Contracts and legal basics
Most business disputes start with something that was never written down, or was written down badly. You don't need to be a lawyer to get the basics right. Here's what every small business should have in writing, the terms that matter most, and when to get professional help.
In short
- A contract can be written, spoken or even implied - but written terms prevent most disputes.
- Every small business should have clear customer terms, written quotes, and agreements with key suppliers, contractors and partners.
- Pay close attention to payment terms, scope, liability, termination and what happens when things go wrong.
- Unfair terms in standard form contracts with consumers and small businesses are banned, and penalties apply - both to contracts you offer and ones you're asked to sign.
- Get a lawyer for high-value, long-term or high-risk agreements, and before signing anything you don't understand.
What makes a contract
A contract is an agreement that the law will enforce. In general it needs an offer, acceptance, something of value exchanged (such as money for work), and an intention to be legally bound. Contracts can be written, verbal, or implied by how people behave, but verbal agreements are hard to prove when memories differ. Put it in writing. Even an email confirming what was agreed is far better than nothing.
The agreements most small businesses need
| Agreement | What it covers |
|---|---|
| Customer terms and conditions | How you sell: quotes, payment, delivery, cancellations, warranties, limits of liability |
| Written quotes and proposals | Exactly what you’ll do, for how much, by when, and what isn’t included |
| Supplier agreements | Pricing, delivery, quality, payment terms, what happens if they let you down |
| Contractor agreements | Scope, fees, deadlines, who owns the work, confidentiality, insurance |
| Partnership or shareholder agreements | Ownership, roles, decision-making, money, and what happens if someone leaves. See Joint ventures and partnerships |
| Leases | Rent, term, outgoings, fit-out, repairs, options to renew. Get advice before signing |
| Website terms and privacy policy | How people may use your site, and how you handle their information |
| Confidentiality agreements | Protecting sensitive information when you share it with others |
Key terms to get right
- Parties: the correct legal names, including the right business entity and ABN.
- Scope: precisely what’s being supplied, and what isn’t. Most disputes are about scope.
- Price and payment: amounts, GST, deposits, due dates, late payment, and variations.
- Timing: start, milestones, completion, and what happens with delays.
- Changes: how variations are agreed and priced (always in writing).
- Liability and warranties: what each side is responsible for if something goes wrong. You can’t exclude consumers’ rights under the Australian Consumer Law.
- Intellectual property: who owns designs, content, code or other work created.
- Termination: how either side can end the agreement, and what’s owed if they do.
- Disputes: steps to resolve disagreements, such as negotiation then mediation, before going to court.
Unfair contract terms
If you use a standard form contract (one you offer on a take-it-or-leave-it basis) with consumers or small businesses, unfair terms are banned. Since 9 November 2023:
- businesses can be penalised for proposing, using or relying on unfair terms, not just have the terms struck out;
- the protections cover small businesses with fewer than 100 employees or annual turnover under $10 million.
Terms that may be unfair include ones that let only one party end or change the contract, impose penalties on only one side, or limit one party’s liability while leaving the other fully exposed. This works both ways: review the terms you offer, and know your protections when a bigger business hands you its standard contract. The ACCC’s guidance has examples.
Getting paid and protecting yourself
- Quote in writing and get acceptance in writing (an email or signed quote).
- Take deposits on larger jobs, and stage payments on longer ones.
- Set clear payment terms and follow up late payments promptly. See Getting paid.
- Keep records: emails, variations, photos of completed work, delivery confirmations.
- Act early on disputes: talk first, put your position in writing, and consider mediation. Small business commissioners in many states and the Australian Small Business and Family Enterprise Ombudsman can help with disputes between businesses.
Templates: helpful, with care
Templates from reputable sources (industry associations, government websites and legal services) are a good starting point for simple, low-risk agreements. Make sure they’re written for Australian law, suit your industry, and that you understand every clause. Don’t copy another business’s terms; they may not fit your business and may be protected by copyright.
When to get a lawyer
Get legal advice for:
- leases, franchise agreements and buying or selling a business,
- partnership and shareholder agreements,
- large, long-term or high-risk contracts,
- anything involving intellectual property you depend on,
- disputes that aren’t resolving,
- any contract you don’t fully understand.
A fixed-fee review of an important contract usually costs far less than a dispute. Ask your industry association or state law society for referrals.