Eastern Commercial Lawyers

FAQ

 

Frequently Asked Questions

 

What is a contract?

A Contract is a legally binding agreement between two or more persons. The area of Contract Law is governed by both the general law, that is laws which have evolved from decisions made by Judges over the years and secondly legislation, being laws introduced by Parliament.


What makes a contract?

A Contract involves certain basic elements, they include:

  • An agreement arising from an offer and acceptance;

  • Consideration – the exchange of some benefit or something of value by the parties, for example, a party pays a sum of money for goods supplied by another party. Money is paid for work carried out by the other party.

  • An intention to enter into legal relations (that is the parties intended to enter into a legally binding agreement, although this is often not specifically stated it can be implied)


What happens if the terms of a contract are broken?

Once you make a Contract, you will be committing a breach if you do not comply with its terms, if you change your mind and decide not to perform your side of the Contract. If a party breaches a contract, there are a number of remedies available, including:

  • Damages (a sum of money) to compensate the innocent party for any loss suffered. This is the most common remedy.

  • A Court Order requiring the party who has breached the Contract to carry out his/her obligations.

  • A Court Order forbidding the party from breaching the Contract.

  • A Court Order declaring that the Contract is at an end, requiring the party who has breached the Contract to put the innocent party in the position he/she was in before the Contract was entered into. 

The type of remedy and its availability will depend on the type of Contract and the type of breach. A solicitor can advise you on the best means of dealing with the problem.


How can a Solicitor help?

A solicitor can explain the terms of a Contract and advise you as to your rights and obligations under the Contract.

  • Advise you as to the consequences of entering into a Contract before you commit yourself to it.

  • Discuss the Contract with the other party, so that terms which you may not have agreed to or which might disadvantage may be altered or removed. 

  • Taking instructions to prepare a Contract for you to enter into with another party.

  • Advise and assist you with the other party if the other party breaches the Contract.

  • Advise and assist you if you are accused of breaching a Contract.


How is a Franchise set up?

Franchising is the type of business ownership which allows an individual partnership or company to operate an independent business under the banner of an already established business.

A franchise agreement is normally entered into outlining the rights and obligations of both the franchisor and franchisee. It is a legal contract and much attention should be given to its contents which ultimately govern the relationship.

A franchisor must give a copy of the Franchise Code of Conduct as well as a Disclosure Document and allowing the Franchisee at least fourteen (14) days to consider them before signing. If fees are payable to the Franchisor, such fees must be clearly stated along with Terms of Sale for goods supplied by the Franchisor. The Franchisee will need to know if you can purchase stock from outside the franchise network.


What business structure is best?

There are several forms of business structures, each having its own legal accounting and tax requirements. The form of organisation of a business determines many things including how tax is paid and how profits are disbursed, and it should be geared to help you achieve maximum benefits.

The types of structure you may ask your solicitor to discuss with you include:

  • Sole Trader – with this structure you intend to conduct your business on your own or with employees but no joint owner. As a sole trader you are responsible for all debts and may have to mortgage or sell your personal assets to pay the debts of your business if it was unsuccessful. 

    • up to 20 people may form a business partnership. A larger number is possible for some professions such as accountants. If no formal partnership agreement exists, partners are deemed by law to be equal owners. Liability for all debts may fall on any of the partners jointly and severally – if one absconds or dies, the other may be left with the liability.

  • Limited Liability Company – if you form a company, the shareholders have limited liability, you may also become an employee or a director with certain duties, liabilities and strict responsibilities set out in the Corporations Act 2001. Companies are subject to their own tax record keeping and reporting obligations.

    • these may be more appropriate for holding business assets rather than trading. They will necessitate unclear details being set out in appropriate documents.


What sort of insurance should I set up when I set up a business?

Usually the only business insurance you are required by law to carry is Workers Compensation. Though landlords and Franchisors may also require you to have certain insurances. The rest is up to you, but you would be foolish to neglect to cover such obvious risks as fire, burglary, public liability, personal disability, and loss of profits.

There are many types of insurances which might be appropriate for your business. If you are a Director and Officer, insurance might be appropriate in certain circumstances. These should be discussed with your solicitor.


How does any sale or purchase affect employment entitlements?

It is important that the purchaser of a business knows what accrued staff entitlements it would be responsible for after acquisition including any outstanding severance, long service leave, annual leave, and or sick leave. Provision for these entitlements should be clearly settled with the previous owner in negotiations before the sale and ideally should form part of any sale agreement.


What is Mediation?

Mediation is a confidential conference where all the participants attend to co-operate to resolve any dispute between them. All negotiations during a Mediation are non binding and confidential. Experience has shown that Mediation is an effective tool because it is confidential and cost effective.

Any settlement reached as a result of a Mediation session is written down by the parties and signed by each side. The terms of settlement may be retained in contract form if there are Court proceedings, the lawyers will obtain an appropriate court order to discharge the proceedings if the matter settles.


How can a solicitor help with respect to Mediation?

Your solicitor can:

  • Advise if your case is suitable for Mediation

  • Describe, in detail, the process of Mediation

  • Contact the other party for you and negotiate on your behalf

  • Prepare your matter for Mediation

  • Attend the Mediation with you in order to advise you during the course of the Mediation

  • Assist you to draft a settlement agreement

  • If necessary, obtain an appropriate Court Order to discharge the Court Proceedings


What legal obligations do I have when buying a Strata Unit?

A Strata Title is the most common title associated with town houses and home units, and is evidence of an ownership of a unit which is called a “lot” in a Strata Plan. A Strata Plan divides a building and its associated land into lots, each of which has a Strata Title and usually common property. Common Properties are part of the land and building in the Strata Plan which does not form any part of the unit (for instance, stairways, passages, driveways and car parks).


What are the types of Title or Lots are there?

Another form of home unit ownership is Company Title which involves ownership of shares in a company which owns the land and buildings. Frequently an owner may need the company’s permission to sell his or his shares or lease the unit. Because the owner does not own any of the land and building, but only shares in the company, lending institutions may not look as favourably on Company Titles as security for housing loans. If you intend to purchase in shares in such a company, you should discuss your rights and obligations associated with Company Title with your solicitor.


What enquiries should be made before buying a Strata Lot?

Your solicitor should seek full details of:

  • The Strata Plan

  • Levies payable to the Owners Corporation and whether they are in arrears

  • Changes to the by-laws

  • Insurance policies held by the Owners Corporation

  • Any legal proceedings involving the Owners Corporation

  • Any expenses for which the Owners Corporation is or may become responsible

  • Any care taker or agreement


How can a solicitor help me in the context of buying a Strata Lot?

Your solicitor can:

  • Investigate all relevant aspects to ensure the Title to the lot you buy is secure

  • Advise you of your rights and duties as a lot owner and member of the Owners Corporation

  • Advise the Owners Corporation of its rights and obligations and take action on it’s behalf to recover unpaid levies and to enforce the by-laws

  • Suggest and prepare changes to by-laws and registered changes at the Department of Lands

  • Assist you in the resolution of disputes

  • Prepare a Contract when you want to sell your lot


How do I register a Company?

We set out the following steps which you must follow in order to register a Company:

  • Decide on your business structure

  • You will need to find out if a company structure best suits your business needs. You should seek legal or other professional advice about your particular circumstances. At this stage you should also ensure you understand what your legal obligations will be if you become a Company Office Holder.

  • When a Company is registered under the Corporations Act 2001 it is automatically registered as an Australian Company. This means that it can conduct business throughout Australia without needing to register an individual state and territory jurisdictions. Note that a registration of a business name does not create a legal entity and it does not allow the use of privileges to which a company is entitled such as corporate tax rate or limited liability. In effect the business name has no legal status. 

  • You will also need to choose a company name, determine if you will operate under Replaceable Rules or a Constitution or a combination of both, obtain consents from Members, Directors and Secretaries and complete and lodge an application form with ASIC.


How does a foreign company register and what post registration obligations are in place?

Who must register?

If a foreign company wishing to carry on business in Australia must be registered under the Corporations Act 2001.

The foreign companies are an incorporated or an unincorporated body that is formed in an external territory of Australia or outside Australia. It may sue and be sued, or may hold property in the name of its Secretary or other Officers.

The Corporations Act 2001 sole exempt public authorities and unincorporated bodies that have their head office or principal place of business in Australia are excluded from the definition of foreign companies.

Whether a body is carrying on business in Australia will depend on certain legal principles and on the circumstances of the case.

Where a body is in any doubt as to whether it may be carrying on business in Australia, it should seek its own legal advice.

Once registered in Australia companies are required to lodge copies of financial statements with ASIC to notify when certain company details change.


What do I do if my company is in financial difficulty?

If you suspect your company is in financial difficulty, get proper accounting and legal advice as soon as possible, as this will increase the likelihood of the company surviving. You will also need to protect the company from trading whilst insolvent.

You will need to be aware of your options so that you can make informed decisions about your company’s future.

Options may include, re-financing, restructuring, changing your company’s activities or appointing an external administrator.


What are the consequences of insolvent trading?

There are various penalties and consequences of insolvent trading including civil penalties, compensation proceedings and criminal charges.

The Corporations Act 2001 provides some statutory defences for Directors. However, Directors may find it difficult to rely upon these if they have not taken steps to keep themselves informed about the company’s financial position.


What is a reasonable notice period for terminating an Employment Contract?

In most cases, the notice period for terminating an Employment Contract is set out in the contract itself. It is particularly important that contracts for senior employees set out the applicable notice period.

In the absence of any contrary term in the contract, a contract of service has an implied term that either party can bring the contract to an end by giving reasonable notice.


Can Employers discipline or dismiss Employees in relation to out of hours conduct?

Whether Employers can discipline or dismiss an Employee in relation to out of hours conduct is a complex matter.

Action may be taken when there is a clear and relevant connection between the employment and the out of hours misconduct. 

In order for the connection to exist, this conduct must amount to a repudiation of the employment contract by the Employee. This is limited to the following circumstances:

  • The conduct when viewed objectively is likely to cause serious damage to the relationship between the Employer and Employee (i.e. it amounts to a fundamental breach of the Employment Contract).

  • The conduct damages the Employer’s interests (including where behaviour significantly undermines the image of the company, management or creates a risk of injury).

  • The conduct is incompatible with the Employee’s duty for the Employer and it is inconsistent with the Employee intending to continue employment.