Every legal contract is not the same, and the substance will differ depending on the arrangement and purpose of the document. However, there are common legal terms that you should look for in every document.

Whether you are a business owner, or if you are entering into a legal relationship with a company, we run through some of these terms below. By remembering these points, you can better understand whether the contract you have received is appropriately drafted.

1. Substance

As mentioned, the substance of the legal contract will always differ for every arrangement. For example, if you engage a building contractor, the questions you should ask include:

  • What will the building contractor be doing for me?
  • How long does the contractor have to complete the work described?
  • Will the contractor assist with anything else that they confirmed verbally, but is not written in the contract?

You should adopt a similar thought process no matter what the good or service is, and if you are the business owner who is providing the goods or services, your customers will be thankful that your legal documents have outlined everything that both parties discussed. 

2. Consideration

Consideration is a legal term used to define what is exchanged between both parties in a legal arrangement. If the business owner has outlined what good or service they are going to provide to you in the legal contract, the legal contract should also include details of what the customer or client will provide to the business owner. Simply put, what will you pay the other party? How will you be invoiced? What are the payment terms, e.g., can you pay a deposit at the outset? 

3. Indemnity

Indemnity refers to the form of security or protection provided by one party to another in the case of any losses or damages that they may incur. This is an important clause as it can have heavy consequences for the party that is offering the indemnity.

In most cases, it is inevitable and difficult to contract out of an indemnity clause. However, they can be drafted in various ways so that it is reasonably fair to both parties. For example, one party will only indemnify the other party for a particular task. Indemnity clauses are often drafted broadly and can be confusing to understand so if you are concerned about this term in a legal contract you receive, a lawyer can help you negotiate. 

4. Confidentiality

Many business contracts will have a clause relating to confidentiality and the obligation of one party to keep the details revealed in the business relationship completely confidential. If you are a business owner who is engaging an employee, contractor or partnership this clause is essential to ensuring that the details you provide will be dealt with appropriately.

5. Governing Law and Dispute Resolution

The governing law, jurisdiction, and dispute resolution clauses are necessary in any legal agreement as it will determine not only which rules apply, but also which courts you will have access to. The dispute resolution provisions will, in particular, establish a clear-cut way to resolve matters, especially when there is tension between the parties. If you are reviewing or getting a legal contract drafted, it is recommended that you have a dispute resolution clause that refers parties to mediation as this can save a lot of costs and legal fees later down the line. 


It’s important to know that not every legal contract is the same. However, it doesn’t hurt to be commercially savvy when reviewing the document or when you’re engaging a solicitor to get one drafted for you. If you have any questions, ask our contract lawyers on 1300 544 755. 

Kristine Biason
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