that licence — exclusive or non-exclusive, irrevocable or revocable — matters greatly.
Background IP. A contractor often brings pre-existing tools, code libraries, or methodologies to the engagement. It is reasonable for the contractor to retain ownership of this background IP; the contract should distinguish it from the deliverables.

Traps:

A client contract that purports to assign all IP the contractor creates — including background IP and tools used across multiple engagements — without any carve-out
A licence that terminates if the contract is terminated, leaving the client unable to use the work they paid for
No warranty that the deliverables do not infringe third-party IP, leaving the client exposed to infringement claims

If you are a developer, designer, or other creative contractor, you should retain ownership of your background IP and any general-purpose tools or frameworks, granting the client only a licence to use the specific deliverables.

Clauses worth including depending on the deal

Not every contract needs all of these, but each is worth considering for the right transaction:

Survival clause. Explicitly lists which obligations (confidentiality, IP ownership, liability, indemnities) continue after termination or expiry. Without it, parties may dispute whether obligations that were silent on this point survive.
Dispute resolution. Specifies whether disputes go to mediation, arbitration, or litigation, and in which jurisdiction. A tiered clause (negotiate, then mediate, then litigate) can reduce the cost of resolving minor disputes.
Force majeure. Excuses performance in defined extraordinary circumstances. The clause should define what events qualify and what each party must do to rely on it.
Restraint of trade. Restricts a party from competing, poaching clients, or soliciting staff after the relationship ends. These clauses are enforceable in Australia only to the extent they protect a legitimate interest and are reasonable in scope and duration.
Entire agreement. Limits the contract to its written terms, displacing representations made in negotiations. Important when the deal involved significant pre-contract discussions.

How Artificer Legal can help you review and negotiate

A commercial contract review is not just a reading exercise — it is a risk allocation exercise. At Artificer Legal, our commercial lawyers review contracts with the following priorities:

First, we identify the clauses that create asymmetric risk: provisions that give the other side broad rights while limiting yours. Liability caps, indemnities, and termination-for-convenience clauses are the most common culprits.

Second, we review the obligations and warranty provisions against what you have agreed commercially — contracts that do not match the deal can create obligations neither party intended.

Third, where your position justifies it, we negotiate. The order in which you tackle a negotiation matters: liability and IP ownership are structural — resolve these first, because they affect the value of everything else. Payment terms and operational clauses come after.

If you have a contract you need reviewed before you sign, or you want help building a template for your own contracts, our team can assist.

The liability limitation clause caps your recovery

Liability limitations are the clause that most often determines the outcome of a commercial dispute — not because they come up most frequently, but because when a dispute escalates, the cap or exclusion clause is usually the provision that limits (or eliminates) recovery. A client who cannot recover losses above a nominal cap has little incentive to litigate; a contractor who has no cap has little leverage in a settlement.

The most skipped clause, however, is the survival clause. Parties routinely assume that obligations end when the contract does. They do not — but only if the contract says so. Confidentiality obligations, IP assignments, and indemnities are all commonly intended to outlast the contract, and without a clear survival provision they may be at risk.

When reviewing a commercial contract, the essential areas to cover are: how liability is allocated and capped; what indemnities you are giving or receiving; how long you are committed and how you can exit; whether payment terms are workable; whether obligations and warranties are realistic; and who owns the IP in anything created under the contract. Each clause connects to the others — a liability cap that seems reasonable becomes inadequate if the indemnity alongside it is uncapped.