Common contract drafting mistakes Australian businesses make — and what goes wrong

Most contract disputes in Australian businesses do not start with a deliberate betrayal. They start with a clause that seemed fine at signing — a scope description that was a little vague, a liability cap lifted from the wrong template, an execution block signed by the wrong person. The contract looked complete. It just wasn't.

The rule that threads through every example below is this: a contract does not protect you unless it is specific enough to enforce. Ambiguity is almost always resolved against the party who drafted the clause — and the costs of that resolution tend to be disproportionate to the original saving on legal fees.

What you need for a valid contract in the first place

Before looking at what goes wrong in drafting, it is worth noting that a written document is only enforceable if the underlying agreement meets the basic requirements of Australian contract law: offer and acceptance on the same terms, consideration (something of value exchanged by each side), a genuine intention to be legally bound, certainty of the essential terms, and the legal capacity of both parties to contract. A well-structured document cannot rescue an agreement that lacks these foundations. Equally, an agreement that has all of them can be undermined by poor drafting.

Scenarios where contract drafting goes wrong

A scope description that doesn't say what's excluded

The facts. A Melbourne marketing agency signed a client to a monthly retainer described as "ongoing digital marketing services." After four months, the client demanded the agency manage a full product launch — including a media buy, influencer campaign, and event presence — under the same monthly fee.

Why it caused the problem. "Ongoing digital marketing services" is not a scope. It is a label. Because the contract said nothing about what was excluded or how out-of-scope work would be agreed and priced, the client could reasonably argue everything digital fell within the description.

What a proper scope clause does. A scope clause names what is included, states specifically what is not (e.g., "paid media spend, event production, and influencer fees are excluded unless separately quoted and approved in writing"), and provides a short variation process — a written change order mechanism with agreed pricing before work begins. Without that mechanism, extra work tends to get done and then argued over at invoice time.

A liability cap copied from an unrelated template

The facts. A Brisbane IT consultant used a contract template downloaded from an overseas provider. The limitation of liability clause capped the consultant's exposure at "the total fees paid in the preceding calendar month" — which, for a fixed-price project billed upfront, meant a liability cap of zero once the engagement ended.

Why it caused the problem. The template was designed for a recurring monthly subscription model. Applied to a one-off project, the cap was mathematically meaningless. When the client suffered losses attributable to a configuration error discovered six months after delivery, the consultant assumed they were protected. The clause was challenged on the basis that a cap of nil is not a genuine limitation.

What a proper liability cap does. The cap should be set by reference to something real — the total fees paid under the contract, or a fixed amount proportionate to the deal size and risk. It should sit alongside your warranty and indemnity clauses so they work together. A cap that cannot be calculated at the point it matters is worse than no cap, because it creates false confidence.

If a counterpart tries to resist any cap entirely, that is usually the point to seek professional review rather than accept it.

Relying on a click-wrap process that doesn't actually form a contract

The facts. A Sydney e-commerce operator had website terms and conditions — but they appeared as a link in the page footer. Customers could complete a purchase without ever clicking the link or acknowledging the terms. When a consumer sought a remedy the operator's terms excluded, the operator tried to rely on those terms.

Why it caused the problem. Acceptance of terms requires a positive act by the customer: checking a box, clicking "I agree," or some other mechanism that demonstrates actual notice and consent. A footer link that a reasonable customer would not see before completing a transaction is unlikely to create binding acceptance. The terms existed; they just were not incorporated into any contract formed with customers.

What a proper online acceptance mechanism does. Place the terms where the customer must interact with them before payment — typically at the checkout step, with a tick-box acceptance linked directly to the terms document. Keep a record of acceptance: the timestamp, the version of the terms, and the customer's identifying information. This is especially important given that Australian Consumer Law consumer guarantees cannot be excluded regardless of what your terms say — but clear acceptance records are still essential for the terms that can be enforced.

An IP ownership clause that assigns nothing

The facts. A Perth graphic designer delivered a full brand identity — logo, style guide, and web assets — under a services agreement that said the client would "own the creative works." After a dispute, the designer claimed the clause was too uncertain to constitute a valid assignment and continued to use the assets in their portfolio.

Why it caused the problem. Ownership of copyright in Australia does not transfer by intention alone. The Copyright Act 1968 (Cth) requires an assignment to be in writing and signed by the assignor. "Will own" is an agreement to assign in the future; it is not an assignment itself. Courts have found that even well-intentioned clauses drafted without the formal requirements may not achieve what both parties assumed.

What a proper IP clause does. For work where ownership matters, the clause should state that, upon payment of all fees, the designer (or supplier) assigns to the client all right, title, and interest in the deliverables, with the signed contract constituting the instrument of assignment. Separately, address any pre-existing IP that is incorporated into the deliverables — that is typically licensed to the client, not assigned, and the distinction matters.

A termination clause that leaves unpaid invoices in limbo

The facts. A Canberra consultancy included a termination-for-convenience clause allowing either party to end the contract on 30 days' notice. When the client terminated mid-project, there were three outstanding invoices covering work already delivered, plus work in progress at the termination date. The contract was silent on what happened to those amounts on termination.

Why it caused the problem. Silence on the fate of unpaid invoices and in-progress work at termination creates a dispute by default. The client argued that termination released it from payment obligations that had not yet matured. The consultancy argued the opposite. Neither position was clearly right because the contract did not say.

What a proper termination clause does. It should specify that termination does not affect rights already accrued — including the right to payment for work completed and in-progress work calculated to the termination date on a pro-rata or agreed basis. Include what happens to materials, deliverables, and data at the point of exit. A survival clause naming which obligations (confidentiality, IP, payment for accrued work) continue after termination closes the gap that causes most post-termination disputes.

Unfair contract terms included in a standard form small business contract

The facts. A national franchisor used a standard form agreement with its franchisees that included a clause allowing the franchisor to unilaterally vary the terms of the franchise system at any time without notice or compensation. It also included an automatic renewal term that ran for five years unless the franchisee gave notice 12 months before expiry.

Why it caused the problem. Since 9 November 2023, it is prohibited under Australian Consumer Law to include, rely on, or propose unfair terms in standard form contracts with small businesses. The expanded regime applies to businesses with fewer than 100 employees or an annual turnover below $10 million — a significantly larger pool than previous thresholds covered. A term that allows one party to unilaterally change contract terms without any right of exit for the other party is a textbook example of a term courts have found unfair. Penalties under the expanded regime are substantial.

What this means for contract review. If you use standard form contracts across multiple relationships — franchise agreements, supplier terms, platform terms of service — you need to review them against the unfair contract terms provisions. Terms that create a significant imbalance in rights and obligations, are not reasonably necessary to protect a legitimate interest, and would cause detriment if relied on are at risk. The ACCC and ASIC both actively enforce this regime.

A company signing block that doesn't execute correctly

The facts. A Victorian manufacturing company entered a significant supply contract. The contract was signed by the company's CEO — who held the title but had not been formally appointed as a director. The supplier later discovered this when trying to enforce the contract, and the company's insurers questioned whether the execution was valid.

Why it caused the problem. Under s 127 of the Corporations Act 2001 (Cth), a company can execute a document without a common seal if it is signed by two directors, or by a director and a company secretary. A person who holds an executive title but who is not a formally appointed director or secretary cannot execute under s 127. Execution outside s 127 may still be valid if the person had actual or ostensible authority — but that requires proof that may not be available when you need it.

What proper company execution looks like. For any contract of significance, check the company's ASIC register to confirm who holds the offices of director and secretary. The execution block should name and show the signature of two directors, or a director and the company secretary. If the company has a sole director who also serves as company secretary, that person alone can execute. Electronic signatures are generally valid for commercial contracts under the Electronic Transactions Act 1999 (Cth) and its state equivalents — but the signatory's authority still needs to satisfy s 127 or an equivalent basis.

The pattern across these scenarios

Every one of these problems had the same structure: a clause (or the absence of one) that was fine for a different deal, a different business model, or a different jurisdiction, applied without adjustment to the actual transaction. The other consistent feature is that the problem only became obvious when the relationship started to break down — by which point the cost of fixing it was much higher than the cost of getting it right.

The practical takeaways:

• Scope, variation, and payment on exit are the three areas where vague drafting most reliably produces disputes. Each needs a clause that can be followed operationally, not just invoked in a courtroom.
• Liability caps must be calculable. A cap that references a figure that might be zero, or that was designed for a different contract structure, gives you no protection.
• Online acceptance requires a positive act. A footer link is not incorporation.
• IP assignment must be in writing and signed. Future tense language does not transfer ownership.
• Unfair contract terms in standard form agreements are now prohibited and penalised. If you use the same contract across multiple customers or partners, it needs review against the ACL regime that commenced in November 2023.
• Company execution requires authorised signatories under s 127. Check the ASIC register before relying on a title.

How Artificer Legal can help you identify and fix these problems

Bringing a contract to Artificer Legal after a dispute has started is always more expensive than bringing it beforehand. The review we would do — whether you are the drafter or the party being asked to sign — covers each of the categories above: scope and variation mechanism, liability architecture, IP ownership and licensing, termination and survival, online acceptance mechanics (where applicable), compliance with ACL unfair contract terms requirements, and correct execution.

Where a contract needs to be redrafted, we work from the commercial deal outwards — starting with what you actually need to protect, then building the clauses that achieve it in plain language. Where you are reviewing a counterparty's draft, we focus on the clauses that create asymmetric risk: unilateral variation rights, uncapped indemnities, liability exclusions that shift all the downside to you, and IP clauses that take more than you agreed to give.

For clients who use standard form agreements across multiple relationships, we also offer periodic reviews to ensure the terms remain compliant as the law changes — including under the expanded unfair contract terms regime.

The clause you cannot afford to get wrong

If there is a single drafting decision that determines whether a contract works, it is the scope clause. Not the liability cap, not the governing law provision, not the dispute resolution mechanism — all of which matter — but the scope. A clearly defined scope, with an explicit variation process and payment terms on exit, prevents the majority of disputes before they start. The other clauses manage the dispute you have already failed to prevent.

The scenarios above share a deeper lesson: a contract that both parties understand the same way at signing, including understanding its limits, is almost always more valuable than a lengthy document that only one side has actually read. Plain language, specific deliverables, and an explicit "what happens if this goes wrong" for each commercial risk — those are the features that make a contract do what you signed it to do.