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Stepping into business comes with a world of excitement – bringing in new customers, building relationships, and growing something you believe in. But whether you’re running an online shop, a service business, or something in between, keeping those relationships clear and protected from day one is vital. That’s where a solid customer contract comes in.
A well-drafted customer contract does more than just list what you provide. It sets out both parties’ expectations, minimises disputes, and gives you peace of mind if something goes wrong. But what needs to go in a customer contract? What are the rules under Australian law, and how can you get it right – even if it’s your first time?
In this guide, we’ll walk through the practical steps and legal essentials for customer contracts, so you can do business confidently and minimise your risk. As always, if you want expert help, our team at Sprintlaw is here to support you.
What Is a Customer Contract?
A customer contract is a legally binding agreement between your business and your customer. It’s sometimes called a client agreement, service agreement, or terms and conditions – but at its core, it’s the document that spells out exactly what you’re doing for your customer, what you expect from them, what they owe you, and what happens if something goes wrong.
You might use a customer contract for:
- Selling goods to consumers or businesses
- Providing services like consulting, design, coaching, maintenance, or repairs
- Running an e-commerce platform or online subscription model
- Any other situation where you’re delivering something in exchange for payment
Customer contracts can be signed in hard copy, agreed to online (like ticking an “I accept” box), or accepted in other ways – what matters is that both parties are clear on the terms before you begin work or supply goods.
For most Australian small businesses – and especially if you’re trading with new or unknown customers – having a clear, tailored contract is one of your best legal protections.
Why Are Customer Contracts Important?
If you’ve been in business for a while, you’ve probably already seen the risks of unclear or handshake deals. Even with the best intentions, disagreements can crop up about scope, price, delivery times, cancellations, non-payment, or faulty products.
A strong customer contract helps to:
- Define the agreement: Avoid misunderstandings by spelling out exactly what’s expected of both sides.
- Set payment terms: Make clear when and how customers need to pay, and how you’ll follow up late payments.
- Limit liability and manage risk: Sophisticated contracts can limit your legal responsibility for certain things, or clarify what happens if there are delays or damages (within the limits of Australian Consumer Law).
- Build trust: Customers are more likely to buy if they feel the contract is fair and transparent.
- Simplify disputes: If something does go wrong, a well-written contract can make all the difference in resolving the issue quickly (possibly avoiding court altogether).
In many industries, written contracts are not just best practice – they’re expected by customers, suppliers, and insurers. They can even be required by law in some situations, especially if you’re supplying to larger clients or government.
What Legal Elements Should You Include In A Customer Contract?
There’s no one-size-fits-all contract, but every good customer contract should cover key areas. Let’s break down the must-haves and why they matter for your business.
- Description of Goods/Services: Clearly outline what you’re providing (products, services, package inclusions). Be specific to avoid scope creep and disappointment.
- Price and Payment Terms: State prices (including GST if applicable), payment deadlines, accepted methods (bank transfer, card, PayPal, etc.), and what happens if payment is late or not received.
- Delivery Terms: For products, include when and how items are delivered, who bears risk during shipping, and what happens if there are delays. For services, state start/end dates or milestones.
- Cancellation and Refund Policy: Explain how cancellations, changes and refunds will be handled – including compliance with Australian Consumer Law (ACL) requirements around consumer guarantees and obligations.
- Warranties and Guarantees: Reference any product or service warranties, including those required by law (again, see the ACL requirements).
- Limitation of Liability: In most cases, you can reasonably limit some liabilities in your contract, but consumer law may override unfair or misleading clauses. Get legal advice to ensure your terms are enforceable. Learn more about warranties in Australian law here.
- Intellectual Property (IP): Who owns any new materials, designs, branding, or logos created during your engagement? Specify what’s yours, what’s theirs, and any licences to use content. If you need to protect your IP, consider registering a trade mark.
- Privacy and Data Protection: If you collect customer information, you may need to comply with the Privacy Act and have a valid Privacy Policy.
- Term and Termination: How long does the agreement last? Can either party end it early, and under what circumstances?
- Dispute Resolution: Outline how you’ll try to resolve disputes – mediation, negotiation, or legal action as a last resort. A clear process helps both sides avoid confusion.
- Jurisdiction: Specify that the contract is governed by Australian law, and ideally your state, to avoid international legal complexities.
It’s a good idea to include plain language, not just legalese. This makes it easy for your customer to understand (and makes it more likely the contract will be enforceable in court if challenged).
Step-By-Step Guide To Creating a Customer Contract
Let’s walk through the typical process for putting your customer contract in place, so you can hit the ground running with every new client or order.
1. Identify Your Business Needs
Think about the nature of your goods or services. Are you selling one-off products, ongoing services, or subscription plans? Will you deal mostly with consumers, other businesses, or both? Are there any special risks to manage (complex projects, large transactions, sensitive data)?
The clearer you are about how you operate, the easier it will be to draft the right contract (or set out good business terms and conditions).
2. Document Your Services and Pricing
Write down in detail what you provide, how you price it, and under what terms. This becomes the “scope” of your agreement, and prevents misunderstandings about deliverables, deadlines, or what’s included.
3. Decide How Customers Will Agree
Will your customers sign a physical contract, click I accept online, or receive the terms via email? For online businesses, website terms and conditions or “clickwrap” agreements are common – but you need to make sure the customer actively agrees to the contract (ticking a box, confirming at checkout, etc.).
4. Customise For Australian Law
Laws in Australia can override any contract terms that are unfair, misleading, or simply not allowed under the ACL. Always tailor your agreements for the local market and stay updated with law changes – for example, recent changes to contract terms for small businesses.
5. Draft and Review Your Contract
You can start with a template, but it’s best to have your customer contracts tailored to your unique business. A legal expert can make sure you cover any risks unique to your industry and that your contract is enforceable.
6. Keep It Up To Date
Review your customer contract regularly – especially if you change products, pricing, delivery structures, or scale to new markets. If in doubt, speak with a lawyer to ensure your contracts (and any related policies) protect your business as you grow.
Common Mistakes To Avoid In Customer Contracts
Even experienced business owners can make errors with their customer contracts. Here are the pitfalls that often cause trouble – and how to avoid them.
- Using vague or generic language: Fuzzy descriptions can leave you and your customer uncertain about what’s required, leading to disputes and lost revenue.
- Overlooking the Australian Consumer Law (ACL): All businesses dealing with consumers must comply – even if you think your contract overrides it. Never try to contract out of legal rights customers are entitled to.
- Relying on overseas or non-specialist templates: Contracts from other countries or unrelated industries might not be enforceable in Australia. It’s worth investing in a local review. Copying templates can be risky.
- Ignoring privacy and data obligations: If you collect personal details (emails, addresses, payment info), you may need a Privacy Policy under the Australian Privacy Principles. See our guide on privacy principles.
- Failing to update contract terms: Business changes, law changes, and new products may mean your old agreement no longer protects you properly.
Good contracts set your business up for success – but out-of-date, unclear, or unfair contracts can expose you to fines, disputes, or loss of reputation.
Essential Legal Documents For Doing Business In Australia
A well-run business relies on more than just a customer contract. Here’s a shortlist of the key legal documents we recommend most businesses consider putting in place:
- Customer Contract/Service Agreement: Outlines your agreement with the customer – core to every commercial operation.
- Terms & Conditions or Website Terms Of Use: Set out general rules for using your online store, app or platform.
- Privacy Policy: Required by law if you collect any personal customer information. Explains how you collect, store, and use data.
- Returns and Refunds Policy: Details the customer’s right to return goods and seek refunds – a must for retail and e-commerce businesses under the ACL. Learn more about returns, refunds, and exchanges.
- Employment Contracts and Workplace Policies: If you have staff, you need proper agreements in line with employment laws and Fair Work obligations.
- Supplier/Distributor Agreements: Manage relationships with those you buy from or supply to – useful for retailers, wholesalers, or manufacturers. See our guide to distribution agreements.
- Non-Disclosure Agreement (NDA): Protects your confidential information and trade secrets during discussions with customers, collaborators, or third parties.
- Shareholders Agreement: If you have business partners or plan to issue shares to new investors, this document outlines key rights, obligations, and dispute processes.
You may not need every one of these right away, but most businesses should have at least a customer contract, Privacy Policy, and employment terms (if hiring staff). As you grow, revisit what’s right for your industry and business model.
How Can You Make Sure Your Customer Contracts Are Legally Compliant?
Australian business law is strict about contracts, especially where consumers are involved. Here’s how to stay compliant (and build better customer relationships at the same time):
- Be Transparent: Use plain language, be upfront about fees, and avoid “gotchas” that might catch your customer off guard.
- Respect Mandatory Consumer Guarantees: Australian law provides inbuilt guarantees for most goods and services – your contract can’t override these. Always honour rights to refunds, repairs, and replacements.
- Don’t Use Unfair Contract Terms: From late 2023, new penalties apply for unfair contract terms in standard form contracts (those not individually negotiated, like many B2B and online agreements). Make sure your terms are reasonable.
- Follow Data Privacy Rules: If you’re handling customer data, comply with the Australian Privacy Principles and post an accessible Privacy Policy.
- Tailor For Each Business Model: For example, online businesses may also need to include disclaimers, shipping policies, and information about digital content rights.
If you’re unsure whether your existing contracts are up to scratch, consider getting a contract review from a lawyer with small business expertise.
Are There Special Scenarios For Customer Contracts?
Depending on your business, you might face unique scenarios:
- Franchises and Licensed Brands: You may have to use the brand’s standard contract – but still check that it complies with local laws and the Franchising Code.
- Online Marketplaces and SaaS: You’ll need platform or app-specific terms tying customers to digital content, subscription models or usage limits. Read our guide to SaaS terms for more info.
- One-Off, High-Value Projects: For bespoke deals or long projects, you may need detailed SOWs (Scope of Work), milestone plans, or staged payments, which should be built into your contracts.
Whatever your scenario, the basics always apply: be clear, be fair, and make sure what you’re agreeing matches how you really do business.
Key Takeaways
- A customer contract is essential for protecting your business and setting clear expectations with every client or buyer.
- Every contract should cover core elements like scope of work, pricing, payment, delivery, liability, cancellations, refunds, and compliance with Australian law.
- The Australian Consumer Law (ACL) sets strict rules around customer rights, refunds, and unfair terms.
- Tailored, plain English contracts reduce disputes and help you build trust as you grow.
- Review and update your contracts regularly to keep up with changing laws and your business model.
- Getting professional legal advice early (or a contract review) can prevent costly mistakes.
If you’d like a consultation on creating or reviewing your customer contract, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
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