Only Ten Minutes to Read a Contract?
READ THESE FIVE CLAUSES
Ideally, every contract gets read line by line and reviewed by a lawyer.
In reality, the other side is pressing and you have ten minutes.
Spend them on these five clauses.
Even ten minutes should be spent with purpose | Source: Pexels
To be clear at the outset: this is not an argument against using a lawyer. For any contract that is large, long, or hard to follow, a review fee is always cheaper than litigation. This article is for the other, very real scenario: a supply agreement, a services contract or a distribution deal is on the table, and there is only time for one pass. Then scan with purpose. When contracts end in disputes, the trouble sits in one of these five places most of the time.
01／Termination: how this relationship ends
People signing contracts think about how things begin; people litigating them argue about how things end. Check three points: can you exit without cause (termination for convenience, and on how much notice); how serious the other side's breach must be before you can terminate (and whether a cure period must be given first); and most importantly, whether the contract auto-renews. Many service agreements roll over for another year unless written notice is given 90 days before expiry. Miss that window and you are locked in again. If there is an auto-renewal, put the notice deadline in your calendar the day you sign.
02／Payment and default: the rules for the money
Do the payment milestones match the delivery milestones (money out before goods in puts the risk on you; goods in before money out puts it on them)? What is the late payment interest? And is there an agreed damages figure? On that last one, a rule many people don't know: an agreed sum will be enforced if it is a genuine pre-estimate of the likely loss, but if it is so high that it operates as a punishment, the courts can refuse to enforce it as a penalty. So don't be scared off by a headline figure in their contract, and don't assume the intimidating number in your own contract will actually be recoverable. Both directions are worth a lawyer's confirmation.
03／Indemnities: the heaviest word in the document
Slow down whenever you see the word indemnity. It is a promise by one party to make the other whole for a category of loss, and it bites much harder than ordinary damages for breach. Three quick checks: is the indemnity one-way or mutual (be wary of clauses where only you indemnify them); is there a liability cap, commonly the contract price or amounts paid; and is consequential loss excluded? In a contract drafted by the other side, the indemnity clause almost always favours the drafter. It is the single clause most worth spending negotiating capital on.
The clauses worth tabbing are the clauses worth negotiating | Source: Pexels
04／Disputes and jurisdiction: where you fight, and under whose rules
Two unremarkable lines of small print decide the future cost of enforcing your rights. Which state's or country's law governs the contract? Which courts have jurisdiction? A contract with an overseas supplier that is governed by foreign law and arbitrated abroad has multiplied your enforcement costs before anything has gone wrong. In interstate and cross-border deals, push for NSW law and NSW courts. Also read the escalation clause: negotiate, then mediate, then litigate or arbitrate is a sensible ladder, but watch that a drawn-out mandatory process doesn't become the other side's delay tool.
05／Entire agreement: the clause that erases every promise
Almost every formal contract ends with an entire agreement clause: this document is the whole deal and supersedes all prior communications, oral or written. Its practical effect: the price the sales rep agreed in a message thread, the exclusivity promised over dinner, are essentially wiped the moment you sign, unless they made it into the document. The rule is simple: anything that matters to you goes into the contract or into a schedule, before signing. The same goes for changes afterwards: contracts usually require variations in writing, so an amendment agreed in a chat needs to become a signed-off document too.
The most expensive clause in any contract is the one you didn't understand.
Ten minutes on five clauses is the floor. Ask before signing, not after it goes wrong.
Sun Lawyers · Sydney Office
If you have a contract in front of you and want it reviewed before you sign, or a dispute has already arisen over its terms, contact Sun Lawyers. We work in both English and Mandarin.
Phone: 02 9267 4988 ｜ Email: enquiry@sunlaws.com
Sydney Office: Suite 703 & 704, 265 Castlereagh Street, Sydney NSW 2000
Website: sunlaws.com.au
This article is general legal information only and is not legal advice.
Please contact us for advice specific to your situation.