Guides · Australian Business Legal Guide · Chapter 2 of 7
Contracts that hold up
Last reviewed 14 August 2026
What makes an Australian commercial contract enforceable, which terms carry the risk, and why terms of trade beat handshake deals.
In short
A contract is enforceable in Australia when there is agreement, consideration, an intention to be legally bound and sufficient certainty. Writing is not usually required, but the absence of it is where disputes come from — the argument is almost never about whether there was a deal, it is about what the deal said.
Very few commercial disputes are about whether a contract exists. They are about scope, price, timing, liability, and what happens when something goes wrong — the parts nobody discussed because the relationship was going well.
The elements of a binding contract
- Offer and acceptance — a clear proposal accepted on its terms.
- Consideration — something of value exchanged (unless the document is executed as a deed, which does not require consideration).
- Intention to create legal relations — presumed in commercial dealings.
- Certainty — the essential terms must be identifiable. "We'll agree a price later" is a classic source of unenforceability.
- Capacity and legality — the parties must be able to contract, and the subject matter must be lawful.
Emails, purchase orders and text messages can all form binding contracts. So can conduct. The question is rarely whether you are bound; it is on what terms.
The clauses that decide the outcome
When a commercial deal turns sour, attention lands on a predictable handful of clauses:
- Scope. What is included, what is expressly excluded, and how changes are priced and approved.
- Payment. Timing, invoicing triggers, interest on late payment, and suspension rights.
- Liability. A cap, exclusions for consequential loss, and the carve-outs that sit outside the cap. See limits of liability.
- Indemnities. A promise to cover another party's loss. The single most commercially significant clause in most contracts — read indemnity vs limitation of liability.
- Termination. For convenience, for breach, for insolvency — and what survives.
- IP and confidentiality. Who owns what is created, and what can be reused.
- Dispute resolution and governing law. Which state's law, and whether a negotiation or mediation step comes before proceedings.
Terms of trade: the highest-value document most businesses do not have
If you supply goods or services repeatedly, a single set of terms of trade — incorporated properly into every order — does more work than any bespoke contract. Properly drafted, they set payment terms, retention of title over goods until payment, a personal guarantee where you extend credit, a liability cap, and the process for claims. Improperly incorporated (printed on the back of an invoice sent after delivery), they may not apply at all.
Incorporation is the technical point that catches people out: the terms need to be brought to the customer's attention before the deal is struck, whether through a signed credit application, a click-through at checkout, or a quote that expressly attaches them.
Signing properly
Companies commonly execute under section 127 of the Corporations Act — two directors, or a director and company secretary, or the sole director of a single-director company. Signing that way gives the counterparty the benefit of statutory assumptions about authority. Electronic execution is permitted, and split execution across counterparts is standard. Where the document is a deed, or where land or securities are involved, check the formalities before signing rather than after.
Changing a contract
Once signed, changes need the same discipline as the original. An addendum or deed of variation identifies the original contract, states an effective date, sets out precisely which clauses change, and confirms the rest continues. Verbal side deals and "as discussed" emails are the usual culprits when parties later disagree about scope or price.
Where this fits
Contract drafting, review and negotiation is the core of our business contracts practice, and the most common reason clients engage us on a fixed fee. If you send us the agreement you are being asked to sign, we will tell you what it actually does before you sign it.
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