Contract First, Practice Later? Why You’ve Got It Backwards

When a new business relationship begins, it’s tempting to grab a contract off the shelf, tweak a few names and dates, and call it a day. After all, the “real work” is about to start — the paperwork just needs to keep up. Right?

Or maybe you take a contract you’ve seen someone else use, and decide to change your business practices to comply with their terms. That makes sense, doesn’t it?

No — not quite.

A contract shouldn’t trail behind the deal like an afterthought. But it also shouldn’t reshape the deal without giving that deal any thought. A well-drafted contract should define and support the arrangement — tailored to how the service will actually be delivered, who will deliver it, how value will be created, and how risk will be managed.

Otherwise, you risk ending up with a document that’s legally tidy but practically unworkable — or worse, a source of confusion and liability down the track.

Here’s why the contract should follow the practice, not force it.

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🎯 1. The Contract Should Reflect the Practice — Not Dictate It

Contract drafting isn’t an exercise in creative writing. It’s a legal mirror held up to your actual business model.

If the agreement assumes a formal signoff process but you operate with agile, iterative sprints — you’re going to breach your own contract just by doing business as usual.

If the contract says “transfer of IP on full payment” but payment is milestone-based and you’ve already handed over the work — you’ve just created ambiguity around ownership.

Rule of thumb: don’t draft a contract until you understand exactly how the service will be performed — including team structure, communication cadence, approvals, deliverables, timing and client involvement.

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🧱 2. Contracts Are Guardrails, Not Strangleholds

A good contract provides structure, accountability and fallback positions — but it should never get in the way of the commercial reality.

That means building in flexibility where needed:

• SaaS development that permits user testing before signoff

• Design services that include concept revisions without resetting timelines

• Joint R&D where IP rights reflect actual contribution, not just billing rates

When the contract forces an artificial or overly rigid process, it can delay projects, sour relationships and ultimately undermine the client’s goals.

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⚠️ 3. Misalignment Can Lead to Legal and Commercial Risk

If your practice and your paperwork aren’t aligned, it can backfire — fast:

• You might lose leverage in a dispute because your contractual obligations were never realistically achievable.

• You could accidentally license more than intended, or assign rights prematurely.

• Your service model may breach regulatory obligations, especially around data handling, privacy, or consumer guarantees.

And in litigation, courts often look past the black-letter terms to how the parties actually behaved. A contract that doesn’t match conduct can be more of a liability than a safeguard.

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🛠️ 4. Tips for Getting it Right

• Start with a reality check. Understand your own processes — or your supplier’s — before putting pen to paper.

• Workshop the workflow. Map out the actual steps of delivery and make sure your contract reflects them.

• Speak human. Avoid boilerplate that doesn’t fit your practice. Contracts should be clear, not cryptic.

• Review regularly. As your service model evolves, your contracts should too.

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🚫 Don’t Retrofit. Design Fit-For-Purpose.

The best contracts aren’t theoretical constructs — they’re practical frameworks. They don’t try to reinvent how you work. They protect how you actually do business.

So don’t write the contract first and force the practice to conform.

Understand the practice. Then draft the contract to match.

XJS Falls Short: No Liquidated Damages Without a Completion Date

The NSW Court of Appeal has handed down a sharp reminder that contract clauses don’t enforce themselves — and that if you leave key blanks unfilled in a standard form agreement, you may be left with no recourse when things go sideways.

In XJS World Pty Ltd v Central West Civil Pty Ltd [2025] NSWCA 133, a property developer sued its former contractor over delays in civil works on a Bathurst land project, seeking liquidated and general damages. The contractor, Central West Civil, cross-claimed for unpaid variation invoices — and won.

XJS appealed. The Court of Appeal wasn’t persuaded.

🧱 In brief …

🔹 No Completion Date, No Liquidated Damages
XJS relied on a standard-form construction contract that allowed the parties to insert a “Date for Completion” in Part D. They didn’t. The Court held that where parties choose not to activate a key provision (by leaving it blank), they can’t later act as if it were operative.

“The parties had the option of setting a Date for Completion and they chose not to do so… that contractual purpose is not to be undermined by seeking to stretch inapposite words.”

🔹 Delays Not Proven to Be the Contractor’s Fault
XJS alleged delays were CWC’s doing — but failed to provide persuasive evidence to back that claim. The Court reinforced that in construction disputes, you bear the burden of proving not just delay, but culpable delay.

🔹 No Breach of Council Requirements
XJS argued that the contractor failed to meet certain council conditions. The Court found that any issues were technical and minor, and not sufficient to constitute a breach.

🔹 Termination Was Repudiatory
When XJS terminated the contract, it did so without legal entitlement — which made it the party in breach. The trial judge’s conclusion that this amounted to repudiation was upheld.

🧠 Key Takeaways

If you’re using standard form construction contracts:

• Don’t leave blanks you plan to enforce later. If it’s not filled in, it may not apply.

• Document delay causes precisely — especially when multiple contractors are involved.

• Termination without cause is dangerous. Even in commercial stand-offs, you need a firm contractual footing to walk away.

In the end, XJS World discovered that skipping a few contract fields can cost a lot more than time — it can cost the whole case.