Master service agreement

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A master service agreement for use in business-to-business transactions for the supply of services, where services are provided pursuant to statements of work .

About this document

This standard document is a business-to-business master service agreement under which a supplier will supply services to the customer during the term (Agreement).

Under this Agreement, the parties agree a set of terms on which the supplier will provide certain services, as described and priced in a schedule. The relevant services may be provided over a longer period (for example, catering services, property maintenance services, or facilities services for several years) or a shorter period (for example, a few weeks' training or refurbishing an office). When the customer requires those services during the term of this Agreement, the parties will enter into a statement of work (SOW) (also known as a work order, service schedule, service order or work contract). For an example SOW, see Standard document, Statement of work.

It may be appropriate for this Agreement to include a service level agreement (SLA) to ensure that the customer receives a specified standard of service from the Supplier. For a template SLA that is drafted to apply to a technology context but can be adapted for the purposes of this Agreement, see Standard document, Service level agreement.

For further information and an overview of the key legal and commercial considerations relating to supply of service arrangements under a master agreement, see:

For an overview of Practical Law's supply chain management resources (including supply of services), see Toolkit, Supply chain management.

Drafting assumptions

Balanced approach. It is drafted from the perspective of a supplier, however, generally a balanced approach is taken. Issues relevant to a supplier and customer are set out in the drafting notes. See Drafting note, Drafting issues.

One contract. All the SOWs made under this document will become part of it. The SOWs do not form separate contracts. Another approach is for this Agreement to be drafted in a way that each SOW gives rise to a separate contract. For further information, see Practice notes:

One service recipient. The customer is the only party receiving the services from the supplier. The customer may want to agree terms governing the supply of services to other members of its group, as well as itself, which would require a more complex master service agreement (for example, where separate individual contracts are formed for each SOW to facilitate a multi-party approach by allowing the parties to name different service recipients in each SOW).

Business to business. It is drafted for use in a business-to-business context. It is not suitable for use in business-to- consumer transactions. Further legal considerations will apply and liability may arise under the unfair practices protections (see Practice note, Application of CCA and ACL to consumers).

Non-exclusive. The relationship between the parties is non-exclusive. The supplier is not providing the customer exclusively with the services and the customer is not obtaining the services exclusively from the supplier.

Not industry specific. It does not account for any industry-specific laws, rules, regulations or business practices that may apply to certain transactions or services.

Supply in Australia. The services are provided wholly in Australia subject to relevant Australian laws. Any disputes are determined by the courts of Australia. If this Agreement is to be used in respect of the supply of services outside of Australia, it will need to be adapted to reflect local law requirements and local legal advice should be sought. For information on issues arising out of international supply of services, see Supply of goods and services (international) toolkit.

Drafting issues

Unless specifically instructed to the contrary, it is usually appropriate to adopt a balanced approach when drafting. In any commercial arrangement where the parties are to have an ongoing relationship, it is generally in both parties' long-term best interests for them both to be happy with the terms of the agreement. Very often, a heavily biased draft:

When preparing or reviewing a master service agreement, the parties should consider adjusting the operative provisions to account for business factors specific to the transaction, including the:

Negotiating and drafting a contract for the supply of services will involve input from the business or the relevant commercial or operations managers, in particular when it comes to drafting the description and specifications of services and business mechanics that will require knowledge of the parties' operations.

One party (likely to be the supplier) should produce the first draft of this Agreement and the Schedules (in particular Schedule 1 (Service details), which sets out the commercial details of the arrangement including a description of the services and fees), which should then be agreed between the parties. Both parties will need to review the main operative clauses of this Agreement carefully to make sure that the mechanics described for the supply and provision of services are compatible with their actual business operations and the obligations they accept are realistically achievable.

Legal issues

The law relating to the supply of services in Australia derives from a combination of the common law and various federal, state and territory legislation. Key legal issues that can arise with respect to service arrangements include:

one-sided exclusions of liability or termination rights, may breach the unfair contract terms regime;

Competition law. For example, arrangements in relation to exclusivity of supply and pricing restrictions can present competition law issues under the Competition and Consumer Act 2010 (Cth).

Environmental, social and governance (ESG) obligations. Certain processes and supply chains involved in supply arrangements can present issues related to ESG risk, for example:

bribery and corruption may be a risk where government approvals or permits are required to provide a service or where attempting to secure a government entity as a customer; or

Intellectual property rights. Depending on the nature of the services and the output the supplier is required to deliver, the ownership and management of intellectual property rights may need to be carefully dealt with.

Privacy and data protection laws. Often the performance of services requires the collection, handling, holding, use, access or correction of personal information (including sensitive information ) and the parties will need to consider how the Privacy Act 1988 (Cth) (Privacy Act) and the Australian Privacy Principles apply to the performance of the services.

Regulatory and other compliance standards. Certain legislative or compliance standards may apply for certain industries or types of services such as industry codes .

Work health and safety laws. The performance of services can raise issues for both parties relating to work health and safety (WHS). WHS, known in some jurisdictions as occupational health and safety (OHS), is regulated by the Commonwealth, states and territories under different statutes.

Parties

It is essential to identify the appropriate parties to this Agreement. This ensures that the correct parties are legally bound by the terms of this Agreement. Corporate parties should be described by their Australian Company Number (ACN) or Australian Business Number (ABN), as well as the full name and registered office address of the company. The ACN or ABN is particularly important because it is not subject to change, unlike the company's name and registered office address.

It is also essential to establish the capacity in which a party is entering into this Agreement. A party may be acting in its own capacity, or may be acting in its capacity as nominee of or trustee for another company or person . Where a party is acting in its capacity as nominee or trustee, this Agreement should specifically state that capacity and details of the company or person for whom that party is acting.

Additional parties

Consider whether anyone in addition to the Supplier and Customer should be included as a party to this Agreement. If this Agreement includes an obligation on a person or company other than the Supplier or Customer, that person or company should be included as a party so that the other parties may enforce the obligation. One example is where the Supplier or Customer requires a third party to act as a guarantor .

BACKGROUND

Background

This section, sometimes referred to as the recitals, sets out the background and purpose of this Agreement. It can be a useful point to introduce unusual or complex features of the transaction that will assist the parties and their advisers in negotiating its terms. This helps with general contract interpretation because it sets the scene for the parties' agreement.

Most importantly, this section does not form part of this Agreement's operative terms. There should not be any rights or obligations of the parties set out in this section, as its provisions are not intended to have any direct legal consequences.

However, this section is important because it can provide evidence of the parties' intentions at the time they are entering into this Agreement. This can be very useful where a dispute arises in future and a party wishes to establish another party's intentions at the time they entered into this Agreement.

The Customer wishes to obtain and the Supplier wishes to provide the Services on the terms set out in this Agreement.

1. Definitions and interpretation

The main purpose of this clause is to reduce repetition and make this Agreement clearer and more concise. This is achieved by:

Giving specific meanings to particular words used in this Agreement. This avoids ambiguity and assists interpretation of this Agreement by clearly stating the meaning of a particular term, rather than parties having to rely on an interpretation of its ordinary meaning.

Setting out general rules that allow the parties to interpret certain words or phrases in a consistent manner, and that clarify the meaning of particular references when used in this Agreement.

Definitions

Broadly, the terms of an agreement will be interpreted by courts in accordance with their ordinary and natural meanings, and in the context of the surrounding circumstances (if those circumstances constitute admissible evidence) (Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; [1982] HCA 24, Mason J at CLR page 352). However, the parties often wish to provide their own definitions for particular words. In this case, a court will give effect to the agreed definition for a particular term, rather than taking its ordinary and natural meaning. The definitions can be tailored to the particular transaction and the parties' requirements.

Parties may also wish to import definitions from the Corporations Act 2001 (Cth) (CA 2001) or other statutes by including a general provision to that effect. If included, that provision should clearly explain that the imported statutory definitions only apply if the term or expression is not already defined in this clause (or, less commonly, that in those circumstances the statutory definitions will prevail).

Interpretation

The key principle for interpreting commercial contracts is to ascertain what an agreement or provision would mean to a reasonable business person having all available information that would have been reasonably available to the parties in the circumstances ( Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 604; [2014] HCA 7 at CLR [35]).This test is an objective one, and it does not turn on the actual intended meaning of the parties to an agreement.

To ensure their agreements are as clear and unambiguous as possible, parties usually agree a common set of interpretation rules between them. Courts will give effect to these agreed rules (and the parties' intentions) in preference to any general principles of contract construction. These interpretation clauses are commonly used in many different types of commercial agreement, and can also be tailored to the particular transaction and the parties' requirements.

Definitions: APP and APP Entity (optional)

These definitions are used in optional Clause 17 (Privacy and data protection) and should be deleted if that clause is not used in this Agreement.

Australian Consumer Law: the Australian Consumer Law set out in Schedule 2 to the Competition and Consumer Act 2010 (Cth).

Business Day: a day on which banks are open for business in [CITY], other than a Saturday, Sunday or public holiday in that city.

Definitions: Business Hours

This definition is used in Clause 8 (Fees and expenses) to calculate SOW Fees, where calculated on a time and materials basis. Amend the hours as appropriate.

a change in the shareholding of the party (provided that the party is not listed on a recognised securities exchange) that results in [a different person or group of persons having control of the composition of the board of directors or more than [50 OR [NUMBER]]% of the shares giving a right to vote at general meetings OR the person or group of persons who at the date of this Agreement control the composition of the board of directors or more than [50 OR [NUMBER]]% of the shares giving a right to vote at general meetings ceasing to have control of the composition of the board of directors or more than [50 OR [NUMBER]]% of the shares giving a right to vote at general meetings]; or

a change in the shareholding of the party's holding company (provided that the holding company is not listed on a recognised securities exchange) that results in [a different person or group of persons having control of the composition of the board of directors or more than [50 OR [NUMBER]]% of the shares giving a right to vote at general meetings OR the person or group of persons who at the date of this Agreement control the composition of the board of directors or more than [50 OR [NUMBER]]% of the shares giving a right to vote at general meetings ceasing to have control of the composition of the board of directors or more than [50 OR [NUMBER]]% of the shares giving a right to vote at general meetings].

Definitions: Change of Control

This definition will only apply where the parties are corporate entities. Consider whether this definition needs to be amended to reflect the circumstances of this Agreement. The parties should be aware that any resulting advantage will operate reciprocally.

The second alternative wording in paragraph (b) and paragraph (c) of the definition captures a situation where, after this Agreement is entered into, there is a change to a party's ownership that results in there being no single shareholder or group of shareholders that have control of the party. For example, where a majority shareholder sells some of its shares in the party to one or more other shareholders with the result that no shareholder holds more than 50% of the party. Consider carefully in each case whether such a situation should give rise to a right to terminate under Clause 14 (Termination and suspension).

Consumer Price Index: the Consumer Price Index (All Groups) (Australia) published by the Australian Bureau of Statistics.

Customer Equipment: any equipment, including machinery, components, parts, devices, appliances, apparatus, tools, goods, systems, cabling or other facilities, provided to the Supplier by the Customer[ or its Representatives ]that is used directly or indirectly to supply the Works including any such items specified in a SOW.

Definitions: Customer Equipment (optional)

This definition is used in optional Clause 5.2(b) (Customer Materials and Customer Equipment) and should be deleted if that clause is not included in this Agreement. If including, the parties should note it is drafted broadly and includes equipment specified in a SOW and any other equipment the Customer may provide, including any equipment provided by its Representatives (including third parties). The Supplier should consider whether the definition should be drafted more narrowly, particularly if it is to be responsible for keeping the Customer Equipment in good working order and compliant with industry standards. The definition may be amended to remove categories of equipment that are not relevant to the Services, or it may be replaced with references to specific equipment if known at the time this Agreement is being concluded.

Customer Materials: all data, documents, information, items and materials in any form (whether owned by the Customer, its Representatives or a third party) that are provided by the Customer to the Supplier [in connection with the Works or this Agreement, including the items provided pursuant to Clause 5.2(a) OR as specified in the relevant SOW].

Definitions: Customer Materials (optional)

This definition is used in optional Clause 5.2(a) (Customer Materials and Customer Equipment) and should be deleted if that clause is not included in this Agreement. If including, consider:

The first option is drafted widely to capture everything provided by the Customer to the Supplier, whether or not this is listed in a SOW. The reason for this is that the Intellectual Property Rights indemnity given by the Supplier at Clause 20.1 (Supplier Intellectual Property Rights indemnity) exempts claims where the alleged infringement arises from the use of Customer Materials in the development of any Deliverable). As such, a wider definition of Customer Materials protects the Supplier by narrowing the scope of the Supplier's indemnity.

The second option is drafted narrowly to include only the materials provided by the Customer as listed in the SOW. This narrower definition of Customer Materials protects the Customer by broadening the scope of the Supplier's indemnity at Clause 20.1 (Supplier Intellectual Property Rights indemnity).

Where the parties land will depend on the nature of the Customer Materials, the risk of infringement and bargaining power of the parties.

Also, where the unfair contract terms regime applies to this Agreement, care should be taken to ensure that the risk of infringement is not unfairly placed on the party that is not in the best position to manage it (for example, if the Customer Materials are defined too narrowly and the Customer is actually the party best placed to ensure the materials are not going to infringe a third party's rights). For further information and indicators of unfair terms, see Practice note, Service agreements: Unfair contract terms and Checklist, Application of the unfair contract terms regime and assessing whether a term is unfair: Indicators of unfair contract terms.

Cross-references and consistency with other terms

Data Breach Investigation: an investigation as required to be carried out in accordance with Clause 17.4(c).

Data Incident: an Eligible Data Breach that has, or is reasonably suspected to have, occurred in respect of any Personal Information the Supplier has collected, held, used or disclosed in the course of or relating to this Agreement.

Definitions: Data Breach Investigation and Data Incident (optional)

These definitions are used in optional Clause 17 (Privacy and data protection) and should be deleted if that clause is not used in this Agreement.

Deliverables: any outputs of the Works to be provided by the Supplier to the Customer as specified in a SOW [and any other documents, products and materials provided by the Supplier to the Customer in relation to the Works (excluding the Supplier Equipment)].

Definitions: Deliverables

This definition refers to the output of the Works, known as the Deliverables, that are specified in a SOW. This is a narrow definition, which is more favourable to the Supplier (as it makes delivery more straightforward) but the wording in square brackets can be used to broaden it, which is more favourable to the Customer (as any warranties regarding the Services will apply to the Deliverables).

Eligible Data Breach: an eligible data breach as that term is defined in the Privacy Amendment (Notifiable Data Breaches) Act 2016 (Cth), occurring on or after 22 February 2018.

Definitions: Eligible Data Breach (optional)

This definition is used in optional Clause 17 (Privacy and data protection) and should be deleted if that clause is not used in this Agreement.

Government Agency: any government body, department, commission, agency or entity or public authority or judicial body or tribunal.

Group: in relation to a company, that company and its Related Bodies Corporate [from time to time OR at the date of this Agreement].

GST Law: has the meaning given in Part 6-3 of A New Tax System (Goods and Services Tax) Act 1999 (Cth).

it is insolvent as defined by section 95A of the Corporations Act as disclosed in its accounts or otherwise, states that it is insolvent, is presumed to be insolvent under an applicable law (including under section 459C(2) or section 585 of the Corporations Act) or otherwise is, or states that it is, unable to pay all its debts as and when they become due and payable;

any step is taken to appoint a receiver, a receiver and manager, a liquidator or a provisional liquidator or other like person to it or any of its assets, operations or business;

an administrator is appointed to it under section 436A, section 436B or section 436C of the Corporations Act;

a controller (as defined in section 9 of the Corporations Act) is appointed to it or any of its assets;

an application is made to a court for an order, or an order is made, that it be wound up, declared bankrupt or that a provisional liquidator, receiver or receiver and manager be appointed, and that application is not withdrawn, struck out or dismissed within [15 OR [NUMBER]] Business Days of it being made;

any step is taken to enter into an arrangement or composition with one or more of its creditors, or an assignment for the benefit of one or more of its creditors[, in each case other than to carry out a reconstruction or amalgamation while solvent];

it proposes a winding-up, dissolution or reorganisation, moratorium, deed of company arrangement or other administration involving one or more of its creditors;

it is taken to have failed to comply with a statutory demand under section 459F(1) of the Corporations Act;

a notice is issued under section 601AA or section 601AB of the Corporations Act [and not withdrawn or dismissed within [15 OR [NUMBER]] Business Days];

a writ of execution[ for an amount of in excess of $[AMOUNT]] is levied against it or[ a material part of] its property[ which is not dismissed within [15 OR [NUMBER]] Business Days];

it ceases to carry on business or threatens to do so, other than in accordance with the terms of this Agreement; or

anything that occurs under the law of any jurisdiction which has a substantially similar effect to any of the events set out in paragraphs (a) to (k) of this definition.

Intellectual Property Rights: all intellectual property rights of any kind, in any jurisdiction, subsisting now or in the future (including, without limitation, business, company or trade names, domain names, patents, inventions, copyright, design rights, know-how, trade marks, the right to sue for passing off and rights to use, and protect the confidentiality of, Confidential Information), whether registered or unregistered, and including the rights to apply for or renew the registration of any such rights and any rights the subject of any lapsed application or registration.

Definitions: Intellectual Property Rights

The definition of intellectual property rights is based on Australian law but is drafted broadly to include rights that are not specifically recognised in Australia or may not subsist due to the nature of certain types of subject matter. For example, Australia (unlike the United Kingdom) does not have a concept of an unregistered design right .

The general wording used in the definition seeks to include similar or equivalent forms of protection worldwide. Moral rights which are related to copyright (and are separately dealt with in Clause 18.4 (Further acts and moral rights)) and other personal rights which by law are non-assignable are outside the scope of this definition.

The nature of the Services and any Intellectual Property Rights associated with the Services (owned by the Supplier or third parties).

Whether the definition should include rights obtained in other jurisdictions or apply to commercial activity outside Australia.

Interest Rate: for a given date, the daily cash rate set by the Reserve Bank of Australia and displayed at or about 2.30 pm (Sydney time) on that date on the Reserve Bank of Australia website.

Definitions: Interest Rate (optional)

Include this definition where default interest (see Clause 11 (Default interest)) is calculated by reference to the daily cash rate set by the Reserve Bank of Australia (RBA). If default interest is calculated by another method or rate, delete this definition.

Key Personnel: the Supplier Contract Manager and the individuals identified as key personnel in a Statement of Work, or any replacement individuals appointed by the Supplier pursuant to Clause 4.3.

Definitions: Key Personnel (optional)

This definition is used in optional wording at Clause 4.3 (Supplier Contract Manager and Key Personnel) and should be deleted if that clause is not included in this Agreement.

Loss: losses, damages, liabilities, costs, charges or expenses and all interest, penalties and legal costs (calculated on a full indemnity basis) and all other reasonable professional costs and expenses.

Mandatory Policies: the Customer's business policies set out at Schedule 3[, as amended by the Customer and notified to the Supplier from time to time].

Definitions: Material Breach (optional)

This definition is used in optional Clause 14.3 (Definition of Material Breach) and should be deleted if that clause is not included in this Agreement.

Definitions: Personal Information and Privacy Act (optional)

These definitions are used in optional Clause 17 (Privacy and data protection) and should be deleted if that clause is not used in this Agreement.

Reference Fees: the standard fees for the Services or the method for their calculation as set out in Paragraph 4 of Schedule 1.

Representatives: a party's directors, officers, employees, agents, consultants, contractors, professional advisers and any member of its Group.

Definitions: Sensitive Information (optional)

This definition is used in optional Clause 17 (Privacy and data protection) and should be deleted if that clause is not used in this Agreement.

Definitions: Services

This is the list of Services set out in Paragraph 3 of Schedule 1 (Service details) that the Customer can request under During the Term: (Statements of work (SOWs)).

SOW: a detailed plan, agreed in accordance with Clause 3, describing the services to be provided by the Supplier, the timetable for their performance and the related matters listed in the template SOW set out in Schedule 2.

Supplier Equipment: any equipment, including machinery, components, parts, devices, appliances, apparatus, tools, goods, systems, cabling or other facilities, provided and used by the Supplier[ or its Representatives] directly or indirectly in the supply of the Works, including any such items specified in a SOW.

Definitions: Supplier Equipment

This definition is drafted widely to cover all equipment provided and used by the Supplier in the performance of the Works, whether or not it is listed in a SOW, and includes any equipment provided by its Representatives (including third parties). The Customer should consider whether the definition should be drafted more narrowly, particularly if it is to be responsible for keeping the Supplier Equipment in good working order and compliant with industry standards or insuring such equipment. The definition may be amended to remove categories of equipment that are not relevant to the Services (or to include categories that are) or it may be replaced with references to specific equipment if known at the time this Agreement is being concluded.

Works: the Services that are provided by the Supplier under a SOW[, including services which are incidental or ancillary to the Works].

Definitions: Works

The optional wording in square brackets widens the definition of Works to cover those services that are incidental or ancillary to the Works. There are arguments for and against this optional wording:

the advantage is that the wording reduces the risk that those Works are outside the scope of this Agreement, and therefore the Supplier's liability for those incidental services is likely to be covered by the cap on liability at Clause 21.1 (Maximum aggregate liability); and

the disadvantage is that those incidental services are subject to the same performance obligations as the Works and covered by the fees payable for that SOW. The Supplier must therefore ensure that if there is scope creep, the price is increased accordingly. This could be achieved by scaling the Reference Fees or price in the SOW, invoking the SOW change control procedure under Clause 7 (SOW change control procedure) or entering into a new SOW for the incidental services.

Either way, the Supplier should ensure that it has robust contract management measures in place to ensure that it is only providing services that are contractually covered by the SOW, and that it monitors any scope creep that could result in an increase in its costs.

For the Customer, the advantage is that those incidental and ancillary services are subject to the same performance obligations as the Works and covered by the fees payable for the SOW they relate to.

In this Agreement the following rules of interpretation apply, unless the contrary intention appears or context otherwise requires:

(a) headings and subheadings are for convenience only and do not affect the interpretation of this Agreement;

(b) references to clauses, Schedules, annexures, appendices, attachments and exhibits are references to the clauses of, and the Schedules, annexures, appendices, attachments and exhibits to, this Agreement;

(d) references to a party to any agreement or document include that party's permitted assignees and successors, including executors and administrators and legal representatives;

(e) words denoting the singular include the plural and words denoting the plural include the singular;

(g) the word "person" includes any individual, corporation or other body corporate, partnership, joint venture, trust, association and any Government Agency;

(h) a reference to a body (other than a party to this Agreement), whether statutory or not, that ceases to exist or has its powers or functions transferred to another body is a reference to the body that replaces it or that substantially succeeds to its powers or functions;

(i) a reference to any agreement or document (including this Agreement) includes any amendments to or replacements of that document;

legislation, regulations and other instruments made under legislation and any consolidations, amendments, re-enactments or replacements of them;

and is a reference to that law as amended, consolidated, re-enacted, replaced or applied to new or different facts;

(k) any promise, agreement, representation or warranty given or entered into on the part of two or more persons binds them [jointly and each of them severally OR jointly but not severally OR each of them severally];

(l) any promise, agreement, representation or warranty given or entered into on the part of two or more persons is for the benefit of them [jointly and each of them severally OR jointly but not severally OR each of them severally];

(m) no provision of this Agreement will be construed adversely to a party because that party was responsible for the preparation of that provision or this Agreement;

(n) if a period of time begins on a given day or the day of an act or event, it is to be calculated exclusive of that day;

(p) a reference to a day is to be interpreted as the period of time commencing at midnight and ending 24 hours later;

(r) a reference to a year is to be interpreted as the [12-month period starting on the Commencement Date and each subsequent consecutive 12-month period OR period from [1 January OR [DATE]] to the following [31 December OR [DATE]]];

1.2(r) Year

The provisions of this Agreement have been drafted on the basis of the definition set out in the first option in Clause 1.2(r). If adopting a definition of year that starts on a date other than the Commencement Date (the second option in Clause 1.2(r)), consider amending the obligations throughout this Agreement that reference the term "year". For example, the following provisions may require amendment:

If adopting a definition of year that starts on a date other than the Commencement Date, also consider whether amendment is required to the above clauses to indicate part of a year will be treated pro rata .

(s) if any act is required to be performed under this Agreement by a party on or by a specified day and the act is performed after 5.00 pm on that day, the act is deemed to be performed on the next day;

(t) if any act is required to be performed under this Agreement on or by a specified day and that day is not a Business Day, the act must be performed on or by the next Business Day;

(u) a reference to an amount of dollars, Australian dollars, $ or A$ is a reference to the lawful currency of the Commonwealth of Australia, unless the amount is specifically denominated in another currency;

(v) specifying anything in this Agreement after the terms "include", "including", "includes", "for example"', "such as" or any similar expression does not limit the sense of the words, description, definition, phrase or term preceding those terms unless there is express wording to the contrary;

(x) a reference to writing or written includes fax and email (unless otherwise expressly provided in this Agreement);

(y) references to a document in agreed form are to that document in the form agreed by the parties and initialled by them or on their behalf for identification;

(z) where a word or phrase is defined, other parts of speech and grammatical forms of that word or phrase have corresponding meanings;

(aa) an agreement other than this Agreement includes a deed, undertaking or legally enforceable agreement or understanding whether in writing or not; and

(bb) if there is any conflict between the terms of the main body of this Agreement and its Schedules and attachments or any SOW, the terms of the main body of this Agreement will prevail.

1.2(bb) Conflict and precedence of terms

Where the terms of an agreement are divided between more than one document (in the case of this Agreement, a master service agreement and a SOW), the potential exists for provisions in one document to conflict with those in the other. To avoid problems, the precedence between them must be settled from the outset and clearly stated in this Agreement. Generally, the order of precedence will depend on the reason for using a master service agreement.

Clause 1.2(bb) gives priority to the terms of this Agreement. If the transaction-specific terms of a SOW are to take priority, this clause will require amendment. However, there is risk in this approach as parties may inadvertently (or intentionally) contradict or override important terms of this Agreement, particularly where legal practitioners are not routinely involved in the negotiation and completion of SOWs.

See also Clause 25.4 (Entire agreement), which deals with the issue of priority with respect to this Agreement and terms and conditions contained in other documents.

2. Term

As with any commercial agreement, the length of the term will be a matter of agreement for the parties. The importance of clearly setting out the term of an agreement is frequently underestimated. It is a provision that will almost certainly be referred to, possibly several times, during the course of an agreement, so it must be clear and unambiguous.

Clause 2 provides for an initial fixed Term followed by a rolling Notice period. Termination of this Agreement is not automatic at the end of the Term. Instead, one party must provide a minimum period of written Notice to bring this Agreement to an end. The Notice is only valid if it is given at such time that Notice period expires on or after the Expiry Date. This option provides certainty for both parties that there is a minimum contract term, but then provides flexibility as to exactly when it may be brought to an end. For further certainty, this clause also provides for when termination will take effect depending on whether there are any SOWs on foot at the time the Notice is given.

Cross-references and consistency with other terms

This clause should be drafted in conjunction with Clause 14 (Termination and suspension), which sets out the parties' rights to terminate the contract. It should also cross-reference to any other termination rights in this Agreement such as the right to terminate with respect to a Force Majeure Event (Clause 13.4 (Termination right)).

This Agreement commences on the Commencement Date and ends when one party gives to the other party at least [NUMBER] [Business Days' OR days' OR weeks' OR months'] written Notice to terminate, expiring on or after the Expiry Date, unless terminated earlier in accordance with Clause 13.4 or Clause 14 (Term). Where Notice to terminate is given:

(a) termination only takes effect on the completion of all SOWs entered into before the date on which the Notice to terminate is given;

(b) termination takes effect immediately, where there are no uncompleted SOWs as at the date Notice to terminate is given; and

(c) the parties will not enter into any further SOWs after the date on which Notice to terminate is given.

3. Statements of Work (SOWs)

While this Agreement sets out the Services and Reference Fees (see Schedule 1 (Service details)), the purpose of the SOW is then to fill out the variables specific to a particular job, such as the start date and timetable, Deliverables, Milestones, location and the actual fees (defined as SOW Fees) for the Works (as applicable). The template SOW at Schedule 2 (Template SOW) needs to clearly identify all the information that is required. It is therefore important that the parties take the time to agree the headings and the information that will be included. In practice, SOWs will often be completed and managed by non-legal personnel (commercial managers, procurement teams or operational teams). Having a detailed template with instructions on how each heading should be completed will make the whole process easier for the contract management team. For further guidance on developing and implementing a contract management process, see Practice note, Effective contract management.

Discretion to provide or request Services

It is important to check whether there have been any pre-contract discussions or assurances on what Services the Supplier must provide or what Services the Customer must request in the future (in addition to any services for which SOWs are agreed on signature of this Agreement). Unless such assurances are reflected in this Agreement, it will be difficult to hold the relevant party to them.

Supplier not obliged to provide requested Services

Clause 3(b)(ii) gives the Supplier the option of turning down the Customer's request to prepare a SOW. The Supplier may need to do this if it does not have the resources to perform the requested Services or has the option of more profitable work elsewhere.

In practice, if the Supplier is obliged to provide requested Services but does not want to, it might opt to present unattractive terms in the draft SOW and refuse to agree to amendments to discourage the Customer. However, where the Services and the pricing for them are already specified in detail in the Schedules, this may be difficult and could result in complaints of bad faith. It is therefore preferable to state the position clearly at the outset of the business relationship.

Customer not obliged to use the Supplier for Services

During the Term: makes it clear that the Customer is not obliged to request any Services from the Supplier. This provision counterbalances the right of the Supplier to refuse to provide requested Services to the Customer.

Commitment to provide and purchase Services

Alternatively, if the Supplier must provide Services whenever requested, then Clause 3(b)(ii) should be amended and the element of negotiation removed. The Supplier is likely to require tight parameters around any such right for the Customer, such as minimum Notice of the Customer's requirements to ensure a sufficient lead time for the Supplier to be able to provide the requested Services and a cap on what can be requested within a particular time frame. The Supplier is also likely to want some commitment from the Customer that is reflected in this Agreement such as:

A right of first refusal clause. To oblige the Customer to offer work to the Supplier, on the agreed terms, before offering it to third parties on no more favourable terms.

The difficulty with such terms however is that they can be impractical and uncommercial to comply with and enforce, for example, such rights:

can result in delay that jeopardises the Customer's business because the Customer must re-offer the work to the Supplier before making concessions in negotiations with third parties;

require the Customer to disclose details of negotiations with third parties (that are often subject to confidentiality obligations and in any case the Customer is likely to be reluctant to disclose); and

are difficult for the Supplier to police and would require audit rights (and any resulting audit process would be time consuming for both parties to undertake).

An exclusivity clause. To require the Customer to buy all its requirements for the Services from the Supplier. However, such a provision needs to be carefully drafted. Consideration should be given to:

unfair restrictions on the Customer's freedom to obtain slightly different services or packages of services elsewhere; and

providing an exception to the Customer's obligation to exclusively buy from the Supplier where the Supplier cannot meet the Customer's requirements.

A minimum spend requirement. To commit the Customer to buy services to a certain minimum value from the Supplier over a specified period. Consideration should be given to providing an exception to the Customer's obligation to buy a minimum value where the Supplier cannot meet the Customer's requirements.

Where the unfair contract terms regime applies to this Agreement, care should be taken if amending this clause to ensure that such amendment does not result in a significant imbalance in the rights of the parties with the result that the term is unfair. For further information and indicators of unfair terms, see Practice note, Service agreements: Unfair contract terms and Checklist, Application of the unfair contract terms regime and assessing whether a term is unfair: Indicators of unfair contract terms.

Payment for preparation of SOW

As this Agreement is generally drafted in a balanced way, an obligation to pay for the preparation of a SOW has not been included. However, the Supplier may want to include such an obligation where the preparation of SOWs requires a moderate to high investment of time or other expense. In such cases, the parties may agree to include a clause that entitles the Supplier to charge for the preparation of all SOWs, for example, on a time and materials basis calculated on the Supplier's daily rate or the parties may agree to a fixed rate per SOW. In which case, the parties should amend this Agreement to include the following or similar wording:

"The Supplier may charge for the reasonable time it spends on preparing and negotiating SOWs on a [time and materials basis in accordance with the Supplier's standard daily rates OR fixed basis at the rate] set out in Paragraph 3 of Schedule 1."

(a) the Customer may procure any of the Services from the Supplier by agreeing a SOW with the Supplier in accordance with this Clause 3;

the Customer must ask the Supplier to provide any or all of the Services and provide the Supplier with as much information as the Supplier reasonably requests in order to prepare a draft SOW for the Services requested;

following receipt of the information requested from the Customer the Supplier must, as soon as reasonably practicable either inform the Customer that it declines to provide the requested Services or provide the Customer with a draft SOW; and

if the Supplier provides the Customer with a draft SOW pursuant to Clause 3(b)(ii) and that draft SOW is agreed by the parties (subject to any negotiations and agreed amendments), the Supplier will provide a final version that both parties agree to sign.

(c) once a SOW has been agreed and signed by the parties, no amendment will be made to it except in accordance with Clause 7;

(e) SOWs are not separate contracts

Clause 3(e) makes it clear that all SOWs together with this document form one agreement. Under this structure, the SOWs do not form separate contracts that can be terminated individually. The consequence of this is that to end a SOW early, the parties must go through the SOW change control procedure set out at Clause 7 (SOW change control procedure).

Another approach is for this Agreement to be drafted in a way that each SOW gives rise to a separate contract. Under this structure, this document is a separate facilitative agreement that sets out the terms on which future contracts will be made between the parties. Each contract incorporates the terms of this document but is considered separate and distinct from it. This structure may also allow entities other than the original signatories to take advantage of its terms.

This clause should be amended to reflect the structure that best suits the parties' needs having regard to the nature of the Services and the relationship between the parties.

For further information on structuring master agreements and supplementary details contained in a separate document, see Practice notes:

(f) if there is an inconsistency between the terms set out in this document and the terms set out in a SOW, precedence is determined under Clause 1.2(bb).

4. Supplier's obligations

Appointing a Supplier Contract Manager (and in some cases, Key Personnel) to be responsible for the performance of the Works.

4.1 Obligation to provide the Works and Deliverables

Clause 4.1 places obligations on the Supplier to provide the Works and Deliverables. Generally, the Supplier will want these obligations to be simple allowing it flexibility in the provision of Services whereas the Customer will want these obligations to be comprehensive. This wording should be adapted to the circumstances of the transaction and the substance of the Services to be supplied, including any requirements for the standard of service the Supplier is to provide.

The parties should be aware of terms that may be implied into this Agreement by law (including in certain circumstances, the consumer guarantees under the Australian Consumer Law) and to give this Agreement business efficacy.

Cross-references and consistency with other terms

(b) perform the Works with the highest level of care, skill and diligence in accordance with best practice in the Supplier's industry, profession or trade;

4.1(b) Standard of care

Clause 4.1(b) requires the highest level of care and best practice to be followed in the supply of Services. This is a higher standard of care than the negligence standard, which requires that reasonable care and skill be used. For further information, see Practice note, Service agreements: Standard of performance.

(d) ensure that all goods, materials, standards and techniques used in providing the Works are of the best quality and are free from defects in workmanship, installation and design;

(e) [ensure that the Supplier Equipment used to provide the Works is in good working order and suitable for the purposes for which it is used in relation to the Works and conforms to [all relevant industry standards or requirements OR [STANDARDS WITH WHICH SUPPLIER EQUIPMENT IS REQUIRED TO COMPLY];] [and]

4.1(e) Condition of Supplier Equipment (optional)

Clause 4.1(e) places obligations on the Supplier with respect to the condition of its equipment. The Customer may push to include this obligation where such equipment is being used at the Customer's premises to safeguard its personnel and property or where the Supplier requires an equivalent obligation regarding the Customer Equipment under optional Clause 5.2(b) (Customer Materials and Customer Equipment).

4.2 Time for performance

Generally, parties to a commercial agreement will specify timelines or deadlines for performance of the contract and not leave such dates to be implied (see Practice note, Service agreements: Time for performance of services and Implied time for performance). Time for performance, however, may be a contentious issue between the parties depending on the nature of the Services and requirements of the parties (in particular the Customer). Clause 4.2 provides two drafting options:

Option one reflects the position the Supplier is likely to want and limits the Customer's remedies if deadlines or Milestones are not met. It provides that:

time is not of the essence in respect of performance dates. If time were of the essence for a deadline, the Customer would have a right to terminate if the deadline were missed. If there is no statement that time is of the essence, a party can argue that such a term should be implied. Including the statement that time is not of the essence in this clause should defeat such arguments (for further information, see Standard clause, Time of the essence); and

as optional wording, the Supplier need only use reasonable endeavours to meet the deadlines, which in any case are just estimates.

Option two reflects the position that the Customer is likely to want and provides that time is of the essence. Making time of the essence means that if the deadlines are missed, the Customer can terminate the whole Agreement (as SOWs do not form a separate agreement, see Drafting note, SOWs are not separate contracts). It provides rights for the Customer that are in addition to, or enhance, its common law rights to terminate and claim damages, in particular the Customer can stop a particular SOW without terminating this Agreement as a whole.

Carefully consider whether this is appropriate for relevant deadlines and where the unfair contract terms regime applies to this Agreement, consider if the rights of the Customer under this clause may be unfair. For further information and indicators of unfair terms, see Practice note, Service agreements: Unfair contract terms and Checklist, Application of the unfair contract terms regime and assessing whether a term is unfair: Indicators of unfair contract terms.

[The Supplier must [use reasonable endeavours to] meet any deadlines or Milestones specified in a SOW but any such dates will be estimates only and time for performance by the Supplier is not of the essence.

Time is of the essence in relation to any deadlines or Milestones. If the Supplier fails to meet the relevant deadlines or Milestones, then (without prejudice to the Customer's right to terminate this Agreement and any other rights it may have), the Customer may:

(a) refuse to accept any subsequent performance of the Works under the relevant SOW that the Supplier attempts to make and have any sums previously paid in advance by the Customer to the Supplier in respect of rejected Works or Works not rendered under the relevant SOW refunded by the Supplier;

(b) purchase substitute services from elsewhere [and reclaim from the Supplier any additional costs incurred as a result of procuring such services from a third party instead of the Supplier]; and

(c) hold the Supplier accountable for any loss and additional costs incurred as a result of the failure of the Supplier to meet the relevant deadlines or Milestones (including costs incurred under Clause 4.2(b))].

4.3 Supplier Contract Manager and Key Personnel

Clause 4.3 provides that the Supplier is required to appoint a contract manager for each SOW. Generally, this person will be the main contact for, and responsible for the performance of, the SOW. This obligation is drafted with a warranty that the Supplier Contract Manager has authority to commit the Supplier, including by signing SOWs and Change Orders. As often the SOW will be completed by non-legal personnel, this clause is noted in the SOW to remind personnel completing the SOW to nominate a contract manager with the requisite authority.

The optional wording in Clause 4.3(d) provides a requirement to appoint a contract manager and a team of key personnel. This optional wording may be required by the Customer where it engages the Supplier specifically to have a particular person or team perform the Services or would like consistency in the provision of the Services. Whether this is accepted will depend on:

The nature of the Works. If the Works are general in nature, it is unlikely that the Supplier will be able to make those personnel exclusively available as it may be providing similar services to another customer. However, if the works are very niche or bespoke to the Customer, then the Supplier may be able to meet this requirement as it is unlikely that another Customer will be seeking those exact same services.

Importance of the Works to the Customer. If the Works are critical to the operation of the Customer's business, then the Customer may insist on including this clause to ensure that the Supplier's personnel are not distracted by other customers that they are working for.

Organisational structure of the Supplier. The Supplier may have insufficient resources to meet this request, or the employees involved with providing the Works may work across more than one business unit within its business.

If including Clause 4.3(c), the optional wording in brackets places more onerous obligations on the Supplier with respect to the Key Personnel and except where the Services are essential to the Customer's business the Supplier is unlikely to agree to such a restraint on its resourcing.

(a) must identify in each SOW a contract manager who is appointed in respect of the relevant Works to be performed (Supplier Contract Manager) [and the Key Personnel];

(b) warrants that the Supplier Contract Manager has authority to contractually bind the Supplier on all matters relating to the relevant Works under that SOW (including by signing Change Orders); [and]

(c) [must use reasonable endeavours to ensure that the same person acts as the Supplier Contract Manager throughout the term of the relevant SOW, but ]may replace the Supplier Contract Manager from time to time where reasonably necessary in the interests of the Supplier's business[; and

use the Key Personnel in the provision of the Works [and procure that the Key Personnel spend [all OR at least [PERCENTAGE]%] of their working hours on the provision of the Works];

ensure that all Key Personnel involved in the provision of the Works have suitable skills and experience to enable them to perform the tasks assigned to them, and that such personnel are in sufficient number to enable the Supplier to fulfil its obligations under this Agreement;

promptly inform the Customer of the absence (or the anticipated absence) of any of the Key Personnel[, and if so required by the Customer, provide a suitably qualified replacement for such individual]; and

use its best endeavours not to make any changes to the Key Personnel throughout the term of the relevant SOW[ and obtain the prior [written] approval of the Customer [(such approval not to be unreasonably withheld or delayed)] to any replacements for such individuals].]

4.4 Subcontracting (optional)

Clause 4.4 is optional and allows the Supplier to appoint subcontractors to assist with the provision of Services. This may be required, for example, where the Supplier does not have all the required expertise or capability to perform the Services. Subcontractors are also commonly used in a number of trades and industries including construction, transportation, manufacturing and information technology.

If allowing subcontracting, the parties should amend this clause to reflect the agreed scope of the Supplier's right to appoint subcontractors.

Cross-references and consistency with other terms

Clause 25.1 (Assignment or Other Dealings), which governs the assignment of rights and obligations under this Agreement, to ensure consistency between the provisions.

The Supplier may appoint subcontractors to perform certain Services under this Agreement[, subject to:

(b) the subcontractor providing written agreement in a form reasonably acceptable to the Customer to comply with all applicable terms of this Agreement].]

4.5 Supplier licences, permits and consents (optional)

Clause 4.5 is optional and should be included where the parties wish to provide obligations with respect to licences, permits or consents required for the Works. This optional obligation could refer, for example, to obtaining:

Consent from a third party for the Customer to use its intellectual property rights in the Deliverables.

Whether the same licences, permits or consents will apply (and can be specified in this clause) or will such requirements change from SOW to SOW (and should be specified in the relevant SOW).

Where the Supplier is responsible for obtaining all licences, permits or consents for the Works, delete the optional wording "(to the extent related to the provision of Works by the Supplier including its staff and equipment)".

Adding in the date by which specific licences, permits or consents must be given. If this approach is taken, consider if a sunset clause is necessary to allow for termination in circumstances where it is not possible to obtain the licence, permit or consent.

Cross-references and consistency with other terms

Optional Clause 5.5 (Customer licences, permits and consents) to ensure there is no overlap in obligations and that responsibility for obtaining licences, permits and consents is clear.

Before the date on which the Works are due to start or by the dates specified in the relevant SOW, the Supplier must obtain and maintain [[SPECIFY ALL REQUIRED LICENCES, PERMITS AND CONSENTS] OR the licences, permits and consents specified in the relevant SOW] required to comply with all relevant legislation, regulations or industry codes[ (to the extent related to the provision of Works by the Supplier including its staff and equipment)] to enable the Supplier to provide those Works.]

4.6 Compliance with Customer's health and safety requirements (optional)

Clause 4.6 is optional and should be included where the Supplier is performing the Works on the Customer's premises and the Customer requires the Supplier to comply with its health and safety requirements. The optional wording may be required where the Customer has more than one premises, and different health and safety requirements apply at each premises.

Cross-references and consistency with other terms.

This clause should be drafted in conjunction with optional Clause 5.7 (Health and safety requirements).

The Supplier must use reasonable endeavours to observe all health and safety requirements that apply at the Customer's premises[ where it will perform the Works] and that have been communicated to it under Clause 5.7, provided that it will not be liable under this Agreement if, as a result of such observation, it breaches any of its obligations under this Agreement.]

4.7 Compliance with Customer's data security requirements (optional)

Clause 4.7 is optional and should be included where the Supplier is performing the Works using the Customer's facilities and has access to the Customer's electronic or physical systems, files and data, and the Customer requires the Supplier to comply with its data security requirements.

Cross-references and consistency with other terms.

The Supplier[, in addition to its obligations under Clause 17,] must use reasonable endeavours to observe all data security requirements that apply to accessing and dealing with the Customer's electronic or physical systems, files and data and that have been communicated to it under Clause 5.8, provided that it will not be liable under this Agreement if, as a result of such observation, it breaches any of its obligations under this Agreement.]

5. Customer's obligations

An optional requirement to provide access to its premises and, where the Supplier will be providing the Services onsite or accessing its electronic or physical systems, files and data.

Appointing a Customer Contract Manager to be responsible for the performance of the Customer's obligations under the SOW.

An optional obligation to disclose to the Supplier any health and safety and date security requirements it must comply with.

5.1 Customer obligations, assistance and co-operation

Clause 5.1 places obligations on the Customer to complete any Customer dependencies and to provide reasonable assistance and co-operation to the Supplier as required to perform the Works. The optional wording also allows the parties the ability to include other relevant obligations (for example, not to allow anyone other than the Customer's employees access to the Services).

Customer dependencies include any actions or obligations the Customer must carry out before the Supplier can deliver the Works. For example, the Customer may be under an obligation to ensure that certain infrastructure is in place first before the Supplier can provide the Works. These are sometimes referred to as customer dependencies and are usually set out in the SOW as they will be specific to the Works provided under that SOW. If including Customer dependencies, consider if a sunset clause is necessary to allow for termination in circumstances where the completion of such dependencies is critical to the supply of Services and the Customer is unable to complete the dependency.

(b) ensure that it completes any Customer dependencies specified in the relevant SOW prior to the commencement of Works or if a date is specified in the SOW, by that date; [and]

(c) provide reasonable assistance and co-operation to the Supplier in all matters relating to the Works[; and

5.2 Customer Materials and Customer Equipment (optional)

Clause 5.2 is optional and should be included where the Customer is required to provide materials and equipment to enable the provision of Works. If the Customer is only required to provide materials or equipment (and not both) this clause will require amendment.

Do the Customer Materials and Customer Equipment (as applicable) need to be provided by a specified date to ensure the successful delivery of the Works (in which case, this should be specified in the relevant SOW).

Where the Customer Materials are important or critical to the successful delivery of the Works, a requirement that the Customer Materials are accurate and complete may be necessary (in which case, the optional wording at Clause 5.2(a) should be included). The Customer may require that the obligation should be qualified by reference to reasonable endeavours, in which case this clause should be amended to include the qualification if the Supplier agrees (for further information, see Practice note, Reasonable and best endeavours).

Whether the Customer needs to retain a duplicate copy of the Customer Materials (if so, amend this clause as appropriate).

What, if any, specific industry standards are applicable to the operation or maintenance of the Customer Equipment and whether the Customer needs to ensure that the equipment complies with those standards.

Whether the Supplier needs the right (without prejudice to any other remedies available) to disconnect or remove any non-compliant equipment and replace it at the expense of the Customer (in which case this clause will require amendment).

The Customer must provide to the Supplier [in a timely manner OR by the dates and in the manner specified in the SOW]:

(a) all Customer Materials required for the Supplier to perform the Works under the relevant SOW[ and ensure that such materials are accurate and complete]; and

(b) the Customer Equipment[ and ensure that the Customer Equipment is in good working order and suitable for the purposes for which it is used in relation to the Works and conforms to [all relevant industry standards or requirements OR [STANDARDS WITH WHICH THE CUSTOMER EQUIPMENT IS REQUIRED TO COMPLY]].]

5.3 Access to premises and facilities (optional)

Clause 5.3 is optional and should be included where the Supplier requires access to the Customer's premises or facilities (or both) to perform the Works. It is expressed in general terms, but if specific premises or facilities have been discussed, particularly if the facilities are unusual (for example, a dedicated telephone line or access for large vehicles at any time of the day or night), they should be set out in the SOW.

The Customer must provide access to the Customer's premises and other facilities as [reasonably] required by the Supplier to provide the Works including any such access specified in the SOW.]

5.4 Customer Contract Manager

Clause 5.4 provides that the Customer is required to appoint a contract manager for each SOW. Generally, this person will be the main contact for, and responsible for the performance of, the SOW. The obligation is drafted with a warranty that the Customer Contract Manager has authority to commit the Customer, including by signing SOWs and Change Orders. As often the SOW will be completed by non-legal personnel, this clause is noted in the SOW to remind personnel completing the SOW to nominate a contract manager with the requisite authority.

(a) must identify in each SOW a contract manager who is appointed in respect of the relevant Works to be performed (Customer Contract Manager); and

(b) warrants that the Customer Contract Manager has authority to contractually bind the Customer on all matters relating to the relevant Works under that SOW (including by signing Change Orders).

5.5 Customer licences, permits and consents (optional)

Clause 5.5 is optional and should be included where the parties wish to provide specific obligations for the Customer with respect to licences, permits or consents. This optional obligation could refer, for example, to obtaining:

Consent from a software provider to allow new software supplied by the Supplier to be used in conjunction with its software.

Consent from a third party for the Customer to sub- licence the third party's intellectual property rights to the Supplier to perform the Works.

Whether it is appropriate for the Customer to obtain any licences, permits or consents will depend on the nature of the Works (and any Customer Materials and Customer Equipment required to perform them) and where the Works are performed.

Whether the same licences, permits or consents will apply (and can be specified in this clause) or will such requirements change from SOW to SOW (and should be specified in the relevant SOW).

Adding in the date by which specific licences, permits or consents must be given. If this approach is taken, consider if a sunset clause is necessary to allow for termination in circumstances where it is not possible to obtain the licence, permit or consent.

Cross-references and consistency with other terms

Optional Clause 4.5 (Supplier licences, permits and consents) to ensure there is no overlap in obligations and that responsibility for obtaining licences, permits and consents is clear.

Before the date on which the Works are due to start or by the dates specified in the relevant SOW, the Customer must obtain and maintain [[SPECIFY ALL REQUIRED LICENCES, PERMITS AND CONSENTS] OR the licences, permits and consents specified in the relevant SOW] required to comply with all relevant legislation, regulations or industry codes (to the extent related to the Customer's business, premises, staff or equipment) as required to enable the Supplier to provide those Works, including in relation to the:

5.6 Care of Supplier Equipment (optional)

Clause 5.6 is optional and should be included where the Customer will use the Supplier Equipment or if there are specific requirements for the care of the Supplier Equipment kept at the Customer's premises (for example, temperature or humidity requirements, or a 24-hour power supply from an uninterrupted source). Any requirements should be specified in this clause (if they will remain the same) or in the relevant SOW (if they will change from SOW to SOW).

Generally, the Supplier will be responsible for maintaining insurance for the Supplier Equipment, however there may be circumstances when the equipment is under the control of the Customer, and it will be appropriate to require that the Customer obtain insurance. Where this is the case, include the optional wording and amend Clause 22 (Insurance) accordingly.

Cross-references and consistency with other terms

If including an obligation on the Customer to obtain insurance for the Supplier Equipment, this clause should be drafted in conjunction with Clause 22 (Insurance).

(b) not dispose of or use the Supplier Equipment other than in accordance with the Supplier's written instructions or authorisation[; and

5.7 Health and safety requirements (optional)

Clause 5.7 is optional and should be included where the Supplier is performing the Works at the Customer's premises or using its facilities and there are work health and safety requirements that the Supplier must comply with.

The parties should also consider whether any more onerous safety audit requirements should be included in this clause (for example, where the Supplier's staff are performing medium or high-risk work on the Customer's premises or facilities).

Where the Customer has specific health and safety requirements, the Supplier should review these requirements to see if it can comply with them and factor any costs of compliance into the SOW Fees (an increase in SOW Fees if the Supplier is responsible for the cost of compliance or a reduction if the Customer is). Changes to the policies (for example, new vetting requirements for personnel) could impact on the Works and the square bracketed wording provides for these to be agreed via the SOW change control procedure at Clause 7 (SOW change control procedure).

This clause may also be amended to include any requirement for the Customer to comply with the Supplier's health and safety requirements when the Supplier is performing Works at the Customer's premises (for example, keeping the area clear or requiring staff to participate in safety briefings).

Cross-references and consistency with other terms.

This clause should be drafted in conjunction with optional Clause 4.6 (Compliance with Customer's health and safety requirements) to ensure consistency in these obligations.

The Customer must inform the Supplier of all health and safety requirements that apply at[ any of] the Customer's premises or facilities where Works will be performed. [If a party wishes to make a change to those requirements which will materially affect provision of the Works, it can only do so via the SOW change control procedure set out in Clause 7.]

5.8 Data security requirements (optional)

Clause 5.8 is optional and should be included where the Supplier has access to the Customer's data while at the Customer's premises or when using its facilities, and there are data security requirements that the Supplier must comply with.

The parties should also consider whether any more onerous audit requirements should be included in this clause, for example, where the Supplier's staff have access to Personal Information , Sensitive Information or Confidential Information.

Where the Customer has specific data security requirements, the Supplier should review these requirements to see if it can comply with them and factor any costs of compliance into the SOW Fees (an increase in SOW Fees if the Supplier is responsible for the cost of compliance or a reduction if the Customer is). Changes to the policies (for example, new vetting requirements for personnel) could impact on the Works and the square bracketed wording provides for these to be agreed via the change control procedure (Clause 7).

Cross-references and consistency with other terms.

The Customer must specify in the relevant SOW all data security requirements that apply at[ any of] the Customer's premises or facilities where Works will be performed[, in addition to the Supplier's obligations under Clause 17]. [If a party wishes to make a change to those requirements which will materially affect provision of the Works, it can only do so via the SOW change control procedure set out in Clause 7.]

5.9 Failure or delay caused by the Customer (optional)

Clause 5.9 is optional and provides for an automatic extension of time for performance where the Customer causes delay. It is without prejudice to any other rights and remedies the Supplier may have, including under this Agreement or at common law. It should be included where the acts or omissions of the Customer are critical to the Services being delivered.

Where the unfair contract terms regime applies to this Agreement and a party is seeking a broad or excessive limitation of liability, for example, excusing delay in performance based on any act or omission of the Customer without restriction, care should be taken as such a provision may be an unfair term. As such, this clause has been drafted to encourage a narrower obligation by requiring the parties to specify the acts and omissions that will trigger the right to an extension of time. For further information and indicators of unfair terms, see Practice note, Service agreements: Unfair contract terms and Checklist, Application of the unfair contract terms regime and assessing whether a term is unfair: Indicators of unfair contract terms.

Cross-references and consistency with other terms

due to the failure of the Customer to provide the Customer Materials, Customer Equipment[, [OTHER ACT OR OMISSION]] or access to its premises or facilities in accordance with this Agreement; and

the Supplier will not be able to reasonably deliver the Works or a Deliverable in accordance with a specific date[, Milestone or Service Level requirement];

then, without prejudice to any other right or remedy it may have, the Supplier is entitled to an extension of time to perform its obligations equal to the delay caused by the Customer.

(b) This clause does not apply where such failure by the Customer is due to a Force Majeure Event (in which case, Clause 13 will apply).

6. Non-solicitation (optional)

Clause 6 is optional and can be included where the parties wish to prevent each other from poaching staff involved in the supply arrangement. A balanced approach has been taken to drafting this clause and it provides protection to both parties. Its inclusion should be considered carefully by the parties as it may raise issues under the common law doctrine of restraint of trade , competition law or where the unfair contract terms regime applies to this Agreement, the Australian Consumer Law. Generally, such a clause should only be included where it is reasonable and necessary to protect the parties' legitimate business interests.

A party's consent to one of its employees being engaged by the other party may, depending on the circumstances, also give rise to issues in relation to termination of employment or transfer of business (or both). These may include considerations relating to the notice of termination the party is required to provide and other obligations in the event there is a transfer of business within the meaning of the Fair Work Act 2009 (Cth).

During the Term of this Agreement and for a period of [NUMBER] months following the termination or expiration of this Agreement, neither party will make any solicitation to employ the other party's personnel involved in the performance of this Agreement without the prior written consent of the other party. [For the purposes of this Clause 6, a general advertisement or notice of a job listing or opening or other similar general publication of a job search or availability to fill employment positions, including on the internet, will not be construed as a solicitation or inducement, and the hiring of any such employees or independent contractor who freely responds is not a breach of this clause.]]

7. SOW change control procedure

Clause 7 sets out the process to request a change to the scope or execution of the Works after a SOW has been agreed. It presumes that the Supplier is responsible for drafting any Change Order.

The procedure in this clause is straightforward and will be suitable where the Works are not too complex.

Template change order form

The parties may also want to agree a template Change Order form, which can be attached as a Schedule to this Agreement. In some organisations, change requests will be prepared and managed by non-legal personnel (commercial managers or operational personnel), so having a clear template may make the process more efficient. It would also ensure consistency across all requested Change Orders and make it easier to track all changes made to the Works during the term of the SOW.

Either party may propose changes to the scope or execution of the Works under a SOW but no proposed changes will come into effect until a relevant Change Order has been signed by both parties.

A Change Order is a document that sets out the proposed changes and the effect that those changes will have on:

(a) If the Supplier wishes to make a change to the Works it must provide a draft Change Order to the Customer.

it must notify the Supplier and provide as much detail as is reasonably necessary to enable the preparation of a draft Change Order; and

the Supplier must, [as soon as reasonably practicable after OR within [NUMBER] Business Days of] receiving the information from the Customer in accordance with Clause 7.3(b)(i), provide a draft Change Order to the Customer.

(c) If the Supplier submits a draft Change Order in order to comply with any applicable safety or regulatory requirements and such changes do not affect the nature, scope of, or fees for the Works, the Customer shall not unreasonably withhold or delay consent to it.

(b) are unable to agree to a Change Order, either party may require the disagreement to be dealt with in accordance with the dispute resolution procedure in Clause 23.

7.5 Cost of preparing Change Orders (optional)

Clause 7.5 is optional and allows the Supplier to charge for its time spent dealing with change requests proposed by the Customer. Such a clause may be necessary where due to the nature of the Services a Change Order may require substantial investment of Supplier resources to prepare or it is anticipated that the Customer may make a number of change requests.

Cross-references and consistency with other clauses

If including this clause, include the optional wording in Paragraph 4 of Schedule 1 (Service details) setting out the fee charged for change requests.

The Supplier may charge for the reasonable time it spends on preparing and negotiating Change Orders which implement changes proposed by the Customer pursuant to Clause 7.3(b) on a [time and materials basis at the Supplier's daily rates OR fixed rate basis at the rate] specified in Paragraph 4 of Schedule 1.]

8. Fees and expenses

Clause 8 sets out the pricing arrangement for the provision of Services. It assumes the parties will agree pricing and payment terms for the Services upfront (the Reference Fees) and set these out in Paragraph 4 of Schedule 1 (Service details). The SOW should then set out the specific fees for the Works specified in it (the SOW Fees), for example, whether the Works will be charged on either a:

The parties may consider using other pricing arrangements (in which case this clause would require amendment) including hybrid arrangements. For further information on pricing arrangements, see Practice note, Service agreements: Fees and expenses.

Cross-references and consistency with other terms

In consideration of the provision of the Works by the Supplier, the Customer must pay the SOW Fees in accordance with the relevant SOW and this Agreement. The SOW Fees may be calculated on a time and materials and fixed price basis.

(a) the Supplier's standard daily fee rates for each individual person as set out in Paragraph 4 of Schedule 1 are calculated on the basis of [an eight OR a [NUMBER]]-hour day, worked during Business Hours;

(b) the Supplier is [entitled to charge overtime rates as set out in Paragraph 4 of Schedule 1 on a pro-rata basis for any time worked by individuals whom it engages on the Works outside Business Hours OR not entitled to charge overtime rates unless it has the Customer's prior written consent to do so]; and

8.2(b) Overtime fees

Clause 8.2(b) provides two options with respect to Works performed outside of Business Hours. The first option allows the Supplier to charge for any overtime work at a pre-agreed rate (likely to be the position favoured by the Supplier). The second option restricts the Supplier's right to charge for overtime to where it has obtained the prior consent of the Customer to do so (likely to be the position preferred by the Customer). While this could be onerous to administer, in practice the Customer is free to give a wide permission.

Setting out the overtime rate in advance is likely to avoid any subsequent disputes over what this rate should be. See also Drafting note, Reference Fees.

(c) the Supplier must ensure that every individual whom it engages on the Works completes time sheets to record time spent on the Works, and the Supplier invoices must indicate the time spent per individual.

Where the SOW Fees are calculated on a fixed price basis, the amount of those fees are to be set out in the relevant SOW.

8.4 SOW Fees and exclusions

Clause 8.4 provides that certain expenses are excluded from the SOW Fees and that the following expenses are payable in addition to the fees specified in the relevant SOW:

Travel costs of personnel engaged in providing the Works. The optional wording requires the Supplier to comply with an agreed expenses policy and get advance approval of monthly expenses in all cases or in excess of a specified amount. Alternatively, the Customer may want to book the Supplier's travel itself.

Sums paid to third parties. In practice, such costs should be agreed up front in principle, if not in detail. The Customer will want to know what will fall into this category and how much it is likely to cost. If the Supplier will charge a premium (perhaps a percentage on top of the costs themselves) to reflect its time spent procuring these supplies, this should be clearly stated.

Depending on the nature of the Services, this clause may require amendment to include or remove certain expenses.

The SOW Fees exclude the following costs, which are payable by the Customer monthly in arrears, subject to the Supplier's submission of a valid tax invoice:

(a) the cost of hotel, meals, travel and other ancillary expenses reasonably incurred by the Supplier in connection with the Works [subject to such costs being incurred in accordance with the policy attached in Schedule 3 AND/OR provided always that the Supplier shall obtain the Customer's written approval before incurring any such expense[ that exceeds [$[AMOUNT] in any month OR the amount specified in the relevant SOW]]; and

(b) the cost to the Supplier of any materials or services procured by the Supplier from third parties for the provision of the Works as specified in the SOW or approved in writing by the Customer in advance from time to time.

8.5 Increase in fees (optional)

Clause 8.5 is optional and allows the Supplier to increase the fees annually by reference to a recognised index. This provision guarantees a minimum increase for the Supplier by reference to the Consumer Price Index (CPI) . By linking the increase to CPI, the clause is likely to be more reasonable rather than the Supplier specifying a fixed percentage increase. The Supplier will likely want to include such a clause where this Agreement is longer-term to ensure it is not locked into uncommercial prices.

Where the unfair contract terms regime applies to this Agreement, carefully consider whether this clause is reasonably necessary to protect the legitimate interests of the Supplier or whether it may be an unfair term (for further information and indicators of unfair terms, see Practice note, Service agreements: Unfair contract terms and Checklist, Application of the unfair contract terms regime and assessing whether a term is unfair: Indicators of unfair contract terms).

Cross-references and consistency with other terms

This clause should be drafted in conjunction with the provision to terminate for convenience at Clause 14.1 (Termination for convenience). Where the Customer is to be given the right to terminate this Agreement before an increase takes effect, the Notice period under Clause 8.5(b) should allow the Customer reasonable time to consider the increase in Reference Fees and provide Notice to terminate under Clause 14.1 before the increase takes effect.

(a) The Supplier may increase the Reference Fees and any SOW Fees not calculated in accordance with the Reference Fees on an annual basis with effect from each anniversary of the Commencement Date in line with the percentage increase in the Consumer Price Index in the preceding 12-month period. The first increase takes effect on the first anniversary of the Commencement Date using the latest available figure for the percentage increase in the Consumer Price Index.

(b) The Supplier must provide at least [NUMBER] Business Days' Notice of the increase in Reference Fees to the Customer.

applies to the calculation of the SOW Fees (to the extent that they are calculated in accordance with the Reference Fees) for SOWs entered into after the date the increase takes effect; and

does not apply to the SOW Fees (to the extent that they are calculated in accordance with the Reference Fees) in SOWs entered into before the date the increase takes effect.]

9. GST

Clause 9 sets out how GST is to be treated under this Agreement where applicable. This type of clause is included in most agreements that involve a supply of services in Australia unless exemptions apply. For further information, see Practice note, Goods and Services Tax (GST) and Standard clause, Goods and Services Tax (GST).

9.1 Exclusive of GST

Clause 9.1 clarifies that the prices are exclusive of GST. It is common for commercial agreements to include such clauses, to ensure certainty. However, there is risk particularly where prices are contained in a separate document (such as a price list) that there is inconsistency with respect to the application of GST. For this reason, it is recommended that the wording "exclusive of GST" or "inclusive of GST" should always be specified whenever a price is stated (for example, see the last column of the table set out in Paragraph 4 of Schedule 1 (Service details)).

(a) Unless expressly stated otherwise, the consideration for any supply under or in connection with this Agreement is exclusive of GST.

(b) To the extent that any supply made under or in connection with this Agreement is a taxable supply (other than any supply made under another agreement that contains a specific provision dealing with GST), the amount payable by the recipient is the consideration provided under this Agreement for that supply (unless it expressly includes GST) plus an amount (Additional Amount) equal to the amount of that consideration (or its GST exclusive market value) multiplied by the rate at which GST is imposed in respect of the supply.

(c) The recipient must pay the Additional Amount at the same time as the consideration to which it is referable, and on the issue of an invoice relating to the supply.

(d) Whenever an adjustment event occurs in relation to any taxable supply to which Clause 9.1(b) applies:

if the GST component of that consideration differs from the amount previously paid, the amount of the difference must be paid by, refunded to or credited to the recipient, as applicable.

(e) If either party is entitled under this Agreement to be reimbursed or indemnified by the other party for a cost or expense incurred in connection with this Agreement, the reimbursement or indemnity payment must not include any GST component of the cost or expense to the extent that the cost or expense is the consideration for a creditable acquisition made by the party being reimbursed or indemnified, or by its Representative.

Words and phrases used in Clause 9.1 that have defined meanings in the GST Law have the same meaning as in the GST Law, unless the context indicates otherwise.

10. Payment terms

Clause 10 sets out the process for payment of the SOW Fees and expenses and should be amended to reflect the parties' commercial agreement. Payment terms can be a key commercial issue and will vary based on the nature of the transaction and the bargaining power of the parties.

10.1 Issuing invoices

Clause 10.1 sets out when the Supplier may invoice the Customer for Works performed. Whether the Supplier will issue invoices on the completion of Works under a SOW, completion of certain Milestones or on a periodic basis is a matter for the parties to agree and will depend on the nature of the Works to be provided. To allow flexibility this clause is drafted so that invoicing is dealt with in an individual SOW. However, if the parties wish to have a common invoice requirement applicable to all SOWs, this clause will require amendment.

Cross-references and consistency with other terms

This clause should be drafted in conjunction with the invoicing requirements under Clause 8.4 (SOW Fees and exclusions), which requires excluded costs to be invoiced monthly in arrears.

(a) The Supplier will invoice the Customer for the SOW Fees at the intervals specified, or on the achievement of any deadlines or Milestones indicated, in the relevant SOW. If no intervals, deadlines or Milestones are specified, the Supplier will invoice the Customer at the end of each month for Works performed during that month.

10.2 Payment of invoices

Clause 10.2 specifies when payment becomes due. Setting the payment period by reference to the date of the invoice makes it easier to ascertain when the deadline for payment falls. Alternatively, amend this clause to specify the date for payment or that payment must be made in advance of the Works being performed.

Clause 10.2(b) ensures that the Customer does not waive their rights with respect to the Works by paying the invoice.

(a) The Customer must pay invoices in full and in cleared funds to the bank account nominated by the Supplier within [30 OR [NUMBER]] [days OR Business Days] of [the date of the relevant invoice OR receipt of the relevant invoice].

(b) Payment of invoices is not deemed acceptance of the Services or a waiver of the Customer's rights under this Agreement.

10.3 Accelerating payments due

Accelerating the due date for outstanding payments on expiry or termination is common in supply agreements and serves to protect suppliers from non-payment where an agreement has expired or is terminated early and there are outstanding payments.

Where the unfair contract terms regime applies to this Agreement, the Supplier should carefully consider whether Clause 10.3 in the context of this Agreement would be unfair (for example, if the entire value of all SOWs is accelerated upon the specified events occurring, but the Supplier is not obligated to provide any outstanding Works to the Customer, the imbalance in obligations may be seen to be unfair) and amend as appropriate. For further information and indicators of unfair terms, see Practice note, Service agreements: Unfair contract terms and Checklist, Application of the unfair contract terms regime and assessing whether a term is unfair: Indicators of unfair contract terms.

The parties may wish to amend the clause to specify the particular payments that are accelerated having regard to the nature of the commercial arrangement between them. For example, payments owed for Works performed by the Supplier as at the date of expiry or termination, or any non-refundable costs reasonably incurred by the Supplier in connection with a SOW.

Accelerating the due date where an Insolvency Event has occurred is also a measure to protect suppliers against non-payment. However, it is also an ipso facto clause and although Clause 10.3(b) is retained in this Agreement, note that enforcement is subject to a statutory stay on proceedings. For further information, see Practice note, Ipso facto clauses: enforcing termination and other contractual rights against a company in external administration.

Without prejudice to any right to set-off or claim interest under applicable laws or the terms of this Agreement (including Clause 11 and Clause 12), all amounts owed to the Supplier by the Customer under this Agreement become immediately due and payable:

Disputes in relation to any invoice or other statement of monies or payment due under this Agreement (Payment Dispute) are to be dealt with in accordance with the process set out at Clause 23.3.

10.5 Audit (optional)

Clause 10.5 is optional and gives the Customer a limited right to carry out an audit in relation to the SOW Fees only. Where the Services are charged entirely on a fixed price basis, a right to audit may not be appropriate and the Supplier will likely object to the inclusion of such rights.

If the Services are high value and complex, the Customer may want a wider clause (in which case, this clause should be made a standalone clause rather than a subclause to Clause 10) to enable it to:

Examine the Supplier's performance of the Services and service levels (if any) (see optional Clause 4.1(c) and optional Paragraph 5 of Schedule 2 (Template SOW)).

Verify the Supplier's compliance with the customer's Mandatory Policies (see Clause 19 (Compliance with laws and Mandatory Policies) and Schedule 3 (Mandatory Policies)).

Verify that the Supplier is handling the Customer's data in a satisfactory manner (see optional Clause 4.7 (Compliance with Customer's data security requirements) and optional Clause 17 (Privacy and data protection)).

Verify the Supplier is paying its staff certain minimum entitlements under the terms of a modern award or enterprise agreement (where the Customer has an enterprise agreement which requires it to ensure that employees of its suppliers on certain sites are remunerated in accordance with the enterprise agreement). See also Drafting note, Reference Fees.

Detailed audit clauses will also set out the consequences of what happens if the Customer is not happy with the results of the audit. For example, the parties may subsequently agree to a reduction in price, or increased monitoring by the Customer of the Supplier's performance of the obligations.

(a) At the reasonable request of the Customer, the Supplier will provide the Customer (or its professional advisers) access to the Supplier's premises, personnel, systems and relevant records to verify that the SOW Fees and any other sums charged to the Customer under this Agreement are accurate.

(b) Subject to the Supplier's confidentiality obligations, the Supplier shall provide the Customer (and its professional advisers) with all reasonable co-operation, access and assistance in relation to each audit.

(c) The Customer shall provide at least [NUMBER] Business Days' notice of its intention to conduct an audit and any audit shall be conducted during Business Hours.

(d) The Customer (and its professional advisers, if applicable) shall have the right to take copies of any records which they reasonably require and remove such copies and the Supplier shall provide the necessary facilities to assist in copying free of charge.]

11. Default interest

Clause 11 sets out the rate at which parties must pay interest on due but unpaid amounts owing under this Agreement. Although courts and arbitrators can award interest on most claims for debt or damages, it is convenient to have an agreed rate applicable as of right to all late payments.

While there is no rate of statutory interest in Australia, common practice in commercial contracts is to agree to interest on late payments at between 2% and 4% above a published base rate (often of the supplier's bank or the RBA cash rate, plus 2%). However, be careful when applying a standard rate. The rate applied should always be a genuine pre-estimate of the loss that is likely to be suffered as a result of late payment.

If the rate is too high or not a genuine pre-estimate, it may constitute an unenforceable penalty or where the unfair contract terms regime applies to this Agreement, an unfair term. For further information and indicators of unfair terms, see Practice note, Service agreements: Unfair contract terms and Checklist, Application of the unfair contract terms regime and assessing whether a term is unfair: Indicators of unfair contract terms.

If any sum due for payment under this Agreement is not paid on the due date, without limiting a party's rights under this Agreement:

(a) the party in default must pay interest on the amount unpaid at the [Interest Rate OR [OTHER SPECIFIED RATE OR CALCULATION METHOD]][ plus [ADDITIONAL PERCENTAGE]%];

(b) interest accrues on a day-to-day basis from the due date up to and including the date of actual payment being received by the other party; and

(c) where a payment is disputed in good faith, interest is only payable after the Payment Dispute is resolved, on sums found or agreed to be due, from [the due date OR [NUMBER] days after the dispute is resolved] until payment is received by the other party.

12. Set-off

Clause 12 allows the parties to set-off their financial claims against each other by deducting amounts owing to them from amounts payable in connection with this Agreement. It is included in many commercial agreements where a party is required to make payments to another party to avoid the parties having to rely on the limited and complex application of the common law right to set-off.

A balanced approach is taken in the drafting of this clause, and it can be relied upon by both parties. Care should be taken where the unfair contract terms regime applies to this Agreement. For example, if the clause is amended to provide a unilateral right to set-off rather than a mutual right, it may be an unfair term. For further information and indicators of unfair terms, see Practice note, Service agreements: Unfair contract terms and Checklist, Application of the unfair contract terms regime and assessing whether a term is unfair: Indicators of unfair contract terms.

Each party to this Agreement is authorised to deduct any amount due and payable by the other party from amounts otherwise due and payable to that other party under or in connection with this Agreement. Any exercise by a party of its rights under this Clause 12 does not limit or affect any other rights or remedies available to it under this Agreement or otherwise.

13. Force majeure

Clause 13 allocates the risk that performance of this Agreement may be delayed or prevented by circumstances beyond the reasonable control of the parties. It is commonly included in commercial agreements, particularly those involving services, to provide the parties with a mechanism to deal with delays beyond the parties' reasonable control.

Given the nature and complexity of supply chains required for most supply of service arrangements, it is important that the inclusion and operation of a force majeure clause is considered carefully. It is recommended that this clause is drafted with reference to the comprehensive drafting notes in Standard clause, Force majeure.

(b) cannot reasonably be prevented by a party taking reasonable precautions and cannot reasonably be circumvented by that party; and

(c) prevents[, hinders or delays] a party from performing any of its obligations under this Agreement,

(d) any act of God, flood, bushfire, drought, earthquake, landslide, storm, lightning strike, cyclone or other natural disaster [but not including [RELEVANT EXCEPTIONS]];

(e) epidemic [as characterised by [the Australian Government Department of Health OR [RELEVANT STATE OR TERRITORY HEALTH AUTHORITY]], pandemic [as characterised by [the World Health Organization OR Australian Government Department of Health]] or other public health and safety emergency [as characterised by [RELEVANT HEALTH AUTHORITY]];

(f) war, threat of or preparation for war, armed conflict, imposition of sanctions, embargo, blockade or breaking off of diplomatic relations;

(k) [any relevant law coming into force after the date of this Agreement, or] any action taken by a Government Agency, including without limitation:

failure to obtain, or delay in obtaining, a necessary approval, permit, licence or consent, where the relevant party has taken all reasonable steps to obtain that approval, permit, licence or consent;

(l) [any labour or trade dispute, strikes, industrial action or lockouts (other than any such action by employees or contractors of the party seeking to rely on this Clause 13.1, or a Related Body Corporate of that party[, that does not form part of any national, state or industry-wide activity]);]

(m) [non-performance by suppliers or subcontractors [(other than by any Related Body Corporate of the party seeking to rely on this Clause 13.1)];]

(n) [any breakage, failure or malfunction of, or accident involving, any plant, equipment, machinery or other facility owned or operated by a party or its Related Bodies Corporate that occurs notwithstanding that the party or Related Body Corporate has taken all reasonable steps to avoid or guard against such an event;]

(o) collapse of buildings, fire, explosion or accident (other than in the case of a party's fraud, negligence or wilful misconduct); and

(p) interruption, material reduction in the rate of, or failure of any utility service (other than where the interruption, reduction or failure of that utility service is caused by an act or omission of the party seeking to rely on this Clause 13.1).

(a) as soon as is reasonably practicable after the start of the Force Majeure Event[ but no later than [NUMBER] days after that date], notify the other party[ in writing] of:

the effect of the Force Majeure Event on the Affected Party's ability to perform any of its obligations under this Agreement; and

(b) use all reasonable endeavours to remedy, mitigate or minimise the effect of the Force Majeure Event on the performance of its obligations.

(a) Provided it has complied with Clause 13.2, if the Affected Party is prevented from[ or hindered or delayed in] performing any of its obligations under this Agreement by a Force Majeure Event:

the Affected Party will not be in breach of this Agreement or otherwise liable for any such failure[, hindrance or delay] in the performance of those obligations to the extent that the failure[, hindrance or delay] is directly caused by the Force Majeure Event; and

the relevant obligations will be suspended, and the time for performance of such obligations will be extended, until the time that those obligations are no longer affected by the Force Majeure Event.

(b) [The corresponding obligations of the other party will be suspended, and its time for performance of such obligations extended, to the same extent as those of the Affected Party.]

(c) The performance of the affected obligations must be resumed as soon as practicable after such Force Majeure Event is removed or has ceased.

If the Force Majeure Event prevents[, hinders or delays] the Affected Party's performance of its obligations for a continuous period of more than [NUMBER] [weeks OR months], the party not affected by the Force Majeure Event may terminate this Agreement by giving [NUMBER] [Business Days' OR weeks'] written Notice to the Affected Party.

14. Termination and suspension

Clause 14 provides mutual rights to terminate this Agreement. A termination clause should always be included in this Agreement, as it is not always certain when an event will give rise to a common law right of termination. The parties will still retain their common law rights of termination.

It is good practice to specify the length of notice to terminate that a party must give, as the default position at common law is simply that, for an open-ended agreement, a party must give a reasonable amount of notice.

Where the unfair contract terms regime applies to this Agreement and a party is seeking a unilateral termination right, care should be taken as such a provision may be an unfair term. For further information and indicators of unfair terms, see Practice note, Service agreements: Unfair contract terms and Checklist, Application of the unfair contract terms regime and assessing whether a term is unfair: Indicators of unfair contract terms.

14.1 Termination for convenience

Under Clause 14.1, each party has the right to terminate this Agreement on an agreed period of Notice for any reason. In determining the Notice period, consider the nature of the Services being supplied and time needed for the parties to make alternative arrangements.

It also includes optional wording allowing for a minimum Term. This is a common inclusion in supply arrangements to ensure an agreement is commercial, because otherwise a party can enter a contract one month and exit the contract the following month.

Cross-references and consistency with other terms

To ensure consistency with any minimum Term requirement, this clause should be drafted in conjunction with Clause 2 (Term).

Without affecting any other right or remedy available to it, either party may terminate this Agreement on giving not less than [NUMBER] [weeks' OR months'] written Notice to the other party[, provided that the Notice to terminate does not expire before the Expiry Date].

14.2 Termination for breach

Clause 14.2 sets out the events that constitute a breach of this Agreement and give rise to the right to terminate this Agreement with immediate effect on giving written Notice. Given the significance of this clause, consider whether a party can terminate this Agreement for breach without first completing the multi-tiered dispute resolution procedure set out at Clause 23 (Dispute resolution).

Without affecting any other right or remedy available to it, a party (Non-Defaulting Party) may terminate this Agreement with immediate effect by giving written Notice to the other party (Defaulting Party) if, the Defaulting Party:

(a) fails to pay any undisputed amount due under this Agreement on the due date for payment and remains in default not less than [ten OR [NUMBER]] Business Days after being notified in writing to make such payment (if an amount is disputed the parties must follow the Payment Dispute resolution process at Clause 23.3);

14.2(b) Termination for material breach

Clause 14.2(b) allows a party to terminate if there is a material breach of this Agreement. For certainty regarding what is considered to be material breach and to avoid future disputes, it is recommended that a definition is included at Clause 1.1 (Definitions) and optional Clause 14.3. Unless an agreement is a low value commercial agreement, in which case the parties typically will not want to spend time negotiating a definition of material breach and such agreements generally do not include a definition.

(c) commits a breach of this Agreement and that breach is irremediable or (if that breach is remediable) fails to remedy that breach within a period of [20 OR [NUMBER]] Business Days after being notified in writing to do so;

(d) the Defaulting Party repeatedly breaches any of the terms of this Agreement in such a manner to reasonably justify the opinion that its conduct is inconsistent with it having the intention or ability to give effect to the terms of this Agreement;

14.2(d) Termination for repeatedly breaching this Agreement

Clause 14.2(d) gives the right to terminate for a series of minor persistent breaches amounting to a material breach of obligations that substantially deprive the Non-Defaulting Party of the benefit of this Agreement. This acknowledges that recurring breaches can cause considerable problems for the Non-Defaulting Party and is generally accepted in commercial agreements.

14.2(e) Termination for insolvency and ipso facto

Clause 14.2(e) is an ipso facto clause and although it is retained in this Agreement, note that enforcement is subject to a statutory stay on proceedings. For further information, see Practice note, Ipso facto clauses: enforcing termination and other contractual rights against a company in external administration.

(f) there is a Change of Control of the Defaulting Party [without the consent of the Non-Defaulting Party (such consent not to be unreasonably withheld or delayed)];

14.2(f) Termination on Change of Control

Clause 14.2(f) provides that the Non-Defaulting Party may terminate this Agreement if the Defaulting Party has a Change of Control. The parties should consider how a change of control is defined (see Clause 1.1 (Definitions)) and whether it should give rise to a right of termination in the context of the relationship between the parties. For example, if the Customer's business is acquired by a third party, consider whether the Supplier will be prepared to continue supplying the Services to the third party on the same terms.

(g) any Force Majeure Event prevents the Defaulting Party from performing its obligations under this Agreement subject to Clause 13.4; or

(h) an Assignment or Other Dealing occurs without the consent of the Non-Defaulting Party [(consent must not be unreasonably withheld)][, except where this Agreement provides otherwise].

14.2(h) Termination for Assignment or Other Dealing without consent

Clause 14.2(h) provides that a party may terminate if the Defaulting Party is in breach of the Assignment or Other Dealing provision. The optional wording in this clause should mirror the drafting at Clause 25.1 (Assignment or Other Dealing).

14.3 Definition of Material Breach (optional)

Clause 14.3 defines what constitutes a material breach triggering a right for the Non-Defaulting Party to terminate under Clause 14.2(b). The definition should not be exhaustive, given the difficulty of foreseeing every possible outcome at the time at which this Agreement is drafted. See also Drafting note, Termination for material breach.

(a) Material Breach includes a breach (including an anticipatory breach) that is serious in the widest sense of having a serious effect on the benefit of which the Non-Defaulting Party would otherwise derive from:

(b) in deciding whether any breach is material, no regard is given to whether it occurs by some accident, mishap, mistake or misunderstanding.]

14.4 Suspension of supply

Clause 14.4 gives the Supplier rights to suspend supply of the Services under this Agreement if the Customer suffers an Insolvency Event, or looks reasonably likely to suffer one, or fails to pay for Works provided. It applies to all Works being provided under any SOWs on foot at the time of suspension.

Where the unfair contract terms regime applies to this Agreement, if the clause causes a significant imbalance in the rights and obligations of the parties it may be an unfair term. For example, if during the period of suspension, the Customer is required to continue to make payments (not including outstanding payments) where the Supplier has ceased all Works the term may be unfair. For further information and indicators of unfair terms, see Practice note, Service agreements: Unfair contract terms and Checklist, Application of the unfair contract terms regime and assessing whether a term is unfair: Indicators of unfair contract terms.

If the Supplier is concerned about the Customer's ability to pay, it should consider negotiating a requirement with the Customer that payment for the Services be made in advance and amend Clause 10 (Payment terms) accordingly.

Without limiting its other rights or remedies, the Supplier may suspend supply of all Services under this Agreement with immediate effect by written Notice, if:

(b) the Supplier reasonably believes that the Customer is about to become subject to an Insolvency Event; or

15.1 Parties' obligations following expiry or termination

Clause 15.1 sets out the parties' obligations on expiry or earlier termination of this Agreement and provides a period of time in which such obligations are to be performed. The intention is to help frame each party's expectations for amicably winding down the commercial arrangement.

When drafting this clause, consider whether there are any transaction-specific requirements that need to be addressed and amend as required. For example, consider whether the Supplier must complete the performance of all Works outstanding prior to termination.

15.1(a) Impact of termination of Agreement on SOW

As the SOWs together with this document form a single agreement (see Clause 3(e) (Statements of work (SOWs))) they will terminate automatically on termination of this Agreement under Clause 15.1(a).

If this Agreement is terminated on Notice under Clause 2 (Term) or Clause 14.1 (Termination for convenience), such Notice will not expire, and this Agreement will not terminate, until all SOWs existing at the time Notice of termination is given have been completed.

This Agreement does not contain a mechanism that allows either party to terminate individual SOWs, whether for breach or on Notice. If an individual SOW were breached, the non-breaching party would have to choose between just claiming damages or terminating the entire Agreement (including all other SOWs). If the parties decide to end a SOW before its stated expiry date but do not want to terminate this Agreement, the end of the individual SOW must be agreed through the change control procedure at Clause 7 (SOW change control procedure).

(b) the Customer must immediately pay to the Supplier all of the Supplier's outstanding unpaid invoices (and any interest) and, in respect of the Works supplied but for which no invoice has been submitted, the Supplier may submit an invoice, which shall be payable immediately on receipt;

(c) subject to Clause 15.1(d), within [NUMBER] Business Days following the expiry of the Term or earlier termination of this Agreement, each party must:

return the other party's equipment (including the Supplier Equipment and Customer Equipment, as applicable);

cease using the other party's Intellectual Property Rights (in the case of the Supplier, this includes the Customer Materials and Deliverables);

return to the other party all documents and materials (and any copies) containing the other party's Confidential Information;

permanently erase all the other party's Confidential Information from its computer systems, software, servers and storage devices (to the extent possible);

deliver to the other party all property belonging to the other party that is in its possession or control (in the case of the Supplier, this includes the Customer Materials and Deliverables, whether or not such Deliverables are complete); [and]

on request, certify in writing to the other party that it has complied with the requirements of this Clause 15.1(c).

(d) if this Agreement is terminated for [material breach OR Material Breach] under Clause 14.2(b), the Defaulting Party must immediately carry out its obligations under Clause 15.1(c).

15.2 Exit assistance (optional)

Clause 15.2 is optional and places a general obligation on the Supplier to help the Customer with any exit assistance as is reasonably required by the Customer at the end of a SOW or this Agreement.

If the Services require some sort of transition back to the Customer or a new supplier when this Agreement expires or terminates, the parties may wish to consider also including provisions for an exit plan, which could be included as a Schedule to this Agreement or specified in the relevant SOW. The Supplier may require payment for such assistance. If the Customer agrees to this, a cap or other mechanism to control costs should be agreed and this clause should be amended accordingly.

For further information and drafting options for an exit management clause, see Standard clause, Exit management.

If requested by the Customer, the Supplier will provide all assistance [reasonably required by the Customer OR set out in Schedule [NUMBER] OR set out in the relevant SOW] to facilitate the smooth transition of the Services to the Customer or any replacement supplier appointed by it.]

Expiry of the Term or termination of this Agreement does not affect any rights, remedies, obligations or liabilities of the parties that have accrued up to the date of expiry or earlier termination, including the right to claim damages for any breach of this Agreement that existed at or before the date of expiry or termination.

15.4 Survival of obligations

Clause 15.4 makes it clear that certain provisions of this Agreement will survive expiry or earlier termination of this Agreement, such as the provisions on confidentiality and limitations of liability.

Delete the optional wording where the corresponding optional clause is not included in this Agreement.

The following clauses survive expiry of the Term or earlier termination of this Agreement [together with any other term which by its nature is intended to do so]:

16. Confidentiality

Clause 16 imposes basic confidentiality obligations on the parties. Typically, in service arrangements both parties will disclose Confidential Information to the other party and as such, this clause has been drafted with mutual obligations.

It is also drafted to require that each party ensures that its directors , officers , employees, agents , consultants, contractors, professional advisers and members in its corporate group respect the confidential nature of the information exchanged in connection with this Agreement and makes the relevant party responsible for any failure to do so.

Confidentiality undertakings can be difficult to enforce, and will generally be construed against the party seeking to rely on them. The scope of the information covered and the reasonableness of the confidentiality obligations are likely to be key factors in determining enforceability.

If confidentiality is a major issue, the most effective method to prevent disclosure of the information is to attach a Schedule of specified individuals who are permitted to receive the information and then to inform each individual that the information handled is to be treated as confidential. If necessary, include an obligation that any individual with whom the Confidential Information is shared must sign a specific confidentiality undertaking with respect to that information.

Cross-references and consistency with other terms

Clause 15.4 (Survival of obligations), which includes these confidentiality obligations in the general list of obligations that survive the expiry of the Term or termination of this Agreement.

It is common for a party to raise concerns with indefinite confidentiality obligations, particularly where the definition of Confidential Information is broad, or the obligations are onerous. To address such concerns, consider the length of time over which the Confidential Information shared in connection with this Agreement has commercial value and needs to remain confidential. If the parties agree for the confidentiality obligations to survive for only a limited period after this Agreement comes to an end, amend this clause accordingly and remove or amend the reference to this clause from Clause 15.4.

Clause 18 (Intellectual Property Rights), where confidential information in respect of intellectual property (such as know-how related to a process or method or trade secrets ) is disclosed by a party.

It is also important during any quotation and negotiation process that appropriate confidentiality agreements have been signed to protect such information being disclosed prior to the supply agreement being signed by the parties (for example, see Standard document, Confidentiality deed (mutual)). Where entering into a pre-transaction confidentiality agreement, consider whether the terms of the confidentiality agreement will continue to apply or are replaced by the obligations in the supply agreement. Amend this clause and the entire agreement provision set out at Clause 25.4 (Entire agreement), as required.

16.1 Confidential Information

Clause 16.1 sets out the definition of confidential information that is protected under Clause 16 . It is drafted using party-neutral language and is relatively broad in scope, which is typical for commercial agreements. In some circumstances, it may be appropriate to describe the information in a Schedule to this Agreement.

Both parties will generally want the terms of this Agreement itself to be confidential, in particular the Supplier, where the Supplier is sensitive to disclosure of competitive prices and pricing terms. In which case, this Agreement will also usually include a clause that prevents either party making announcements about this Agreement without the other party's consent (for example, see optional Clause 16.2 (Media announcements)).

any information of a confidential nature concerning the business, affairs, customers, clients or suppliers of the other party or of any member of its Group, including but not limited to information relating to a party's operations, processes, plans, product information, know-how, designs, trade secrets, software, market opportunities and customer lists; and

(b) Each party (Recipient) must keep secret and confidential and not disclose any Confidential Information that is disclosed to the Recipient by the other party or its Representatives, except:

where the information is in the public domain as at the date of this Agreement (or subsequently becomes in the public domain other than by breach of this Clause 16.1(b) by the Recipient);

if the Recipient is required to disclose the information by applicable law or the rules of any recognised securities exchange or other document with statutory content requirements, provided that the Recipient has[, to the extent practicable having regard to those obligations and the required timing of the disclosure,] consulted with the other party as to the form and content of the disclosure of the information;

as may be required by law, a court of competent jurisdiction, or any Government Agency or regulatory authority (including but not limited to the rules of any recognised securities exchange);

if disclosure is made to the Recipient's Representatives to the extent necessary to enable the Recipient to properly perform its obligations under this Agreement [or to conduct their business generally], in which case the Recipient must ensure that its Representatives keep the information secret and confidential and do not disclose the information to any other person in accordance with this Clause 16.1(b); or

(c) Each party reserves all rights in its Confidential Information. No rights or obligations in respect of a party's Confidential Information other than those expressly stated in this Agreement are granted to the other party or are to be implied from this Agreement.

16.2 Media announcements (optional)

Clause 16.2 is optional and should be included where the parties have agreed to a form of media announcement regarding the supply arrangement or where this Agreement is confidential (see Clause 16.1(a)(ii)). This clause restricts a party making a media announcement without the consent of the other party.

Where personal information (for example, customer details) is collected, used or shared between the parties in connection with this Agreement, carefully consider the parties' obligations under relevant privacy laws and whether announcements with respect to a data breach should be carved out as an exception to this clause. For further information, see Practice note, Responding to a data breach incident.

Cross-references and consistency with other terms

This clause should be drafted in conjunction with optional Clause 17.4(e)(iii) (Privacy and data protection).

A party must not make, send, publish or otherwise make available any public announcement, press release, communication, circular or statement relating to the subject matter or terms of this Agreement (Announcement) without the prior written consent [(such consent not to be unreasonably withheld)] of the other party to the Announcement (including the timing, form and content of that disclosure).]

17. Privacy and data protection (optional)

Clause 17 is optional and should be included where the Services involve Personal Information being shared between the parties to ensure that the recipient of that information collects, uses and discloses it in accordance with the Privacy Act, APPs and any specific requirements of the disclosing party. It is drafted to cover the most common position which is where information flows from the Customer to the Supplier.

Who is providing Personal Information to the Supplier? For example, is the Customer supplying Personal Information it holds directly to the Supplier or is the Supplier collecting information directly from individuals in the course of performing its contractual obligations?

What Personal Information relating to Key Personnel or others employed by the Customer will be provided to the Supplier?

If information is also to flow from the Supplier to the Customer, the above considerations should be applied to the Customer's receipt of information and this clause should be amended accordingly.

For further information on privacy generally and additional drafting options, see Standard clause, Privacy clause.

Cross-references and consistency with other terms

If including this clause, ensure the optional definitions at Clause 1.1 (Definitions) are included. Or conversely, if not including this clause, then the optional definitions should be deleted.

17.1 Application of the Privacy Act

The Privacy Act applies to APP entities and regulates the collection, use and disclosure of personal information. The key obligations on entities that handle personal data are set out in the APPs (see Practice note, Key concepts in privacy law: APP entity).

The purpose of the optional drafting in Clause 17.1(a) and Clause 17.1(b) is to allow for a circumstance where a party is not an APP entity (for example, because their annual turnover is under $3 million, or another exception), but the parties require each other to be bound by the Privacy Act as if they were APP Entities. This will be necessary, for example, where the Customer itself is an APP Entity, and requires the Supplier to collect, hold, use and disclose Personal Information to the same legal standard of compliance with the Privacy Act, even though the Supplier is not required to meet this standard as a matter of law because its annual turnover is under $3 million.

(a) The Supplier warrants that [it complies with and will continue to comply with the Privacy Act and all other applicable privacy laws OR for the purposes of this Agreement, it agrees it is an APP Entity and complies with and will continue to comply with the Privacy Act and all other applicable privacy laws].

(b) The Customer warrants that [it complies with and will continue to comply with the Privacy Act and all other applicable privacy laws OR for the purposes of this Agreement, it agrees it is an APP Entity and complies with and will continue to comply with the Privacy Act and all other applicable privacy laws].

If the Supplier collects, holds, uses or discloses Personal Information in the course of or relating to this Agreement, the Supplier must:

(a) handle all Personal Information in accordance with [the Supplier's privacy policy OR the Customer's privacy policy] to the extent that policy is not inconsistent with the requirements of Clause 17 or this Agreement;

17.2(a) Supplier or Customer privacy policy

The optional wording in Clause 17.2(a) allows the parties to choose whether Personal Information must be handled in accordance with the Supplier or Customer's privacy policy. The parties should ensure that this is consistent with any Mandatory Policies the parties are required to comply with.

Cross-references and consistency with other terms

This clause should be drafted in conjunction with Clause 19 (Compliance with laws and Mandatory Policies).

(b) only use Personal Information for the purpose of performing its obligations under this Agreement;

(c) not disclose Personal Information to any third party (including any contractor and subcontractor) without the Customer's prior written consent or as required by law;

(d) ensure that its Representatives (including any third party that has received Personal Information in compliance with Clause 17.3(c)) who are required to access or handle Personal Information in the course of this Agreement are made aware of the obligations set out in Clause 17, and if requested by the Customer, sign written undertakings to comply with Clause 17 in a form of the Customer's election. The Supplier is responsible for the acts and omissions of such persons and a breach by such person is a breach of the Supplier; and

(e) not disclose Personal Information to a person (including any Representative) not located in Australia [without the express written consent of the Customer].

(a) will not provide any Sensitive Information to the Supplier unless that information is necessary for the Supplier to perform its obligations under this Agreement and then only with the Supplier's specific written consent;

the individuals whose Personal Information it is disclosing to the Supplier in the course of this Agreement to enable the Supplier to lawfully use the Personal Information and perform its obligations in accordance with this Agreement;

(c) must provide direction as to the extent to which the Supplier is entitled to use Personal Information disclosed to it in the course of and for the purpose of this Agreement; and

(d) must ensure that its Representatives who are required to access or handle Personal Information in the course of this Agreement are made aware of the obligations set out in Clause 17. The Customer is responsible for the acts and omissions of such persons and a breach by such person is a breach of the Customer.

If the Supplier becomes aware, or there are reasonable grounds to suspect, that a Data Incident has occurred, the Supplier must:

(a) immediately take reasonable steps, and bear any costs, of containing and resolving the Data Incident and preventing any further serious harm to affected individuals (for the avoidance of doubt, this obligation is ongoing);

(c) identify whether the Data Incident is an Eligible Data Breach by conducting a thorough investigation of the Data Incident within 20 days of becoming aware of the Data Incident (Data Breach Investigation);

(d) provide a full, unedited and unredacted copy of the report of the Data Breach Investigation in Clause 17.4(c) to the Customer on completion (for the avoidance of doubt, the Supplier agrees not to withhold any information from the report and expressly waives its right to any claim of privilege (including legal professional privilege) to any part of report); and

its ongoing actions to contain and resolve the Data Incident and prevent any further serious harm to affected individuals at Clause 17.4(a); and

in the case of an Eligible Data Breach, whether the Customer or the Supplier will make the relevant notifications under the Privacy Act and whether and to what extent any public or media statements will be made (in each case, the Customer's decision to be final); and

(iii) Public or media statements

Clause 17.4(e)(iii) addresses the issue of public announcements relating to data breaches. Carefully consider the parties' obligations under relevant privacy laws and whether announcements with respect to a data breach should be carved out as an exception to any restrictions on a party's ability to make public announcements, in particular where optional Clause 16.2 (Media announcements) is included in this Agreement.

where the Supplier is making the relevant notifications at Clause 17.4(e)(iii), the Customer must approve the notifications before they are made (such approval to be given promptly and not to be unreasonably withheld).

Without limiting any other rights a party may have, the Supplier and Customer provide the indemnities in respect of Personal Information as set out at Clause 20.3.

18. Intellectual property rights

Depending on the nature of the Services, Intellectual Property Rights may not be an important consideration for the parties. For example, certain services may not involve any intellectual property rights (for example, services of a purely physical nature such as cleaning or maintenance). In which case, Clause 18 may be amended to simply state that any Intellectual Property Rights will remain the property of the party that owns them or created them.

In other circumstances, however, Intellectual Property Rights may be an important and potentially contentious issue for the parties. This clause has been drafted on the basis that Intellectual Property Rights are important to the parties and ownership (including assignment and licencing ) needs to be addressed. The parties should review the provisions carefully and amend as required to reflect the specific Intellectual Property Rights involved in the Services and the commercial agreement with the parties as to their use and ownership.

18.1 Pre-existing and independently created Intellectual Property Rights

Generally, materials owned by each party which were developed before the commencement of the Services or independently of the Works will be carved out of any transfer of ownership in Intellectual Property Rights. For example, the Supplier's intellectual property in its processes or the Customer's intellectual property in its materials or any data it provides will be retained by the respective parties. Each party will retain ownership of these but will need to license them to the other as necessary for the provision or receipt of any Works.

Subject to the other provisions of Clause 18, a party's Intellectual Property Rights remain the exclusive property of that party (or, where applicable, the third-party licensor from whom that party derives the right to use them). No rights or obligations in respect of a party's Intellectual Property Rights other than those expressly stated in this Agreement are granted to the other party or are to be implied from this Agreement.

18.2 Intellectual Property Rights in the Deliverables

Where the Works result in the provision of Deliverables the issue of ownership can sometimes be contentious where the Supplier wishes to retain ownership however the Customer insists on owning them. Often a Supplier will licence the Intellectual Property Rights in the Deliverables for use by the Customer for the purposes of this Agreement (this may be an indefinite licence or restricted to the duration of the relevant SOW or Term of this Agreement and will depend on the nature of the Works). Clause 18.2 addresses the ownership of Intellectual Property Rights in the Deliverables to ensure disputes do not arise.

Intellectual Property Rights are licenced (choose the first option) or assigned (choose the second option) in Clause 18.2(a). Further consider:

what Intellectual Property Rights are being licenced or assigned (for example, only those rights in specific Deliverables or rights in all materials produced by the Supplier when performing the Works);

where the Supplier has been engaged specifically to create something in which the Intellectual Property Rights are key (such as branding materials for the Customer) it generally will be appropriate for this Agreement to require the Supplier to enter into a specific assignment to the Customer of all rights in such materials;

in practice, it may not be obvious which parts of a Deliverable have been specifically developed for the Customer (and are being assigned to the Customer) and that comprise of the Supplier's pre-existing materials or third-party materials (and are merely being licensed). The Customer may wish to include an obligation that materials that cannot be assigned are not included by the Supplier in a Deliverable without the Customer's prior approval;

if the Customer wants to receive an assignment of the Intellectual Property Rights in the Deliverables created specifically for it, however some of those rights are owned by a third party, this clause will require amendment to grant a licence to such rights that cannot be assigned; and

the benefits for the Customer of owning the Intellectual Property Rights in Deliverables are that ownership guarantees exclusivity and also gives the Customer the right to enforce the relevant Intellectual Property Rights. However, where exclusivity is not an issue and the Supplier's business model is such that improvements made for one customer are shared with all customers then it may be appropriate for the Customer to just receive a non-exclusive licence. Where the Supplier is willing to give the Customer a limited period of exclusivity this could be achieved by granting an exclusive licence, which later becomes non-exclusive.

for the purpose of receiving the benefit of the Works and Deliverables, for a specified purpose or any purpose.

The Customer can sublicence or assign the Intellectual Property Rights to its Representatives or other third parties (such as its own customers) and are there any restrictions on such rights.

In relation to the Deliverables[ and other materials] produced by the Supplier in connection with this Agreement:

and its licensors retain ownership of all Intellectual Property Rights in the Deliverables, excluding the Customer Materials; and

grants to the Customer, or will procure the direct grant to the Customer of, a [worldwide OR [JURISDICTION]], non-exclusive, royalty-free, [perpetual and irrevocable licence OR licence during the Term OR [PERIOD]] to use, copy and modify the Deliverables for the sole purpose of [receiving the benefit of the Works and Deliverables OR [PURPOSE]].

assigns ownership of all Intellectual Property Rights in the Deliverables to the Customer, free from all third-party rights; and]

(b) the Customer [must not sublicense, assign or otherwise transfer the rights granted in Clause 18.2(a) [without the prior written consent of the Supplier] OR may sublicence the rights granted in Clause 18.2(a)].

(a) and its licensors retain ownership of all Intellectual Property Rights in the Customer Materials; and

(b) grants to the Supplier a non-exclusive, royalty-free, non-transferable licence to copy and modify the Customer Materials for the Term for the sole purpose of providing the Works and Deliverables to the Customer.

18.4 Further acts and moral rights

Clause 18.4 requires both parties to do all things necessary to give effect to Clause 18 (including a waiver of moral rights ). This clause is important to ensure that the parties can perform their obligations under this Agreement and for the Customer, to obtain the benefit of the Services provided by the Supplier.

A waiver of moral rights can be a contentious issue and the parties should consider whether it is appropriate having regard to the nature of the Services, and amend this clause accordingly.

(a) at the reasonable request of the other party, do (or procure to be done) all such further acts and things and the execution of all such other documents as the other party may from time to time require for the purpose of giving effect to Clause 18; and

(b) waive (and where applicable, will procure that its Representatives waive) all moral rights arising under the Copyright Act 1968 (Cth) in the Customer Materials, Deliverables or other materials developed in connection with the Services to be used by a party and consent to all such uses of such materials, including any use which may constitute a breach of moral rights by a party.

18.5 Supplier Intellectual Property Rights warranty

Generally, the Supplier should bear the risk that its provision of Services infringe third party rights. At the very least, the Supplier should be aware of whether any part of the Works or Deliverables has been copied or extracted from a third-party source and so should be able to give an unqualified warranty of non-infringement of copyright .

Cross-references and consistency with other terms

This clause should be drafted in conjunction with the indemnity given by the Supplier at Clause 20.1 (Supplier Intellectual Property Rights indemnity).

(a) warrants that the receipt and use of the Works and the Deliverables by the Customer in accordance with this Agreement will not infringe the rights, including any Intellectual Property Rights, of any third party;

(c) will not be in breach of the warranty at Clause 18.5(a), and the Customer will have no claim under the indemnity at Clause 20.1 to the extent the infringement arises from:

the use of Customer Materials in the development of, or the inclusion of the Customer Materials in, the Works or any Deliverable;

compliance with the Customer's specifications or instructions[, where infringement could not have been avoided while complying with such specifications or instructions and provided that the Supplier notifies the Customer if it knows or suspects that compliance with such specification or instruction may result in infringement].

18.6 Customer Intellectual Property Rights warranty

Clause 18.6 is a warranty from the Customer that the Supplier's use of the Customer Materials (for example, trade marks , logos or software ) will not infringe third party rights. No exceptions have been provided so the Supplier should be free to modify the materials (for example, to resize logos) as necessary for the performance of the Works and Deliverables.

Cross-references and consistency with other terms

This clause should be drafted in conjunction with the indemnity given by the Customer at Clause 20.2 (Customer Intellectual Property Rights indemnity).

(a) warrants that the receipt and use of the Customer Materials by the Supplier in accordance with this Agreement will not infringe the rights, including any Intellectual Property Rights, of any third party; and

19. Compliance with laws and Mandatory Policies

While both parties must comply with relevant laws while performing their respective obligations under this Agreement in any event, Clause 19 re-enforces that obligation on the Supplier. The optional wording extends the obligation to compliance by the Supplier's Group, which means that the Customer may have the ability to terminate this Agreement not just for the Supplier's behaviour but also that of each member of the Group.

The clause is intentionally drafted broadly but can be amended to include more specific references to legislation relevant to the nature of the parties, Services or supply arrangement. For example, compliance with:

Privacy and data protection laws. For example, see Standard clause, Privacy clause. See also optional Clause 17 (Privacy and data protection).

This clause also obliges the Supplier to comply with the Customer's business policies such as its code of conduct, modern slavery policy or expense policy (for further information, see Drafting note, Mandatory Policies). It is common for supply agreements to require compliance with the Customer's policies; however, this clause may require amendment where:

It would be unduly onerous for the Supplier to comply with the Customer's policies, for example, where it has its own robust policies in place or the costs, time and resourcing required for the Supplier to comply are unreasonable.

The Customer requires that the Supplier procures that the Supplier's supply chains (relevant to the supply of services) complies with such policies.

This clause also provides that if there is a change in law that impacts on the cost to the Supplier of providing the services, the Supplier can negotiate a corresponding increase in the price or time for performance.

Cross-references and consistency with other terms

(a) all applicable laws, statutes, regulations, regulatory policies, guidelines or industry codes from time to time in force; and

(b) the Mandatory Policies[, provided that the Customer gives the Supplier not less than [NUMBER] months' notice of any change to such policies].

Changes to the Works required as a result of changes to applicable laws, statutes, regulations, regulatory policies, guidelines, industry codes or the Mandatory Policies shall be agreed via the SOW change control procedure set out in Clause 7.

20. Indemnity

Given parties have common law rights to indemnification, whether a party gives a contractual indemnity will depend on the circumstances of the supply arrangement and the party's bargaining power, willingness and ability to do so. By their nature, indemnities give rise to liabilities that are not necessarily quantifiable at the time the parties enter into an agreement. For this reason, indemnities are a common cause of disputes and it is common for a party to object to giving an indemnity.

In a negotiation, a party may not wish to include an indemnity in favour of the other party as its starting position. Alternatively, it may take the view that the other party is more likely to see its position as reasonable if it has already included an indemnity. This allows a party to draft the scope of the indemnity more narrowly and only in respect of specific liabilities as its starting point.

To draft an effective indemnity, carefully consider the circumstances under which the indemnity may be required. Relying on a precedent indemnity clause or a broadly drafted general indemnity clause is unlikely to produce the best outcome for the parties and may have unintended and costly consequences. Whereas a well thought out and clearly drafted indemnity that reasonably addresses a legitimate concern will help to provide certainty for the parties and is likely to reduce push-back by the party giving the indemnity.

Where the unfair contract term regime applies to this Agreement, careful consideration should be given to the inclusion of an indemnity to ensure it is not unreasonably one-sided, excessive or otherwise an unfair term. For further information and indicators of unfair terms, see Practice note, Service agreements: Unfair contract terms and Checklist, Application of the unfair contract terms regime and assessing whether a term is unfair: Indicators of unfair contract terms.

For information on the use of indemnity clauses in contracts for the supply of services, see Practice note, Service agreements: Indemnities and Standard clause, Indemnity.

Cross-references and consistency with other terms

Limitation of liability provisions at Clause 21 (Limitation of liability) to ensure any liability cap or restriction to the types of loss that are indemnified are appropriate.

Insurance provisions at Clause 22 (Insurance) to ensure insurance coverage is appropriate and that risk of exposure to liability under the contract that is not covered by insurance is limited.

20.1 Supplier Intellectual Property Rights indemnity

Clause 20.1 requires the Supplier to indemnify the Customer for any resulting losses which arises if Intellectual Property Rights in the Works and Deliverables infringe a third party's Intellectual Property Rights. The reason for such a provision is that in general, the Customer cannot be expected to know whether the Deliverables or Works infringe a third party's Intellectual Property Rights. It is usual for a supplier to give such an indemnity, although the issue of whether it is capped or uncapped will often be the subject of negotiations between the parties.

Limits liability for loss to those that are direct and reasonably foreseeable and provides an option to exclude broader forms of loss, such as consequential loss (see also Clause 21.3(b)(vii) (Liabilities that are not limited or excluded)).

Indemnifies the Customer only and not a broader list of indemnified parties (such as related bodies corporate , directors , officers , employees, agents , consultants or contractors).

Where the unfair contract term regime applies to this Agreement and an indemnity is provided in favour of one party, it may be considered an unfair term (for example, if it is found to be excessive). For further information and indicators of unfair terms, see Practice note, Service agreements: Unfair contract terms and Checklist, Application of the unfair contract terms regime and assessing whether a term is unfair: Indicators of unfair contract terms.

Cross-references and consistency with other terms

(a) Except to the extent caused, or contributed to, by the negligent act or omission, wilful misconduct or breach of this Agreement by the Customer, and subject to Clause 18.5(c) and Clause 21, the Supplier indemnifies the Customer against any direct and reasonably foreseeable Loss suffered or incurred by the Customer arising out of any claim made against the Customer for actual or alleged infringement of a third party's Intellectual Property Rights arising out of the receipt or use of the Works and Deliverables in accordance with this Agreement.

(b) The Supplier's liability under Clause 20.1(a) is conditional upon the Customer discharging its obligations under Clause 20.4.

20.2 Customer Intellectual Property Rights indemnity

Clause 20.2 is a corresponding indemnity from the Customer to ensure that if the Supplier receives a claim from a third party claiming that its Intellectual Property Rights have been infringed, it can make a claim against the Customer. Where the Customer is not providing any Customer Materials, the parties may wish to remove this clause from this Agreement (and amend Clause 20.4 (Third Party Claims of infringement and conduct of claims) accordingly). Where the Customer is providing Customer Materials and the Supplier is required to give an indemnity, it will be difficult for the Customer to refuse to give this corresponding indemnity.

Cross-references and consistency with other terms

(a) Except to the extent caused, or contributed to, by the negligent act or omission, wilful misconduct or breach of this Agreement by the Supplier, and subject to Clause 21, the Customer indemnifies the Supplier against any direct and reasonably foreseeable Loss suffered or incurred by the Supplier arising out of any claim made against the Supplier for actual or alleged infringement of a third party's Intellectual Property Rights arising out of the receipt or use of the Customer Materials in accordance with this Agreement.

(b) The Customer's liability under Clause 20.2(a) is conditional upon the Supplier discharging its obligations under Clause 20.4.

20.3 Privacy and data protection indemnity (optional)

Clause 20.3 is optional and should be included where the Services involve Personal Information being shared between the parties and obligations with respect to the use, collection and disclosure of that information are provided for in this Agreement (see optional Clause 17 (Privacy and data protection)).

Cross-references and consistency with other terms

(a) Except to the extent caused, or contributed to, by the negligent act or omission, wilful misconduct or breach of this Agreement by the other party, and subject to Clause 21 , a party in breach of its data and privacy obligations under this Agreement or relevant privacy laws indemnifies the other party against any direct and reasonably foreseeable Loss suffered or incurred by the other party in connection with such breach.

(b) A party's liability under Clause 20.3(a) is conditional upon the other party discharging its obligations under Clause 20.4.]

20.4 Conduct of claims

Clause 20.4 gives the indemnifying party some control over the claims to which the indemnity relates. Otherwise, the risk for the indemnifying party is that a large settlement will be agreed to, or disproportionate costs run up in defending a claim and they will have to cover the cost under the indemnity. However, either party might seek to resist this clause on the grounds that it needs to keep control over claims against it for reputational reasons.

(a) If any third party makes a claim, or notifies an intention to make a claim, against a party that may reasonably be considered likely to give rise to the other party having liability under Clause 20 (Third Party Claim), that party must:

as soon as reasonably practicable, give written notice of the Third Party Claim to the other party, specifying the nature of the Third Party Claim in reasonable detail;

not make any admission of liability, agreement or compromise, or take any action in relation to the Third Party Claim without the prior written consent of the other party;

give the other party and its professional advisers access at reasonable times (on reasonable prior Notice) to its premises and its Representatives, and to any relevant assets, accounts, documents and records within their power or control, to enable the other party and its professional advisers to examine them and to take copies (at the other party's expense) to assess the Third Party Claim; and

give the other party sole authority to admit, avoid, dispute, compromise, settle or defend the Third Party Claim.

(b) A party must use reasonable endeavours to mitigate any loss it may suffer or incur as a result of an event that may give rise to a claim under Clause 20.