What Is an Undertaking in Law?

If you run a business, you’ll eventually be asked to give someone an “undertaking” - or you might be relying on someone else’s undertaking to protect your commercial position.

An undertaking can sound informal (like a promise), but in a legal or commercial context it can carry real consequences. In the wrong circumstances, it can expose your business to unexpected liability, disputes, or compliance issues. In the right circumstances, it can be a helpful tool to keep negotiations moving and resolve problems quickly.

In this guide, we’ll walk you through what an undertaking is in law (from an Australian business perspective), when undertakings commonly come up, how they differ from contracts and deeds, and the practical steps you can take to manage the risk.

What Is An Undertaking In Law (In Plain English)?

In law, an undertaking is generally a formal promise to do (or not do) something. The key point is that it’s usually given in a context where it’s intended to be relied on or treated seriously - for example, to proceed with a transaction, pause a dispute, or allow a process to continue.

Depending on the situation, an undertaking can be:

• Contractual (part of a contract or agreement)
• Given to a court (a promise made to the court, often in litigation)
• Given to another party (for example, in settlement negotiations, compliance matters, or commercial arrangements)

In business terms, you can think of an undertaking as: “We will do X by Y date, and you’re entitled to treat that promise as meaningful.”

It’s worth noting that people use the word “undertaking” differently in day-to-day business. Some undertakings are highly formal and enforceable; others are closer to a “good faith assurance”. The risk for business owners is assuming all undertakings are informal, when some can be treated very seriously.

One important distinction is that undertakings given in legal proceedings (including court undertakings and solicitor’s undertakings) are typically treated far more strictly than an “undertaking” used in ordinary commercial correspondence.

If you want a quick definition-focused overview, the term is also broken down here: undertaking.

Why Do Undertakings Matter For Small Businesses?

Undertakings matter because they’re often used to:

• solve a problem quickly without signing a full contract
• reduce risk while negotiations continue
• avoid escalating a dispute (and the costs that come with it)
• give confidence to customers, suppliers, landlords, or counterparties

But that speed can come at a price: if the wording is vague, unrealistic, or given by the wrong person, it can create a mess later.

When Do Businesses Commonly Give (Or Receive) Undertakings?

Undertakings often appear at “high pressure” moments - when a deal is about to close, a dispute is brewing, or someone needs reassurance before they take the next step.

1. During Commercial Disputes Or Settlement Negotiations

If there’s a dispute (for example, about payment, performance, or alleged breach), an undertaking might be offered to stop things escalating. For example:

• a supplier gives an undertaking to replace defective goods within 7 days
• a customer gives an undertaking to pay an outstanding invoice by a set date
• a business gives an undertaking not to use certain marketing materials while a complaint is investigated

In more structured resolutions, the undertaking may be documented as part of a settlement arrangement (which might also include releases, payment terms, or confidentiality). If you’re documenting the broader deal, a Deed of Settlement is often the more complete (and enforceable) tool.

2. In Contracting And Project Delivery

Undertakings can also appear inside contracts as “you undertake that…” clauses, especially around:

• quality standards
• timelines and delivery milestones
• compliance with laws (for example, work health and safety, privacy, industry regulation)
• non-solicitation or non-disparagement behaviour

If you’ve ever seen a clause like “The Contractor undertakes to maintain all required licences…”, that’s an undertaking within a broader contract.

3. When Someone Needs Assurance Before They Proceed

Undertakings can be used as a practical bridge when a full agreement isn’t ready yet. For example:

• a landlord may request an undertaking to repair damage before agreeing to assign a lease
• a buyer may request an undertaking that key intellectual property will be transferred at settlement
• a vendor may request an undertaking that confidential information will not be used if the deal doesn’t proceed

Often, these “deal momentum” undertakings are given by email. That’s where businesses can get caught off guard: what feels like operational communication can be relied on as a legally meaningful promise.

4. In Court Or Regulatory Contexts (Less Common, But High Stakes)

Some undertakings are given to a court (for example, to avoid an urgent court order being made) or to a regulator (for example, as part of a compliance outcome). These undertakings can have serious consequences if breached.

Even if your business doesn’t regularly deal with courts or regulators, it’s useful to understand that the same word can be used in a very formal way.

Is An Undertaking Legally Binding In Australia?

This is where the answer depends on context.

An undertaking can be legally binding in Australia, but whether it’s enforceable (and what the remedy is if it’s breached) will depend on factors like:

• what exactly was promised (specific and measurable vs vague)
• who it was given to (another party, a court, a regulator)
• how it was recorded (email, letter, contract clause, deed)
• the surrounding circumstances (including whether it was intended to be binding and how it fits with any existing agreement)
• whether there’s consideration (in a contractual setting)

If the undertaking is part of a contract, enforceability often comes back to contract fundamentals - offer, acceptance, intention, certainty, and (usually) consideration. If you want a clearer picture of those fundamentals, it’s helpful to understand what makes a contract legally binding.

Undertaking vs Contract Term: What’s The Difference?

Sometimes “undertaking” is simply the label used for a particular promise inside a contract. In that case, the legal effect is usually the same as any other contractual promise: if it’s breached, the other party may have rights to remedies under the contract (including damages, termination rights, or specific performance where relevant).

Undertaking vs Deed: Why The Document Type Matters

Where businesses can get tripped up is when they give a serious promise outside a contract framework, but it’s still intended to have teeth.

A deed is commonly used where you want enforceability without needing to prove “consideration” in the same way a contract does. For example, you might document promises and releases in a deed as part of a settlement or restructuring. If you’re changing obligations in an existing relationship, you might also use a Deed of Variation rather than relying on informal undertakings back and forth.

What Are The Risks If Your Business Breaches An Undertaking?

The consequences depend on the context, but common business risks include:

• damages or compensation claims (if the other party suffers loss)
• termination rights under a broader contract
• injunctions (court orders requiring you to do or stop doing something)
• costs and dispute escalation (what could have been a quick fix becomes expensive)
• reputational damage (especially if the undertaking was relied on to build trust)

Even where the legal remedy is arguable, the commercial reality is that broken undertakings can quickly break relationships - with customers, suppliers, landlords, and partners.

How Do You Give An Undertaking Safely As A Business?

If you’re about to give an undertaking, your goal is to keep it clear, realistic, and given by the right person - while preserving your ability to operate your business.

1. Be Specific About What You’re Promising

Vague undertakings are risky because each party may interpret them differently.

Instead of:

• “We undertake to fix the issue ASAP.”

Use something more measurable:

• “We undertake to provide a replacement unit by 5:00pm AEST on Friday, 12 January 2026.”

Clarity reduces misunderstandings and gives you a clear internal deadline.

2. Include Any Assumptions Or Conditions

Many undertakings become problematic because the business assumed something was obvious (but didn’t write it down).

For example, if your ability to perform depends on stock availability, access to a site, customer cooperation, third-party approvals, or payment being made first - say so.

Otherwise, you may have accidentally promised something your business can’t fully control.

3. Confirm Who Has Authority To Give It

One practical risk for small businesses is staff members giving undertakings by email without realising the legal and commercial impact.

It’s a good idea to define who can give binding commitments on behalf of the business and what approvals they need. Depending on your setup, you may also use an Authority to Act so third parties understand who can negotiate and confirm commitments.

4. Put It In Writing (But Don’t Rush The Wording)

Undertakings are often given in writing (email, letter, or a signed document) because it reduces disputes over what was promised.

At the same time, written undertakings are easier to rely on. So before you hit send, it’s worth asking internally:

• Can we actually do this within the timeframe?
• What happens if something outside our control delays performance?
• Do we need to carve out exceptions or conditions?
• Should this be a formal contract/deed instead?

5. Treat It Like A Project: Track It And Close It Out

Once your business gives an undertaking, it should be managed like any other critical obligation:

• assign an owner internally
• set calendar reminders before the due date
• keep evidence of completion (photos, delivery confirmations, sign-offs)
• confirm completion in writing to the other side

This is especially important if the undertaking is tied to a dispute. You want a clean record that you complied and the matter should be treated as resolved (or at least progressed).

Do You Need To Update Your Contract If An Undertaking Changes The Deal?

A common scenario is that an undertaking starts as a “temporary fix” - but it actually changes the commercial arrangement.

For example:

• You agree to new delivery timeframes.
• You agree to reduce the scope of services to resolve a complaint.
• You agree to change payment dates or restructure instalments.

If the undertaking effectively changes what the parties agreed to under the original contract, you should consider properly documenting that change. Otherwise, you can end up with two competing narratives: “the contract says X” versus “but you undertook Y”.

In many cases, a written variation is the cleanest way to avoid confusion. Depending on the circumstances, you might document this as a contract amendment or as a deed. If you’re making changes mid-stream, it’s worth thinking about vary a contract in a way that’s enforceable and easy to follow later.

Practical Tip: Don’t Let Side Promises Undermine Your Protections

Your original contract may include protections like limitation of liability, dispute resolution steps, or time bars. An informal undertaking can unintentionally bypass those protections if it’s not aligned with the contract.

This is one reason it’s helpful to keep undertakings consistent with the “core deal documents”, and where needed, formally update them.

Key Takeaways

• An undertaking is generally a formal promise to do (or not do) something, and in business contexts it can carry real legal and commercial consequences.
• Undertakings often arise during disputes, negotiations, project delivery, or when one party needs reassurance before taking the next step.
• Whether an undertaking is legally binding depends on context - including how it’s recorded, whether it forms part of a contract or deed, and the surrounding circumstances.
• To give an undertaking safely, keep it specific, realistic, and clear about assumptions/conditions, and make sure the right person has authority to give it.
• If an undertaking changes the underlying commercial arrangement, it’s usually better to document that change properly so your contract position stays clear and enforceable.

This article is general information only and does not constitute legal advice. If you need advice about an undertaking for your specific situation, you should speak to a lawyer.

If you’d like help drafting, reviewing, or negotiating an undertaking (or documenting the broader deal properly), contact Sprintlaw on 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.