Key Clauses to Review in Commercial Contracts

Last Updated on 27/07/2026 by Damin Murdock

Entering into commercial contracts, although essential to businesses, has to be done with a risk management lens. Rushed decisions can expose businesses to liabilities, especially under Consumer Law. 

If disputes arise, Australian courts follow an objective approach to contracts. They look at what a reasonable business person would have understood. This is why it is essential to keep the terms of the contracts clear and defined. 

At Leo Lawyers, we’ve helped many clients draft and review their contracts. Below you can find the most important clauses to review. 

Termination Clauses

A well-drafted termination clause prepares for an orderly exit; otherwise, businesses can be trapped in an underperforming contract or lead to wrongful repudiation. Termination could be for cause or for convenience. 

Termination for Cause and Material Breach 

Termination for cause gives an aggrieved party the right to end the agreement due to the other party’s default. From a drafting perspective, the word “breach” alone isn’t enough. Normally, the clause is drafted in the following manner:

1. Define “material breach” (e.g. non-payment, breach of confidentiality)
2. Specify strict timeframes to remedy defaults before allowing for termination (e.g. 14 business days from the receipt of a written notice). 
3. Ensure that the necessary clauses, like intellectual property rights and non-disclosure obligations,  explicitly survive the termination of the contract.

Termination for Convenience

Australian courts often scrutinise “for convenience” clauses. A clause that allows for an unreciprocated right to terminate for convenience without cause can be deemed an unfair contract term. This is why parties must ensure that termination for convenience clauses mandate fair compensation for all work in progress, non-refundable third-party costs, and wind-down expenses incurred up to the termination date. Further, if only one party is allowed to terminate for convenience by notice, then that clause may be held to be an unfair contract term under the Australian Consumer Law.

Dispute Resolution

Dispute resolution clauses should act as a condition precedent to the commencement of court proceedings to be legally effective. A good framework follows these steps: 

Step 1: Good faith negotiations

Step 2: Mediation

Step 3: The clause must specify the applicable law and jurisdiction and  state whether the parties may suspend services or continue the performance until the dispute is resolved. If the right of suspension of the services is not dealt with, then when there is a dispute and a party suspends the performance of works (such as suspends services because of non-payment), this could be treated as an act of repudiation evidencing an intention to no longer be bound by the contract due to there being no expressed provision in the contract to suspend the services during the non-payment and dispute period.

Indemnity and Limitation of Liability

A common error we see is when a liability cap is specific, but it is undermined with a broad indemnity clause. Below are our recommendations for well-drafted indemnity and limitation of liability clauses: 

1. Establish a clear monetary cap on total liability aligned with your professional indemnity or public liability insurance limits. 
2. Don’t use generic phrases like “consequential loss”. We recommend explicitly listing the scope, such as loss of profits, loss of revenue, loss of data, or loss of business opportunity. 
3. Limit carve-outs from your liability caps strictly to unlawful acts, fraud, gross negligence, or third-party intellectual property infringement claims. 

Automatic Renewal Clauses

Automatic renewal clauses can trap businesses into multi-year commitments. Under the current Unfair Contract Terms regime, the Australian Competition and Consumer Commission enforces severe penalties for unfair terms, especially involving small businesses. This is why you should always include a mandatory “reminder notice” provision, requiring the vendor to notify the client in writing a set timeframe before the opt-out deadline passes. 

In our experience, reviewing your commercial contracts is not a mere formality. If you are preparing to sign, renew or renegotiate a significant commercial contract,  feel free to contact Damin Murdock at Leo Lawyers via our website, on (02) 8201 0051 or at office@leolawyers.com.au. Further, if you liked this article, please subscribe to our newsletter via our Website, and subscribe to our YouTube , LinkedIn, Facebook and Instagram. If you liked this article or video, please also give us a favourable Google Review.

DISCLAIMER: This is not legal advice and is general information only. You should not rely upon the information contained in this article and if you require specific legal advice, please contact us.