Contract Terms
Learn about contract terms, the specific provisions that define your rights, obligations, and the risks when you sign without reading them.
Written by: Mark Lazarus, Commercial Lawyer, Director of Lazarus Legal
Last updated: 26 December 2025
Legal Disclaimer: The information on this page is general in nature and is not intended to constitute legal advice. It does not take into account your personal circumstances. Laws and legal processes can change, and their application varies between cases. You should seek independent legal advice before acting on any information on this page.
What Are Contract Terms?
In Australian contract law, contract terms are the individual clauses, conditions, and provisions that make up the substance of an agreement between parties. These terms establish specific rights, responsibilities, and expectations that each party accepts when entering the contract.
The key distinction is between what the parties actually agreed to and what one party merely assumed or expected. A party cannot rely on their own expectations if the contract terms say something different.
Understanding what constitutes a term, as opposed to mere negotiation talk or advertising statements, is essential to knowing what you’re actually bound to perform.
Types of Contract Terms
Australian contract law recognizes several categories of terms, each serving different functions and carrying different legal consequences.
Express Contract Terms
Express terms are those clearly stated by the parties, either in writing or verbally. These are the provisions you can point to in a written contract or recall from a verbal agreement. In consumer contracts, express terms typically cover price, delivery dates, warranties, and termination rights. In business contracts, express terms often detail payment schedules, performance standards, intellectual property ownership, confidentiality obligations, and dispute resolution procedures. The Australian Consumer Law requires certain express terms to be transparent and presented clearly in standard form consumer contracts.
Implied Contract Terms
Implied terms are provisions that become part of the contract even though the parties never explicitly agreed to them. Courts imply terms in three main ways: terms implied by statute (such as consumer guarantees under the Australian Consumer Law), terms implied by custom or common practice in a particular trade or industry, and terms implied by the courts to give the contract “business efficacy” or make it work as the parties clearly intended. For example, employment contracts contain implied terms of trust and confidence even if never written down. Implied terms cannot contradict express terms in the contract.
Conditions And Warranties
Conditions are fundamental terms that go to the heart of the contract. If a condition is breached, the innocent party can terminate the contract and claim damages. Warranties are less critical terms. If a warranty is breached, the innocent party can claim damages but generally cannot terminate the entire contract. For example, in a contract to buy a vehicle, the promise that it’s roadworthy might be a condition, while the promise that it has a full tank of fuel might be a warranty. The distinction matters because it determines your remedies if something goes wrong.
What Is A Fixed Term Contract?
A fixed term contract is an agreement that operates for a specific, predetermined period, such as six months, two years, or five years. Unlike ongoing or open-ended arrangements that continue indefinitely until one party ends them, a fixed term contract automatically expires when the term ends unless the parties agree to renew or extend it.
You commonly see fixed term contracts in employment relationships (where someone is hired for a specific project duration), commercial service agreements (such as cleaning or IT support contracts), and commercial leases for retail or office space. The fixed term matters significantly for your obligations and termination rights.
Generally, neither party can simply walk away before the term expires without breaching the contract, unless the contract includes an early termination clause or both parties agree to end it early.
How Contract Terms Are Interpreted
When disputes arise about what contract terms mean, Australian courts follow established interpretation principles.
Courts read the contract as a whole document, not just isolated clauses. They give words their plain, ordinary meaning unless the context shows the parties intended something different. The surrounding circumstances at the time of contracting, known as the “factual matrix,” can help clarify ambiguous terms, but courts won’t rewrite what the parties clearly agreed to.
Unclear or ambiguous contract terms create significant risk. If a term is genuinely ambiguous, courts may interpret it against the party who drafted it, particularly in standard form contracts where one party had no real opportunity to negotiate. The NSW Supreme Court regularly hears disputes about contract interpretation, highlighting why clarity in drafting matters from the start.
Unfair Contract Terms
Under the Australian Consumer Law, certain contract terms may be deemed unfair and therefore void. These laws protect consumers and small businesses from one-sided terms in standard form contracts.
A term may be considered unfair if it:
- Creates a significant imbalance in the parties' rights and obligations under the contract
- Is not reasonably necessary to protect the legitimate interests of the party who would benefit from the term
- Would cause detriment to a party if enforced
If a term is found unfair, that specific term becomes void, but the rest of the contract generally remains enforceable. This means the contract continues to operate without the unfair provision rather than being invalidated entirely.
Can Contract Terms Be Changed After Signing?
Once a contract is signed, the terms generally cannot be changed by one party acting alone. Contract law requires agreement from all parties to vary the terms after formation.
Some types of contracts include variation clauses that specify how changes can be made, typically requiring written notice and acceptance. Even with a variation clause, both parties must genuinely agree to the change.
Simply sending a notification that terms will change is not enough unless the contract explicitly allows unilateral variation, and even then, such clauses may be unfair terms if the contract is a standard form consumer or small business contract. Any variation to contract terms should be properly documented in writing to avoid later disputes about what was actually agreed.
When Contract Terms Require Legal Review
Consider seeking legal advice before signing contracts with complex obligations or long-term commitments. Fixed term contracts that lock you in for extended periods carry real financial risk if you need to end the arrangement early. Standard form contracts offered on a take-it-or-leave-it basis often contain one-sided terms favoring the party who drafted them. Legal advice obtained before you sign can identify problematic terms and prevent disputes that cost far more to resolve later.
Summary
- Contract terms are the specific provisions that set out rights, obligations, and consequences in an agreement.
- Terms can be express (clearly stated), implied (added by law or custom), or classified as conditions (fundamental) or warranties (less critical).
- Fixed term contracts operate for a predetermined period and typically cannot be ended early without agreement or breach.
- Courts interpret terms by looking at the whole contract, plain meaning, and surrounding context.
- Unfair contract terms may be void under Australian Consumer Law if they create significant imbalance in standard form contracts.
- Contract terms generally cannot be changed by one party alone after signing.
- Legal advice before signing helps identify risks in complex, long-term, or one-sided contracts.
About Mark Lazarus – Director, Lazarus Legal
Admitted in both Australia and the UK, Mark brings more than two decades of global legal experience to Lazarus Legal. Having worked as a barrister, in private practice, and as in-house counsel for a major international consumer brand he combines courtroom-honed advocacy with commercial insight. Specialising in commercial law, intellectual property and dispute resolution, Mark advises startups, creative businesses, and established enterprises on transactions, trademarks, contract drafting, and litigation strategy. His cross-jurisdictional background and history as a former in-house legal director give clients confidence that their legal issues will be managed with both strategic foresight and commercial realism.