Deed of Undertaking: What It Is and When to Use One in Australia

When you need a rock-solid promise from another party - or you want to give one - a simple contract isn’t always enough.

That’s where a Deed of Undertaking can help. It’s a powerful way to secure commitments in situations where trust and enforceability really matter, like protecting your IP, settling a dispute, or getting directors to stand behind obligations.

In this guide, we’ll explain what a Deed of Undertaking is, when it makes sense for a small business to use one, and how to draft and sign it properly under Australian law. We’ll also flag common pitfalls and compare it with related documents, so you can choose the right tool for the job.

What Is A Deed Of Undertaking?

A Deed of Undertaking is a formal promise documented as a deed, rather than a standard contract. In plain English, it’s an enforceable commitment to do (or not do) specific things, usually used when you want a higher level of certainty and formality than a typical agreement.

Unlike ordinary contracts, a deed doesn’t require consideration (no need for a payment or mutual exchange) to be binding. However, a deed must meet stricter formalities to be valid, which is why businesses often use deeds for serious obligations.

If you’re weighing up whether to use a deed instead of a contract, it helps to understand how deeds work in Australia. We’ve covered the fundamentals of a deed - including why and when to use one - so you can decide with confidence.

When Should A Small Business Use One?

Deeds of Undertaking are common across a range of business scenarios where you need a clear, enforceable promise. Typical use cases include:

• Protecting confidential information or IP - An individual or company undertakes not to use your confidential information, trade secrets or brand assets outside agreed purposes, with strong remedies if they do.
• Settlement or resolution assurance - As part of resolving a dispute, a party undertakes to do certain things (e.g. stop certain conduct, pay amounts by dates, remove content, return stock or assets). In many cases, this sits alongside a Deed of Release and Settlement.
• Directors’ or owners’ commitments - Company directors may undertake to perform specific actions (like procuring shareholder approvals) or refrain from moving assets while a transaction completes.
• Supplier and distribution arrangements - A supplier might undertake to meet standards or non-compete obligations, especially where consideration is limited or one-sided promises are required.
• Project or service delivery - A contractor may give undertakings about timing, safety, or compliance with permits as a condition of being awarded work.
• Brand protection - A counterparty undertakes to cease infringing activities (e.g. stop selling lookalike goods or remove infringing listings), often with verification obligations.

Put simply, use a Deed of Undertaking when you want to lock in a clear promise, remove doubt about enforceability, and escalate the seriousness of the obligation.

How To Draft And Execute A Deed Of Undertaking In Australia

Because deeds have stricter formalities, it’s important to draft and sign them carefully. Here’s how to get it right.

1) Clarify Purpose, Parties And Definitions

Start with a clear statement of purpose and exactly who is giving the undertakings. Identify each party’s correct legal name, ACN/ABN and address. Define any key terms (e.g. “Confidential Information”, “IP”, “Business Day”) so obligations are unambiguous.

2) Set Out The Undertakings Precisely

List each undertaking in practical, measurable terms. For instance, “The Undertaking Party must remove all listings of the Products from any online marketplace within 48 hours,” or “must refrain from soliciting any client of ABC Pty Ltd for 12 months from the Date.”

Avoid vague language like “best endeavours” unless you explain what that means in context.

3) Include Evidence, Reporting And Verification

Where relevant, require proof that actions have been taken - screenshots, email confirmations, or declarations from an authorised officer. This makes enforcement easier if you need to show non-compliance later.

4) Outline Remedies For Breach

Spell out what happens if the undertaking is breached. This could include an indemnity for losses, an obligation to pay a reasonable pre-estimate of loss (avoid penalties), or consent to injunctive relief.

Be careful with any fixed sums - if they look like a punishment rather than a genuine estimate of loss, a court may treat them as unenforceable penalties.

5) Manage Duration And Scope

Make sure timeframes (e.g. 6 months, 2 years) and scope (geographic limits, particular customers or products) are reasonable. Overly broad restraints can be struck out or read down. Tailor them to what’s necessary to protect your legitimate business interests.

6) Execution Formalities Matter

Deeds require specific signing formalities. Before you sign, check the legal requirements for signing documents in Australia, including how deeds must be executed by companies and individuals.

For companies, consider execution under section 127 of the Corporations Act (with two directors, a director and company secretary, or a sole director/secretary, where applicable). This creates strong assumptions that the deed has been properly executed.

For individuals, check if a witness is required and follow local witness signature rules. Some jurisdictions require specific witnessing for deeds to be validly executed, and electronic execution may have additional steps.

7) Delivery And Commencement

In deed language, “delivery” typically means an intention to be bound - make this explicit. State when the deed takes effect (e.g. on the date the last party signs, or on a specified “Commencement Date”).

8) Common Pitfalls To Avoid

• Vague obligations - If an undertaking isn’t specific, it’s hard to prove a breach. Make obligations clear and measurable.
• Unreasonable restraints - Non-compete or non-solicit clauses that are too broad in time, scope or geography may be unenforceable.
• Penalty clauses - Avoid “fines.” Focus on indemnities or genuine pre-estimates of loss.
• Wrong party details - Always use correct legal names and identifiers (ACN/ABN), not just trading names.
• Poor execution - If the deed isn’t executed properly, it can fail. Follow company and individual execution rules and keep robust records.
• Forgetting verification - If you require someone to stop conduct, require proof they did so.

Essential Clauses To Consider

While the precise content will depend on your situation, most Deeds of Undertaking benefit from these core clauses:

• Recitals - Short background explaining why the parties are entering the deed.
• Undertakings - The heart of the document: what the undertaking party must do or avoid.
• Timeframes - Clear deadlines or durations for each undertaking.
• Evidence and Reporting - What proof must be provided, and when.
• Confidentiality - Keep the deed and its terms confidential (with carve-outs for legal and tax advisers).
• Indemnity - Compensation for losses caused by breach of the undertakings.
• Injunctive Relief - Acknowledgement that damages may be inadequate and that urgent court orders may be appropriate.
• Costs - Clarify who pays preparation and enforcement costs.
• No Waiver - One failure to enforce isn’t a waiver of rights.
• Severability - If one clause is unenforceable, the rest still stand.
• Notices - How formal communications must be given (email, postal address, deemed receipt).
• Assignment - Whether rights or obligations can be transferred; if you intend to transfer benefits later, you might instead use a Deed of Assignment.
• Governing Law and Jurisdiction - Choose the Australian state or territory law that applies and where disputes will be heard.
• Execution and Delivery - Include correct signing blocks for companies and individuals, with dates and witness lines (if required).

Deed Of Undertaking Vs Other Documents

A Deed of Undertaking is powerful, but it isn’t always the best fit. Here’s how it compares with common alternatives so you can select the right document for your situation.

Deed Of Undertaking vs Confidentiality Agreement (NDA)

An NDA is a contract protecting specific information shared between parties. A Deed of Undertaking can include confidentiality promises, but it’s broader - it’s suited to one-sided, serious commitments or where consideration is limited. If you only need confidentiality on a two-way basis, a standard NDA may be sufficient.

Deed Of Undertaking vs Deed Of Release And Settlement

If you’re finalising a dispute, a Deed of Release and Settlement is typically used to release claims and set out who pays what, when. A Deed of Undertaking can sit alongside that to capture ongoing promises (e.g. stop using a mark, remove posts, return goods) with enforcement mechanisms.

Deed Of Undertaking vs Deed Of Guarantee And Indemnity

When you want a person (often a director) to guarantee a company’s obligations or indemnify you for certain losses, a Deed of Guarantee and Indemnity is purpose-built. A Deed of Undertaking can still work for specific promises, but a dedicated guarantee deed is a cleaner way to secure payment or performance risks.

Deed Of Undertaking vs Waiver/Release/Indemnity Deeds

In risk-heavy activities or events, a waiver or release focuses on reducing liability exposure. Those are different in purpose from undertakings (which compel conduct), though sometimes they’re combined. If your goal is primarily to limit liability, consider a waiver or a Deed of Release; if your goal is to compel actions or restraint, a Deed of Undertaking fits better.

Key Takeaways

• A Deed of Undertaking captures serious, enforceable promises without requiring consideration, making it ideal for one-sided or high-stakes commitments.
• Common use cases include settlement assurance, IP and confidentiality protection, directors’ commitments, supplier standards, and project delivery obligations.
• Draft undertakings in clear, measurable terms, include proof and reporting requirements, and set reasonable timeframes and scope to improve enforceability.
• Get execution right: follow the legal requirements for signing documents, consider company execution under section 127, and check any witnessing requirements for individuals.
• If you’re settling a dispute or securing payment performance, you may pair or compare a Deed of Undertaking with a Deed of Release and Settlement or a Deed of Guarantee and Indemnity.
• Careful drafting and choosing the right document up front can prevent disputes and make enforcement faster and more cost-effective.

If you’d like help preparing or reviewing a Deed of Undertaking for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.