Last reviewed and updated: May 2026. By Mark Harley, Principal Solicitor, Boss Lawyers.
This is part six of a six-part series on credit applications and the terms and conditions that accompany them. We conclude the series by examining two of the most important risk-limiting provisions in commercial contracts: indemnities and exclusion of liability clauses.
What Is an Indemnity Clause?
An indemnity clause is a contractual promise by one party to compensate the other for losses arising from a specified event or circumstance. Unlike a damages claim — which requires proof of breach and causation — an indemnity is triggered by the occurrence of the specified event, regardless of fault.
In trade terms and conditions, indemnities commonly appear in relation to:
- Third-party claims arising from the customer’s use of the supplier’s goods or services
- Intellectual property infringement by the customer
- Damage caused to the supplier’s equipment or property by the customer
- Loss arising from inaccurate information provided by the customer in the credit application
Indemnities are powerful provisions. Australian courts have held that indemnities must be construed strictly, but where clearly worded, they will be enforced even in respect of losses caused by the indemnified party’s own negligence — subject to the Australian Consumer Law and unfair contract terms legislation.
What Is an Exclusion of Liability Clause?
An exclusion of liability clause (also known as a limitation clause) restricts or eliminates one party’s liability for specified losses. Common forms include:
- Exclusion clauses: Completely exclude liability for certain types of loss (e.g., consequential loss, loss of profit)
- Limitation clauses: Cap total liability at a specified amount (e.g., the value of the contract, or a fixed dollar figure)
- Time-bar clauses: Require claims to be made within a specified period, after which the right to claim is lost
Are Exclusion Clauses Enforceable in Queensland?
The enforceability of exclusion clauses in Queensland is subject to significant constraints under both statute and common law:
Australian Consumer Law (ACL) — Consumer Guarantees
Under the Competition and Consumer Act 2010 (Cth), Schedule 2 (ACL), suppliers of goods and services to consumers cannot exclude the statutory consumer guarantees (quality, fitness for purpose, acceptable condition). Any clause purporting to do so is void. However, for business-to-business contracts where the goods/services are not “of a kind ordinarily acquired for personal, domestic or household use,” liability for breach of consumer guarantees can be limited to repair, replacement, or refunding the price paid.
Unfair Contract Terms
Since November 2023, unfair contract terms provisions in the ACL apply to standard form small business contracts. A term is unfair if it causes a significant imbalance in the parties’ rights and obligations, is not reasonably necessary to protect the supplier’s legitimate interests, and would cause detriment if relied upon. Exclusion clauses in standard-form credit terms are increasingly scrutinised on this basis.
Common Law Construction
Courts construe exclusion clauses strictly and against the party seeking to rely on them (the contra proferentem rule). To exclude liability for negligence, the clause must do so expressly or by necessary implication.
Practical Tips for Queensland Businesses
Whether you are a supplier wanting to limit your exposure, or a customer reviewing terms before signing, consider the following:
- Review your standard terms at least annually — unfair contract terms law has changed significantly in recent years
- Ensure exclusion clauses are clearly drafted and brought to the other party’s attention before contracting
- Include a cap on liability set at a commercially sensible level (e.g., the value of the contract or the amount of insurance held)
- Exclude consequential loss explicitly if that is your intention
- Obtain legal advice before relying on an exclusion clause in a dispute — courts will test its validity rigorously
How Boss Lawyers Can Help
Boss Lawyers regularly advises Queensland businesses on commercial contract drafting, review, and dispute resolution, including disputes arising from indemnity and exclusion clauses. Whether you need your standard terms reviewed for compliance with the current unfair contract terms regime, or you are involved in a dispute about liability, our team can provide practical, commercial advice.
Contact us on 1300 267 711 or visit our Commercial Litigation Lawyers Brisbane page to discuss your situation with Mark Harley.
This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.
