Top 7 Contract Clauses Every Australian Business Owner Should Review
- RHC Solicitors
- 4 days ago
- 7 min read
Running a business means entering into contracts regularly, whether hiring staff, engaging suppliers, or providing services to clients. Yet many businesses still operate on set-and-forget agreements drafted years ago, leaving them exposed to legal, financial, and reputational risk.
With recent legislative changes in 2024–2025, now is the perfect time to review your contracts to ensure they are fair, compliant, and commercially effective.
In This Article:
1. Unfair Contract Terms
Under the Australian Consumer Law (ACL), it’s illegal for businesses to include unfair terms in standard form contracts with consumers or small businesses.
A contract is standard form if:
one party has significantly more bargaining power
the contract is pre-prepared
the other party has little or no ability to negotiate
Recent reforms have expanded the definition of a small business, meaning more contracts are now caught by the regime. Corporations face penalties of up to $50 million, three times any benefit obtained, or 30% of their adjusted turnover during the breach, while individuals can be fined up to $2.5 million.
Red Flags
When reviewing your contracts, watch for clauses that may be considered unfair or one-sided, as these can expose your business to significant risk.
These may include:
one-sided termination, suspension, or variation rights
automatic renewals with hidden notice periods
broad indemnities or liability caps favouring one party
unilateral price or service changes without exit rights
rollover clauses limiting remedies
If you encounter these clauses in your contracts, you should review all such clauses, amend or remove unfair terms, ensure risks are allocated fairly, and use clear, transparent language throughout the contract.
2. Data Security And Privacy
The Privacy and Other Legislation Amendment Act 2024 strengthened obligations under the Privacy Act 1988, increasing penalties to corporations and individuals, and expanding the Office of the Australian Information Commissioner’s (OAIC) powers.
Contract Implications
When reviewing your contracts, it’s important to address how personal information is handled to ensure compliance with privacy and data security obligations.
Contracts should:
specify recognised security standards and audit rights
include timelines for breach notification and cooperation obligations
limit data collection, retention, and require secure destruction
confirm where and how data is stored or processed
Vague or outdated clauses are no longer sufficient, and contracts must clearly allocate responsibilities to ensure compliance with the Notifiable Data Breach (NDB) scheme.
3. Employment-Related Terms
The Fair Work ‘Closing Loopholes’ reforms affect not only employment contracts, but also client and supplier agreements.
Key changes include:
Right To Disconnect
Employees can refuse unreasonable contact outside working hours.
Criminalisation Of Wage Theft
Intentional underpayment of wages is now a criminal offence.
Fixed-Term Employment Limits
A maximum of two years, with only one renewal or extension for the same role.
Business owners should ensure that employment agreements and workplace policies reflect the latest Fair Work reforms, avoid assuming continuous staff availability in client or supplier contracts, and include clauses that allow agreements to be updated as these reforms continue to evolve.
4. Liability And Indemnity
Understanding who bears responsibility when things go wrong is essential for protecting your business from financial and legal risk.
Liability Clauses
Liability clauses determine the circumstances under which each party is legally responsible for losses, damages, or other risks.
For business owners, this means clearly setting out:
each party’s responsibilities (what your business is and isn’t responsible for)
any limitations or exclusions of liability
any financial caps to limit exposure to losses
explicit definitions of the types of losses covered
Indemnity Clauses
Indemnity clauses are promises by one party to compensate the other for specific losses or damages, regardless of fault.
For busines owner and employers, a common example may involve a contractor causing damage to a client’s property or a subcontractor breaching a contract.
To protect your business, indemnity clauses should:
clearly define the scope of indemnity
specify which events or actions are covered
limit the financial exposure where possible
align with your insurance coverage to avoid gaps
5. Warranties And Representations
These clauses are assurances made by one party about the goods, services or performance they are providing. Warranties and representations generally benefit the client, since they give them assurances about your goods, services, or performance.
Warranties are promises that certain facts or conditions about goods, services, or performance are true. If the warranty is breached, the client may have a claim for compensation.
Representations are statements of fact made before or at the time of entering into a contract, and often relate to capabilities, qualifications or legal authority. If a representation is found to be false, the client may have remedies such as rescission or damages.
Any clauses relating to warrantire or representations should :
include promises about lawful and competent performance
adhere to industry standards, comply with all relevant laws, and align with statutory consumer guarantees
explicitly define the warranty’s scope and duration to help prevent disputes and over-commitment. (e.g. 'five year warrantly')
A well-drafted liability and indemnity framework can save your business from significant financial and legal exposure.
6. Intellectual Property
Determining who owns intellectual property (IP) is a crucial consideration in business contracts, particularly in software agreements, SaaS arrangements, marketplace terms, and agreements with content creators or influencers.
IP can include trademarks, patents, designs, underlying code and more, and it’s important to clearly establish ownership of any materials created under the contract. Typically, clients will own new IP developed as part of the services they are paying for, while the service provider retains a licence to use it as needed.
However, business owners should protect their rights to pre-existing or underlying work that is not bespoke to the client. For example, a web developer should retain ownership of general code or software components that are reused across projects.
Clearly defining IP ownership in contracts helps prevent disputes and ensures both parties understand their rights and obligations.
7. Termination And Restraint Of Trade
Termination clauses are a critical component of any business contract, as they define how and when a party can end the agreement and what obligations survive after the contract ends.
For employers and business owners, well-drafted termination clauses help manage risk, prevent disputes, and provide clarity if a commercial relationship or employment arrangement does not go as planned.
A comprehensive termination clause should address:
Grounds For Termination
Specify whether termination can occur for cause (such as a material breach, insolvency or failure to meet obligations).
Notice Requirements
Clearly outline how much notice must be given and in what form to avoid disputes over whether a termination was valid.
Obligations On Termination
Address final payments, return or destruction of confidential information, transfer of work in progress, and any intellectual property or data obligations.
Early Termination Fees Or Penalties
Include provisions for compensation if the contract is ended early, particularly in long-term service or supply agreements.
Obligations After Termination
Identify which clauses, such as confidentiality, liability, indemnity, warranties, and dispute resolution, continue after termination.
Transition Arrangements
For service, software or product agreements, outline responsibilities to ensure a smooth handover to another provider or back to the client.
Restraint Of Trade (Non-Compete And Related Clauses)
Restraint of trade clauses, including non-compete provisions, are closely linked to termination and employment contracts. These clauses limit a former employee’s ability to work for competitors or solicit clients or staff after leaving a business.
Traditionally, employers use them to protect proprietary knowledge, client relationships, and investments in employee training.
The 2025–26 Federal Budget announced significant changes to worker restraints, set to take effect in 2027 after consultation and legislation.
The change proposed includes a:
ban on non-compete clauses for low and middle-income workers
ban on wage-fixing agreements between employers
ban on no-poach agreements between businesses
Other common post-employment restraints that still apply include:
non-disclosure agreements (NDAs) to prevent disclosure of confidential information
client non-solicitation to prevent poaching clients after leaving
co-worker non-solicitation to prevent hiring colleagues from the former employer
Why This Matters For Business Owners
Clear termination and restraint-of-trade provisions are essential for protecting your business, managing risk, and ensuring smooth transitions when employment or commercial relationships end.
Important Considerations:
Surveys show 1 in 5 Australian workers and businesses currently use non-compete clauses, including in lower-wage roles such as childcare or clerical positions.
Research indicates that widespread use of restraints can reduce job mobility, wages and business growth, potentially affecting your ability to attract and retain talent.
Employers must carefully review existing restraint clauses to ensure they remain enforceable under any upcoming reforms, especially for lower and middle-income staff.
BONUS: Regularly Review Your Contracts
Even the best-drafted contracts can become outdated as laws, regulations, and business circumstances change.
Legislative reforms, technology changes, and evolving commercial relationships can make previously compliant agreements risky or unenforceable. Regularly reviewing your contracts ensures your business stays protected, obligations remain clear, and opportunities for renegotiation are not missed.
Schedule an annual review of all standard forms and key commercial contracts
Track legislative and industry changes, including privacy laws, Fair Work reforms, and IP regulations
Maintain a simple audit log to note amendments, renewals or clauses that need updating
Engage a reputable business lawyer to prepare any contracts or agreements
Business owners who proactively review and update their contracts gain peace of mind and stronger negotiating positions. Working with reputable business lawyers such as RHC Solicitors ensures your agreements reflect the latest legal requirements, allocate risk appropriately, and remain enforceable.
Get The Right Advice
Contracts that were fit for purpose a few years ago may now expose your business to legal, financial, and reputational risk. Reviewing your agreements at the start of the year is essential to ensure fairness, transparency and compliance.
Our senior commercial lawyers at RHC Solicitors can help you review and update standard form and commercial contracts, draft clear and enforceable agreements aligned with current legislation, and protect your business from unnecessary risk while maintaining strong commercial relationships.
Disclaimer: This publication is not intended to be comprehensive, nor does it constitute legal advice. We are unable to ensure the information is current and there is no guarantee in relation to accuracy. You should seek legal or other professional advice before acting or relying on any of the content of this publication. The views and/or opinions expressed in this publication is that of the author and may not necessarily represent the views and/or opinions of RHC Solicitors.
RHC Solicitors ©
