If you are running a business in Australia and someone hands you a draft agreement — or asks you to sign something — knowing what you are actually agreeing to matters. Contracts govern almost every commercial relationship you have: with your customers, your suppliers, your staff, your co-founders, and anyone who licences your intellectual property. Getting them right from the start is far cheaper than unpicking them later.
What makes a contract binding in Australia
A contract is a legally binding agreement. For one to be enforceable, four elements must be present: an offer, an acceptance of that offer, consideration (something of value exchanged by each party), and an intention to create legal relations.
That last element is worth pausing on. Many business people assume that a handshake deal or a casual email exchange carries no legal weight. In some circumstances it does — oral and informal written agreements can be binding. The practical problem is proof. A well-drafted written contract records exactly what was agreed and makes enforcement straightforward. For anything of commercial significance, written is always the right form.
Some categories of contract must be in writing under Australian law — sales of land and most commercial leases are the clearest examples. Outside those, writing is not always mandatory, but the risk of relying on an oral or implied agreement far outweighs any convenience.
The main contract types for Australian businesses
Most small and medium businesses will use several of the following. The ones that matter most depend on your model.
Employment contracts
An employment contract records the role, duties, pay, hours, leave entitlements, and termination conditions for each member of staff. In Australia, no single law requires a written employment contract in every situation, but every employment relationship must comply with the National Employment Standards (NES) under the Fair Work Act 2009 (Cth) and any applicable modern award — regardless of what the contract says. A written contract cannot contract out of the NES or award minimums; it can only provide conditions that are at least as good.
A well-drafted employment agreement:
- Specifies role title, duties, and reporting lines so there is a clear baseline for performance management
- Sets pay and confirms which award (if any) applies and how the contract interacts with it
- Covers confidentiality, IP ownership, and any post-employment restraints in terms that will actually be enforceable
- States notice periods for both parties (which must meet or exceed the statutory minimums under the NES)
Contractor agreements
When you engage a freelancer or independent contractor rather than hiring a staff member, a contractor agreement should govern the arrangement. The distinction between employee and independent contractor carries significant legal consequences — for superannuation, workers' compensation, unfair dismissal rights, and tax obligations. A contractor agreement should define the scope of work, fees and payment schedule, IP ownership, confidentiality obligations, and how either party can end the arrangement. It does not, on its own, determine whether the relationship is truly one of contractor and principal; the courts and the Fair Work Commission look at the substance of the arrangement, not just the label.
Service agreements
If your business provides services — consulting, design, marketing, trades, professional services — a service agreement (sometimes called a client services agreement or terms of business) defines the engagement. Core terms to include:
- Scope of work: what is included, what is not, and how variations are handled
- Fees and payment: rate, invoicing schedule, due dates, interest on late payment
- Liability cap: how much your exposure is if something goes wrong
- Intellectual property: who owns deliverables, and on what terms the client can use them
- Termination: how either side can exit, and what happens to work in progress
Without a service agreement, the scope expands, invoices get disputed, and liability sits with whoever has the deeper pockets.
Sale of goods terms and supply agreements
Product businesses need terms that cover pricing, delivery, the point at which risk and title pass to the buyer, defects and returns, and limits on liability. For consumer sales, these terms must comply with the consumer guarantees under the Australian Consumer Law (ACL), which cannot be excluded. For wholesale or distributor arrangements, a supply agreement should also deal with minimum order volumes, exclusivity (if any), territory, and how the relationship can be terminated.
If you sell online, your terms of sale should be accessible at the point of checkout, not buried in a footer link that no customer reaches before clicking "pay now."
Non-disclosure agreements
An NDA (sometimes called a confidentiality agreement) protects information you share in the course of exploring a deal, partnership, investment, or supplier relationship before any binding transaction is in place. A useful NDA is specific about what counts as confidential, how long the obligation lasts, and what the permitted uses are. Mutual NDAs are appropriate where both sides are sharing sensitive material; one-way NDAs suit situations where only one party is disclosing.
Shareholders agreements and partnership deeds
If your business has more than one owner — whether as a company with multiple shareholders, a partnership, or a joint venture — the relationship between the owners needs its own document. A shareholders agreement covers decision-making rights, how new shares can be issued, what happens when a founder wants to exit, drag-along and tag-along rights, and how disputes between shareholders are resolved. It sits alongside (and typically overrides, where they conflict) the company's constitution.
A partnership deed performs a similar function for partnerships, covering profit and loss allocation, contributions, and dissolution mechanics.
Franchise agreements
Franchise agreements are regulated under the Competition and Consumer (Industry Codes — Franchising) Regulations 2024 (Cth), which impose obligations on franchisors around pre-contract disclosure, cooling-off rights, and ongoing conduct. If you are buying into a franchise system, you should receive a disclosure document before you sign, and you have a cooling-off period after signing. The agreement itself will govern fees, use of branding, operational requirements, and how and when the franchisor can terminate. Independent legal advice before signing is not optional in practice.
IP licence agreements
Where you licence software, content, a brand, or other intellectual property — or receive a licence from someone else — the licence agreement needs to define what is licensed, the scope of permitted use (territory, duration, exclusivity), the fee structure, and what happens if the licence is breached or the underlying IP changes hands. Many businesses licence IP without a written agreement and discover the gap only when the relationship breaks down.
Commercial leases
A commercial lease is a contract. If you lease premises, the lease terms govern rent, outgoings, permitted use, fit-out obligations, make-good requirements, and any options to renew. Commercial leases in Australia are generally less regulated than residential leases, which means the terms you negotiate matter more. Getting the permitted use clause right, for example, can determine whether your business model is even lawful on the premises.
What every business contract should cover
Regardless of type, most business agreements should address the following in plain and specific language:
- Party details: correct legal names (not trading names) and ABN or ACN where relevant
- Scope or deliverables: what is actually being supplied, to what standard, and by when
- Price and payment: fees, when they fall due, deposit requirements, and consequences of late payment
- Term and termination: start and end dates, renewal mechanics, and each party's right to exit
- Liability allocation: how risk is shared if things go wrong, and any agreed cap on exposure
- IP and confidentiality: who owns existing IP, who owns newly created IP, and how sensitive information is protected
- Dispute resolution: the process for raising and resolving disputes — typically negotiation first, then mediation — and which jurisdiction's law governs
- Execution: the right people signing in the right form
On that last point: for companies, s 127 of the Corporations Act 2001 (Cth) allows a company to execute a document without a common seal if it is signed by two directors, or by a director and a company secretary. Getting execution right matters — a document signed by someone without authority can create enforcement difficulties when you least want them.
Laws your contracts must work alongside
Contracts operate within a framework of statute and regulation that neither party can contract out of.
Australian Consumer Law
The ACL (Schedule 2 to the Competition and Consumer Act 2010 (Cth)) applies to most businesses selling goods or services to consumers and, in many cases, to small businesses. It imposes consumer guarantees that cannot be excluded, prohibits misleading or deceptive conduct, and — since 9 November 2023 — makes it unlawful to include unfair terms in standard form contracts. Before those changes, a court could only declare a term void; now, including an unfair term attracts civil penalties of up to $50 million for a body corporate (or the greater of three times the benefit obtained or 30% of adjusted turnover during the breach period).
The expanded small business provisions cover contracts where one party employs fewer than 100 people or has an annual turnover of less than $10 million. If you use template agreements or online checkout terms, they are overdue for review.
Employment law
Minimum entitlements under the NES and applicable modern awards set a floor that employment contracts cannot go below. Casual conversion rights, maximum ordinary hours, and notice periods are all statutory. A written contract cannot displace them; it can record them and add to them.
Privacy obligations
The Privacy Act 1988 (Cth) and the Australian Privacy Principles (APPs) apply to organisations with an annual turnover of more than $3 million, and to certain categories of smaller business regardless of turnover — including health service providers and businesses that trade in personal information. If your contracts involve the collection or handling of personal data (customer records, employee files, health information), the APPs impose obligations about how that data is collected, stored, used, and disclosed. Even businesses below the threshold often adopt privacy notices because their platforms or commercial partners require it.
Franchising regulation
The Competition and Consumer (Industry Codes — Franchising) Regulations 2024 (Cth) impose mandatory disclosure obligations, cooling-off rights, and conduct standards on franchisors. A franchise agreement that does not reflect those requirements is defective, and the consequences fall on the franchisor.
Company execution
For companies, validly executing documents under s 127 of the Corporations Act 2001 (Cth) matters for enforceability, particularly in high-value or high-risk arrangements where you may later need to prove the other side was properly bound.
Where Artificer Legal can help
The checklist above is straightforward in outline. The work is in the detail: the scope clause that actually captures what you meant to sell, the liability cap set at a level your insurer will back, the restraint clause specific enough to protect you but not so broad that a court will read it down, the IP assignment that actually transfers what you thought it transferred.
An Artificer Legal practitioner reviewing a contract you have been handed will identify the terms that are standard and low-risk, the terms that are negotiable but not yet negotiated, and the terms that need to change before you sign. For agreements you are drafting, we draft to your model — your pricing structure, your risk tolerance, your delivery process — rather than adapting a generic template that was built for a different business.
The documents most businesses need first, and where getting professional input saves the most downstream cost, are: a client services agreement (or terms of business), employment contracts aligned with the relevant award, a contractor agreement if you use freelancers, and an NDA for any early-stage discussions where you are disclosing proprietary information. If you have co-founders or investors, a shareholders agreement belongs in that first tier too.
The liability clause and the amount of its cap
The liability clause — specifically, whether it caps your exposure and at what amount — is the most consequential and most frequently misdrafted term in Australian business contracts. A well-drafted liability cap, set at a realistic and insurable amount, is the difference between a dispute that costs you time and some money and one that costs you the business. Counterparties routinely push for uncapped liability, unlimited indemnities, and consequential loss provisions that expose you to losses far beyond the direct value of the contract. Those positions are negotiable; the question is whether you know they are before you sign.
Taken together, contracts are the operating rules for your business relationships. Written agreements in the right form, covering the right ground, and calibrated to your actual risk profile give you a document that works before anything goes wrong — not just evidence to argue about after it does.