Contract review: the eight clauses we read first

We check that the counterparty is a real legal entity, named with its ACN, not a trading name. A trustee must be named as trustee for the trust, or its liability may be wider than the trust assets. We look for execution under the Corporations Act 2001, by two directors or a director and secretary. A counterparty can rely on that signature. If the counterparty is a shell company, we ask for a guarantee from its parent or its director. A foreign counterparty raises enforcement questions we address under governing law.

Scope is what is being supplied, by when, and to what standard. We look for defined deliverables and acceptance criteria. The variation clause should say who can change the scope and at what price. Vague scope is the most common cause of a services dispute. A clear scope protects both sides. It also decides whether the liability cap and the payment terms mean anything.

We check the payment trigger, the invoicing cycle, the process for disputed invoices and interest on late payment. Then we look for set-off: a right for the customer to deduct its own claims from what it owes. A one-way set-off clause in a standard form small business contract may be unfair under the Australian Consumer Law. For building work, security of payment legislation overrides some payment terms. We read the payment clause with the termination clause, because payment for work done on exit is often missing.

A cap limits what a party can claim, often a multiple of fees or the insurance limit. We check what sits outside the cap: fraud, wilful default, breach of confidence, and intellectual property infringement are usual. An exclusion of consequential loss needs its own definition, because Australian courts read the phrase by the contract's words. Indemnities are the sharp end. An uncapped, one-way indemnity can turn a small contract into an unlimited exposure. We push for mutual indemnities, capped, and limited to third-party claims.

In Australia, intellectual property created by a contractor stays with the contractor unless it is assigned in writing. We check who owns what the contract creates. Background material should stay with its owner and be licensed. New material should be assigned or licensed with a defined scope: exclusive or not, territory, term, and permitted use. Moral rights consents from individual authors are needed for edited or unattributed work. Third-party material needs its own licence chain.

We look for termination for convenience, and who has it. Then termination for breach, and whether there is a cure period. Insolvency triggers are limited by the Corporations Act 2001, which stays enforcement of rights triggered only by an insolvency event. The consequences of termination matter as much as the trigger: transition assistance, return of materials, payment for work done, and which clauses survive. A contract that ends badly is usually one where these were never written.

A tiered clause works well: written notice, a meeting between senior people, then mediation, then court or arbitration. We check that the clause does not bar urgent court relief, such as an injunction to protect confidential information. Arbitration is private but can cost more than a small dispute is worth. Expert determination suits technical or pricing disputes. Time limits for raising a claim should be reasonable and mutual.

For a Melbourne business we want the law of Victoria and the courts of Victoria. A foreign governing law makes enforcement slow and expensive, and can change the meaning of familiar words. We check whether jurisdiction is exclusive or non-exclusive. For a cross-border deal, an arbitration seat may serve better than a foreign court. Whatever the clause says, the Australian Consumer Law still applies to conduct in Australia.