Contract Reviews and Negotiations -

CONTRACT REVIEWS AND NEGOTIATIONS

A BUSINESS LAWYER'S PRACTICAL GUIDE

Presented by:

Tom MeagherDirector – Commercial Law

© Murfett Legal 2013

Disclaimer

• The information presented in this seminar is intended only as a guide, as to the topic and the matters discussed.

• This seminar is not legal advice and must not be relied on as such.

• If you have a matter which relates to this seminar or you require legal advice, careful review and analysis of your matter’s particular facts, information and documents is required before proper legal advice can be given or applied to your matter.


What is a Contract ?

– Offer: intention to create legal relations

– Acceptance of Offer

– Certainty of Terms: between the parties• reasonable and objective interpretation;• variation of contract or counter offer

– Consideration: the parties have bargained or paid for their mutual promises

– Privity: only the parties to the contract may enforce their contractual promises


Methods of Formation of Contract -When have you entered into a contract?

– Verbal;

– Written; • Note: must always be for land transactions;

– By performance; or• Note: also estoppel

– Any combination of the above.


Who can Bind the Parties to a Contract?

The accepting party, who may be: » the business owner» a customer» a director » a partner » an agent » a manager; or » an employee.

Authority to bind: • contractual right (e.g. manager), • ostensible authority (e.g. agent); or • statutory (s.128 & 129 of Corporations Act – a party’s

assumptions in relation to their dealings with a company).


Types of Contract

Examples of various types of contracts:

– For goods and/or services

– A bus ride and car parking

– Employment agreements

– Leases and licences (note: offers to lease)

– Shareholder and unit holder agreements.


Types of Contract

Some parties may present a “Heads of Agreement” also commonly referred to as an:– “Agreement to Agree”, – “Memorandum of Understanding”– or “Term Sheet”,

before a formal contract.

The Heads of Agreement typically sets out only the key terms of the contract but an still be legally binding!


At or Before Contracting

– Agree the terms or deal, then confirm it in “in writing” e.g. by signed agreement, fax or email.

– Consider not proceeding if, despite an apparent contract, you don’t reasonably believe you will get what you seek or what you should be paid.

– Also consider if a Confidentiality Deed is required e.g. IP protection, competitor buyer.


At or Before Contracting

– Ensure proper advice and other material matters are in place e.g. • check tax consequences with accountant, • check with insurance advisor – duty of disclosure

proper and adequate insurances • any necessary statutory licences or permits or

authorisations required.

– Statutory disclosure • Product Disclosure Statements (PDS)• Consumer Credit Code• ‘Disclosure Statements’ for Retail leases • ‘Disclosure Documents’ for Franchise

agreements.


Terms and Conditions of Agreement(aka Terms of Trade or the Contract!)

You should be aware of and understand effects (and differences) the following clauses:

• Insurances;• Indemnities and Warranties;• Defects and Liability;• Limitations of liability –

consequential losses; • Liquidated damages;• Default and Termination (tip:

watch for ‘termination for convenience’ clauses);

• Retention of title and the Personal Property Security Act;

• Direct and consequential losses;

• Notices; and• Incorporation of other

documents into the contract eg. annexures, schedules, policies.


Terms and Conditions of Agreement

You should also ensure the following clauses are acceptable and/or incorporated:

• Satisfactory payment terms;• Security for payment;• Ability (or first right) to rectify

any defects in the goods and/or services;

• Ownership of Intellectual Property Rights;

• Variations to the works;• Extension of time;• Dispute resolution;

• Protective Covenants (e.g. ‘anti-poaching’ of staff , clients etc.) and Restraints of Trade;

• Confidentiality;• Assignment, novation, sub-

contracting;• Force Majeure/ ‘Act of God’• Jurisdiction/ Governing Laws• Entire agreement clause; and• Further assurances.



• Don’t rely on friends, ‘mates’, agents or other non-qualified third parties for “advice”. They:

a) do not act for you,

b) do not owe you a fiduciary duty; and

c) are not qualified (or insured!) to give you proper legal advice.

• Engage a lawyer at the right time – e.g. you do the deal but before you accept a contract, be sure to obtain appropriate legal advice.

• Business lawyers can add value and can be better than warranty/insurance claims or litigation!

• If a dispute arises, be sure to clarify the issues in writing, keep all material information/documents and seek advice early (also, if applicable, promptly notify your relevant insurer – rights of subrogation).

How to avoid unnecessary legal risk, cost and stress


THANK YOU

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