Commercial Contracts

Types of commercial contracts we handle

• Supply and purchase agreements for goods.
• Services agreements — professional services, consultancy, licensing.
• Distribution, agency and reseller agreements.
• Intellectual property licences and technology licences.
• Shareholders' agreements, unitholder agreements and joint venture agreements.
• Confidentiality and non-disclosure agreements.
• Loan agreements, security documents and personal guarantees.
• Heads of agreement and term sheets.

What matters in commercial drafting

A useful commercial contract is not a long form document; it is a document that addresses the risks that actually matter for the transaction. Common attention points include:

• Scope. What each party is agreeing to do or supply, in enough detail to test performance.
• Price and payment. Not just the price, but timing, invoicing mechanics, interest on late payment and any set-off rights.
• Term and termination. How long the contract runs, how it renews, and how it can be brought to an end.
• Warranties. Statements of fact that the parties rely upon, and consequences of breach.
• Liability and indemnities. Which risks each party bears, and any cap on liability. The Australian Consumer Law restricts what can be excluded in dealings with consumers and small businesses.
• Confidentiality and IP. What information is confidential, and who owns intellectual property developed in the course of the contract.
• Dispute resolution. Escalation, mediation and jurisdiction. In some circumstances arbitration is preferable to court.
• Unfair contract terms. Since November 2023, contravening unfair contract terms in standard form small-business contracts can attract civil penalties. We review contracts against that regime.

Standard-form contracts

Standard-form documents are efficient for repeat transactions — supplier terms, customer terms and services agreements — but they must be maintained. We draft standard-form suites, keep them under review as legislation changes, and train in-house staff on their proper use.

Contract disputes

Prevention is cheaper than cure. Where a dispute nonetheless arises, we advise on the contract's operation, negotiate a commercial resolution where possible, and refer to litigation counsel if proceedings become necessary.

Types of commercial contract we prepare and review

The commercial contracts we work on most often include supply and services agreements, distribution and reseller arrangements, consultancy and independent contractor agreements, confidentiality and non-disclosure agreements, terms and conditions of trade, subcontracts, licensing agreements, and shareholders and unitholders agreements. Each has a recurring set of issues and a set of client-specific issues that emerge from the way the particular business operates.

Issues we routinely address

• Scope and change control. A contract that does not say clearly what each party must do produces disputes, no matter how carefully the legal clauses are drafted. We ask detailed scope questions before drafting.
• Price, payment and adjustments. Fixed price, time and materials, retainer, milestone, and hybrid arrangements all have consequences for cash flow and dispute risk.
• Warranties and liability. Australian Consumer Law guarantees cannot be excluded where they apply. Contractual warranties, indemnities and limitations of liability are negotiated within that framework, not around it.
• Intellectual property. Ownership of pre-existing IP, ownership of IP created during the engagement, and licences in favour of each party are addressed explicitly.
• Confidentiality and data. Confidential information provisions and, where personal information is involved, obligations under the Privacy Act 1988 (Cth) are addressed.
• Termination. Termination for breach, for convenience, and for insolvency events each carry different consequences and are drafted with the specific relationship in mind.
• Dispute resolution. Escalation, mediation and jurisdiction clauses are practical tools that materially affect the cost of any future dispute.

Australian Consumer Law and unfair contract terms

The Australian Consumer Law prohibits unfair terms in standard form consumer and small business contracts, and provides consumer guarantees that cannot be excluded. Drafting contracts for Victorian businesses must take this framework into account, particularly where a business supplies to consumers or to other small businesses under standard form terms.

Review of counterparty contracts

Where a counter-party has proposed their own contract, we review it against the client's commercial objectives and produce a marked up version with a plain-English summary of the issues. Not every issue is worth pushing on — we focus on the terms that materially allocate risk, price or intellectual property.

Personal guarantees

Personal guarantees provided by directors and shareholders are common in supply and finance contracts. A guarantee should not be signed without a clear understanding of its scope, the events that trigger recovery, and whether the guarantor has any right of contribution from other guarantors. We identify guarantee clauses in every contract we review.

Where separate advice is required

Tax treatment of consideration, GST treatment of supplies, and the accounting treatment of long-term contracts are matters for the client's accountant. Cross-border contracts may require input from overseas counsel. We coordinate that input but do not provide taxation or overseas legal advice.

Limitations of general information

This page describes typical commercial contract work at a general level. It is not a substitute for advice on the contract in front of you.