A Quick Guide for Industrial Lease Tenants: What to Consider Before Signing a Lease

Remember – an agreement to lease can be binding and oblige you to forfeit a deposit if you change your mind about the lease. Get advice before you sign anything.

1. Define Your Needs and Objectives

Before you start searching for industrial space, it’s essential to have a clear understanding of your needs and objectives. Ask yourself:

• Space Requirements: How much square meterage do you need for your operations, and how will you use the space efficiently? Do you have space to expand and what if you want to contract? 
• Location: What is the ideal location for your business? Consider zoning, proximity to suppliers, customers, transportation hubs, and workforce availability. Consider past flooding or bush fire events for the location. 
• Budget: What can you afford in terms of rent, utilities, and other operating costs? Establish a budget and stick to it. Lease costs increase every year so it is important to consider a worked example of what your rent and outgoings will be at the end of the lease, not just the beginning. 
• Lease Term: Determine the length of the lease term that aligns with your business goals. Industrial leases can vary from short-term to long-term agreements and while a holding over might work for some tenants, and month by month lease may not provide sufficient time to vacate cost effectively if, as the tenant you have to get out.

2. Location and Accessibility

The location of your industrial space can significantly impact your business. Consider that some areas are not accessible by all types of vehicles and might have high vehicle or heavy load detours. Planned future road works, particularly major works like road widening or installing traffic lights can hinder access for months. Review:

• Zoning and Land Use: Ensure that the property is zoned for your intended industrial use. Check local zoning regulations to avoid complications later. Keep in mind that city fringe areas may be subject re-zoning over time. 
• Proximity to Transportation: Evaluate access to major highways, ports, railways, and airports, especially if your business involves shipping and logistics.
• Local Amenities: Assess the availability of nearby amenities, such as restaurants, hotels, and retail, which can be beneficial for employees and business operations. Accommodation at a port might be handy for logistics and inappropriate for accommodation of your office staff. 
• Labor Pool: Consider the availability of skilled labour in the area, as this can impact your ability to hire and retain employees. Transport accessibility might also be an issue if your potential labour pool can’t get to you easily, or there is no where for safe parking. 

3. Types of Lease Payments

Industrial premises might be located in an estate owned by one landlord or developer, or stand alone, and this can affect the different types of outlays payable by tenants. 

It is not unusual in industrial and commercial leases for the tenant to be responsible for all costs associated with the property, other than capital costs. This can include things like security details, management rights, landscaping teams etc. It is important to understand the extent of costs payable on top of the rent. 

Outlays are generally estimated in advance and paid monthly, then reconciled at the end of the financial year with any overpayment amortised against the next outlays invoice, and underpayments invoiced as an additional fee. 

4. Lease Terms and Flexibility

Pay close attention to the terms and flexibility of the lease:

• Lease Duration: Consider whether a short-term or long-term lease aligns better with your business strategy. Longer leases may provide stability but could limit flexibility. 
• Renewal Options: Check if the lease includes renewal options, which can be essential for long-term planning and avoiding the hassle of relocating. For a newer business, a shorter initial lease with longer options might enable the business to become established without the pressure of a long lease, and for older premises, a longer initial lease with shorter options might provide the necessary flexibility to look for an upgrade in premises when the lease ends.
• Exit Strategies: It is not unusual for a commercial or industrial lease to be inflexible around exit, providing the landlord with options, but not the tenant. If your business is expected to change as it grows, consider what factors might mean you have to change premises to remain viable and request appropriate provisions for the lease to ensure that flexibility. Changing from a predominantly domestic to a predominantly export market might mean a need to shift location.

5. Rent and Operating Costs

Understanding the costs associated with the lease is crucial:

• Base Rent: When you create your budget for leasing premises remember that the base rent is only the beginning of calculating your costs and if it starts to high, you put your business under pressure. Budget conservatively. Determine the base rent and any escalations over the lease term. Escalations typically include:
  • annual fixed percentage increase or
  • annual CPI increase and
  • timed market reviews

It is highly unusual, but not unheard of, to have rental fixed for the whole of the term of the lease, payable in equal monthly instalments – much like payday lending. Your percentage increase is disguised behind predictable monthly payments.   

• Outlays: Clarify your responsibility for outlays, which are costs incurred by the landlord and payable by you. They can include almost every cost associated with the land, including rates, taxes, insurance and management fees, or may be limited to a fixed category of costs identified in the lease. These costs can vary widely, so negotiate terms that align with your budget.
• Operating Expenses: You will have all your usual expenses for operating and maintaining industrial premises including necessary utilities, telecommunications and internet access. For new premises you may need to check that those services have already been connected, or require installation.  
• Security: It is rare to enter a lease without providing at least one form of security. This can be by bank guarantee, personal guarantee or security bond paid in cash. Find out the amount of the security deposit required and the conditions for its return. Open ended bank guarantees should not be offered, and should have an expiry date no more than six years after the end of the lease term to match the statute of limitations. 

6. Property Condition and Maintenance

Inspect the property and understand your responsibilities regarding its condition and maintenance. It sounds simple and logical but just with people who buy houses without building and pest inspections, businesses go into leases without thorough checks.

• Property Inspection: Conduct a thorough inspection of the industrial space to identify any existing issues or necessary repairs. Document these and negotiate necessary repairs with the landlord. In the rush to get into premises these inspections can be missed and become a problem only after the lease has started and the tenant has been in the premises for a while. Drains partially block by tree roots can become the tenant’s problem rather than the landlord’s if not identified at the beginning of the lease. Keeping pipework clear and functioning is usually the obligation of the tenant once the lease starts. 
• Maintenance Obligations: Clearly define maintenance responsibilities in the lease agreement. Determine who is responsible for routine maintenance and major repairs. This is particularly important for things like fire safety equipment. If the responsibilities are not clear in the lease and there is a failure during a fire, or a malfunction causing damage to stock, no only can there be an argument about responsibility, but there can also be a failure in insurance cover if the equipment didn’t meet minimum regulatory maintenance requirements. 

7. Environmental Compliance

Industrial properties often have environmental considerations:

• Environmental Regulations: Ensure that the property complies with all relevant environmental regulations, especially if your operations involve hazardous materials handling or a product that can travel past the boundary of the property like – water, soot, sand, smoke, paint overspray etc. 
• Contingency Planning: Ensure you have all necessary contingency plans documented for compliance and to minimise risks. Understand the impact of neighbouring properties. 

8. Fire Safety and Equipment

Safety should be a top priority:

• Fire Safety Systems: Verify the condition and functionality of fire alarm systems, sprinklers, extinguishers, and emergency lighting. Non-compliance with safety regulations can lead to legal issues.
• Safety Inspections: Establish a schedule for regular safety inspections and ensure that both you and the landlord are aware of your respective responsibilities.

9. Infrastructure and Utilities

Consider your infrastructure needs:

• Infrastructure Development: If the property is still under development, understand the timeline for infrastructure development, including roads, utilities, and access.
• Utilities: Ensure that utilities, including water, electricity, and internet, are connected and meet your operational requirements.
• Contracting and Expanding Space: Do you have the flexibility to grow or shrink with market demand? In complexes where there are adjoining units you may have the ability to negotiate the acquisition or leasing of neighbouring units for expansion. Is there the possibility of building a mezzanine in the premises to meet your future growth? If so, will the increase floor meterage increase your rent?

10. Lease Negotiation and Legal Advice

Finally, don’t underestimate the importance of lease negotiation and legal advice:

• Professional Assistance: Engage a qualified lawyer experienced in industrial leases to review and negotiate the lease terms on your behalf. Commercial agents act in the interests of the landlord they represent and who pays them a commission on getting the premises leased. They are unlikely to prioritise your interests over those of the landlord and may seek to trivialise aspects of a lease or the premises that can have a significant financial impact for the tenant once the lease starts. 
• Negotiate Terms: Be prepared to negotiate terms and conditions to ensure the lease aligns with your business objectives and safeguards your interests. Be aware that timeframes can be subject to significant change if an industrial property is still under development. There can be years between getting approval to build a new industrial estate and actually having buildings available for a tenant to move into. 
• Due Diligence: Conduct thorough due diligence on the property and the landlord to ensure a smooth and reliable leasing experience. Ask if there are any thoughts or plans for sale, refurbishment or further development in the future. 

Seek professional guidance when needed to navigate the complexities of industrial leases, and don’t hesitate to ask questions and seek clarifications during the leasing process. Your choice of industrial space can have a profound impact on your business, so choose wisely and confidently.

What you should know about Privacy Law in Australia – it’s changing.

And privacy law is changing around the world as well.

2023 Privacy Awareness Week was the first week of May.

Changes to Australian Privacy Law in December 2022

Privacy law is under review in Australia. In December 2022 the federal government pushed through the Privacy Legislation Amendment (Enforcement and Other Measures) Act 2022 which was tabled in response to the Optus and Medibank personal data hacks.

The legislation was rushed due to several factors. Many people are upset because the Medibank hack perpetrators released all the collected data on the dark web in November 2022. Even politicians have been affected, and they want to take action during their first term to prevent a similar data breach from occurring again.

Cynically, it also provides the government with the potential to recover a little of the budget deficit if it gets to impose penalties at the higher rate, and it is no small jump in penalties. The Australian Information (OAIC/Privacy Commissioner) will have the opportunity to test these recent changes in the law in reviewing the Latitude Finance data breach, where it was discovered that some personal information had been held on to for almost 20 years, and well past Latitude’s legitimate business needs.

The main changes to Privacy law extending the Privacy Commissioner’s powers and increasing in penalties are:

• significant increase in penalties up to $50 million – see more below;
• extension of coverage to foreign entities that carry on a commercial activity in Australia, whether or not having any other Australian link;
• provide the OAIC with greater enforcement and information sharing powers; and
• provide the Australian Communications and Media Authority (ACMA – the body responsible for regulating anti-spam compliance) with greater information sharing powers.

One practical consequence is that conduct complained about as spam could now result in investigations into how the same company manages personal information, with potentially huge penalties for non-compliance.

Privacy Review Recommendations for 2023

Earlier in 2023 the federal government was calling for submissions on the Privacy Act Review Report,  published by the Attorney-General’s Department, which makes 116 recommendations for proposed changes to the Act.    

‘Small business’ is mentioned 207 times in the Report.

Some of the changes proposed to affect small business are:

1. that the exemption for small businesses with a turnover of $3 million or less be removed;
2. that the exemption for small businesses who have obtained consent to trade in the personal information they collect, be removed;
3. that protections be extended to private sector employees (noting that many of these employees are employed by small businesses);
4. OAICs powers to issue penalty notices be extended;
5. criminal offences be introduced;
6. introduce the right of a person to sue for ‘serious invasions of privacy’ and or for a ‘serious invasion of privacy’ to be a criminal offence;
7. Introduce an express requirement in APP 5 that requires collection notices to be clear, up-to-date, concise and understandable with appropriate accessibility measures; and
8. the requirement for risk assessments to be conducted for activities ‘with high privacy risks’. 

What do Changes in Australian Privacy Law mean for Small Business?

Given the changes in technology over the last 20 years and the amount of data collected by small businesses, it is likely the exemption will be lifted because the data collected does put individuals at risk.

One of the examples used in the report referred the amount of information collected by real estate agents in receiving tenancy applications. The risks to individuals relating to the type of information collected (photo identification, earnings, bank account details etc) by real estate agents was considered sufficiently high to warrant a positive obligation on the collecting party.

It was also mentioned that the lack of understanding of data handling practices by small businesses could increase the risk of a data breach occurring.

In our experience, many small business owners have not thought about what systems they use and how that impacts the personal information they collect.

Can you answer these questions?

• What email system do you use? 
• When was the last time you checked your email provider’s privacy obligations and protections, and how that impacts your use of their system?
• What happens to the personal information (names, email addresses, phone numbers etc) going through your email?
• How much historical email data do you have stored? Should you?

Preparing for the Removal of the Small Business Privacy Law Exemption

Small business owners need to immediately increase their knowledge and understanding of the information you collect, how you collect it, what you do with it, how long you need it, and what you do with it when you no longer need it.

This also means small business owners will need to understand your privacy policies and whether the policy accurately reflects what you do, and whether it is clear enough for your customers to understand.

This means thinking about your customer base in a new way, regardless of whether they are likely to read your policy before the purchase or wait until they have a problem.

“When was the last time you read your privacy policy?”

When the small business privacy law exemptions are removed, as a small business owner you will be exposed to the risks of penalties from the OAIC, being charged with a criminal offence or being sued by an irate customer. 

If you don’t understand how you protect personal information, take the time to review now, and understand your existing systems, or implement new systems. 

Do you know how to complete a risk assessment on the types of information you collect, 

What are the Penalties for Serious Breaches of the Privacy Act?

Penalties for serious breaches of privacy obligations have increased.

For individuals, such as sole traders and independent contractors, to a maximum of $2.5 million (from $440k).

And, for bodies corporate, such as companies and incorporated associations, from $2.22 million to a maximum of:

• $50 million
• three times the value of any benefit obtained through the misuse of information
• if the value of the benefit cannot be determined, 30% of the body corporate’s adjusted turnover (revenue in Australia) in the relevant period.

As a Small Business Owner, do I need a Privacy Policy?

If you fall within a small business exemption, then before mid-year 2023 you will not be legally required to have one. Your customers or clients might have different expectations.

Proposals for changes in legislation are under consideration in 2023. The government responded to the Optus and Medibank breaches within a few short months, with legislation that had immediate effect. It is likely that changes to small business privacy obligations with have a 6 – 12 month lead time before they become effective.

You can act now to be prepared, or wait for the last minute rush. Again, it might be worthwhile surveying your client base to find out what their expectations are of the systems you have in place to protect their privacy.

Can Small Business Owners just use template Privacy Policies?

Some business owners have a high-risk tolerance and just want to get on with business without worrying too much about compliance issues, and are more inclined to ask for forgiveness rather than consent.

Other business owners are low risk and want to get everything right before they start trading.

Most small businesses are somewhere in between.

The highest risk is copying and pasting something from a source that is not relevant to your country, or from someone else’s website without understanding the implications on your business. If you get it wrong, you can potentially create higher liability than you are legally required to, or no protection at all.

One of the most common problems with privacy policies is that people try and use them without understanding them. If a template comes from a trusted provider and mentions your local laws, and you understand it, and it reflects what you actually do in your business, then it may be appropriate for your business.

We are unable to specifically say if something is right for your business or not without reviewing your business and the terms of the privacy policy. You can book a consultation with one of our team to check any website legal terms you have in place by making an appointment.

What about ChatGPT Privacy Policies?

We have tested ChatGPT and the draft policies it generated were not 100% compliant with privacy laws of any jurisdiction. They were more geared toward the United States law.

The United States does not have a single consistent approach to privacy protection. Laws are different in each state, so there is no clear guidance on compliance, which is probably why the ChatGPT version is a bit vague.

Who Cares about Privacy Laws?

There is privacy, and then there are privacy laws.

Someone wanting privacy may be considering time away from the public eye, and no being disturbed by other people. That is not what privacy law is about.

Privacy law is not about stopping someone from stalking you on social media or keeping someone out of your home or away from your family. As much as you might sometimes like to, privacy law does not support you in telling someone to “keep your nose out of my business”.

Australian privacy law is specific to the protection of personal information.

Personal information is something that can identify you or be combined with other available information to identify you. A photo, an address, a phone number, and all the same information that some social media users freely give away when being asked to participate in a quiz to determine their Star Wars identity.

Many businesses want as much information they can get from a customer or potential customer so that they can target products or advertising to that person. The question is, is the collection of all that information necessary?

The Office of the Australian Information Commissioner completed a survey in 2020 (pre- Optus and Medibank hacks) suggesting that 70% of Australians were concerned for the use of their personal information and 87% wanted more control and choice over the collection and use of their personal information.

In addition, the recommendations for changes to privacy laws include enabling individuals to have their personal information erased, and propose giving individuals the right to sue controllers or processers of personal information for serious invasions of privacy.

It is also likely that there will be penalties for collecting more personal information than is reasonably required for the services being delivered, and for coercing people to provide personal information, such as using provisions that do not entitle someone to obtain a free quote unless they provide their name and email address.

If you worry about what is happening every time you give another business your personal information, then imagine how your customers feel. Now is the right time, before there are significant consequences for non-compliance, to consider reviewing and updating your privacy policy and procedures.

This article contains general legal information and should not be relied upon without seeking appropriate legal advice specific to your circumstances. 

What is the purpose of a restraint of trade?

Thank you to The Project & Procurement Professional Community of Practice for asking for more information on this topic.

A restraint of trade is usually requested to protect business revenue and reputation. Some areas where restraints are commonly requested are:

• where an employee is leaving a business
• where a contractor is engaged to work with a business temporarily
• where a shareholder or investor is exiting a company and they were more than a silent partner
• on the sale of a business to new owners

Restrictions on trade must be reasonably necessary and proportionate to the legitimate interests being protected. In general, for a restraint of trade provision to be enforceable, it must protect a legitimate interest, such as protecting trade secrets, confidential information, or customer relationships, and it must be reasonable in scope, duration, and geographic area.

A confidentiality agreement regarding the use of confidential information may have some of the same effects as a restraint of trade, but they are not the same thing. 

What is reasonably necessary and proportionate for a restraint of trade? 

Different types of restraint will be considered differently by the courts if a decision needs to be made about the reasonableness of the restraint. 

The parameters of a restraint need to be considered for each different type of agreement and circumstance. Restrictions on stealing clients or customers are the most likely to be enforceable. Having regard to the difficulty in attracting and retaining those clients, and the value they bring to the restraining business is what will impact the reasonableness or otherwise of a timeframe for restraint.  

For some businesses, a restraint framed in time and area is more easily applied and makes more sense. In cases where business can be conducted online with international partners, a limit by location will have no benefit. Note also that a court may be limited by its territorial jurisdiction in enforcing a restraint, so an employee leaving a job in Australia and taking up with a direct competitor in the US might only be able to be sued if they steal clients and that is what they are restrained from doing.

Employment 

Where a restraint of trade is stated to apply to an employee, then it will NOT be reasonable if it has the practical effect of stopping someone from earning a living or requires them to move away from their usual home to be able to get a job. 

How an employee restraint takes effect may be different if the person had ownership in the business. A more restrictive restraint of trade is likely to be reasonable when applied to a former owner, rather than an unrelated employee. See ‘sale of business’ below. 

Restraints on employees also must take into consideration the nature of the work completed by the employee. 

It is unlikely to be considered reasonable to attempt to restrain someone who is a barista from working in another local café. This is because the barista is unlikely to hold any unique or confidential information that could be detrimental to the original business. The barista is unlikely to control where the coffee is sourced, how it is priced, who the customers are or what the business serves in addition to coffee. 

Compare a barista with a chef. The chef may have a following of people who really appreciate their style of food and will follow them. In that case, a form of restraint might be reasonable. 

At the other end of the scale, a C-suite executive is likely to have a restraint in their contract of employment because of the nature of the work they do and the amount of knowledge they have. 

Examples of what could make a restraint reasonable (restraints don’t usually contain all) are:

Limits on time

A 6-month restraint will be more reasonable than a 5 year restraint, however, you must think about the impact on the business.  Think about the cycle of change applying to customers or clients of the business. If they come back every week, then a shorter restraint is likely to be reasonable. If they purchase products or services only once every few months, then a 12-month restraint might be reasonable. The more knowledge a person has about the management and operations of the business, and they risk that knowledge has to their competitive advantage, will also impact the length of time that is considered reasonable. 

The impact on the business to be minimised is the loss of customers. If customers purchase again getting used to working with a new member of staff, then the restraint has had the desired effect.

Limits on geography

I’ve seen people request restraints from as little as 3km to worldwide restraints. What is reasonable, will depend on the potential impact on the business. 

So, an accountant who works with clients predominantly located in Queensland, Australia, might be able to be restrained form working within a radius of their former office, but are still unlikely to be able to be restrained in the whole of Queensland. If their work is conducted in Queensland and their client base is not, then a geographical limitation might not be supportable at all, and a different type of restraint should be considered. 

Limits on contact with existing clients of the former employer

Limiting contact with existing clients and prospects is the most commonly supportable form of restraint because it is easy to demonstrate the benefit/ loss to the business. If a client that has spent $100,000 a year with their insurance broker suddenly leaves to follow the particularly broker they were working with, then that is a quantifiable impact on the broking business. 

Limits on roles or the nature of work

It would be difficult to justify a restraint on anyone who does customer facing work in retail or hospitality simply because of the nature of the work, and personal service industries like hairdressing and beauty therapy may also be challenging. Someone in general management might be restrained from working in the same industry or for a competitor, but not as a general manager and not from managements roles. 

Investors/ shareholders 

Common sense dictates that a restraint won’t stop a former investor or shareholder from purchasing shares on the share market. This is sometimes specified as a carve of from a restraint in the restraint clauses. 

A shareholder who has been involved in a startup and been involved in the initial ideation, strategy, implementation and changes required to develop the business is likely to be restrained from seeking to be involved (other than through the stock exchange) in a competing business for a period consistent with the initial development phase of that business – which might be 2 -3 years.  

Sale of business 

When buying a business, it is common to restrain the seller from competing for a period of time which reflects your investment in that purchase. If the purchase price has been based on a multiplier of the business revenue or profits, then that multiplier might also support a period of restraint. So if the business was sold for 3 x the value of the profits, then a 3 year restraint might be considered reasonable as the seller should recover its purchase price in that time frame.  

Contractors

It is difficult to restrain contractors. The nature of what they do requires a level of flexibility in what they deliver, and there is less certainty in their roles than that of employees. A contractor can be restrained from using or misusing confidential information and can be reasonably restrained from poaching clients and staff, but geographical restraints are rarely supportable. It might be reasonable to restrain a contractor from working with a direct competitor within a certain period, but that restraint will be more focused on how the use of confidential information might cause detriment to the party applying the restraint, or benefit to a future contracting partner. 

Do restraints get enforced?

It is not unusual for businesses to send cautionary or potentially threatening letters when they are of the view that a restraint has been infringed. As with any kind of dispute, most are resolved without ever going to court. There are a variety of restraint cases reported in superior courts around the country in the last ten years including:

A 2014 Queensland Supreme Court case involving an ophthalmologist who sold his Rockhampton practice to a publicly listed company. 

The restraint provision was held to be reasonable only in prohibiting the doctor from poaching clients or offering services to clients of the business he sold.

The court found the restraint unreasonable where it attempted to restrain the doctor from working as an ophthalmologist within any of the decreasing radii of 20, 15, 10, 5 or 2 kilometres of a clinic owned by the buyer, or him being employed by a competitor. It was also considered unreasonable to attempt to stop the doctor from attempting to poach employees from the buyer.  

 The reasonableness of the restraints in this case is impacted significantly by the standing of the buyer and might have been considered reasonable if the buyer was another small business owner. 

A 2020 ACT Federal Court case involving a restraint against a shareholder of a financial planning business. 

In that case the “restraint provisions were clearly the work of lawyers, each with one eye on drafting the greatest possible protection for the applicants and with the other eye firmly shut to the limits that the law places on such restraints by requiring them to be the least necessary to protect the applicants’ interests in the business of New Civic. The result is restraint provisions that are impossibly convoluted and complex and unjustifiably broad” and therefore unenforceable.

Can there be compensation offered in exchange for agreeing to a restraint?

Yes, it is possible for compensation (payment) to be offered in exchange for agreeing to a restraint of trade provision, which can be used as a way to “sweeten the deal.” However, the enforceability of such provisions and the compensation offered will depend on various factors, including the reasonableness of the restraint and the specific circumstances of the agreement.

The amount of the payment should have a direct correlation to the reasonableness of the restraint. So, if an executive is to be broadly restrained for 12 months in a way that impacts their ability to seek other employment, reasonable compensation for that restraint might be the equivalent of that person’s annual wage. However, the specific circumstances, the scope and duration of the restraint, and the legitimate interests being protected will all still need to be considered in determining the reasonableness of a restraint. It may still be challenged in a court. 

Unless a restraint has been written into an agreement, such as an employment agreement, at the start of employment and therefore agreed in advance, an employer must offer some form of consideration for that restraint to form a binding and enforceable contract. Compensation offered as consideration can include monetary payments, shares, benefits, or other forms of value.

However, it’s important to note that even if compensation is offered, a restraint of trade provision may still be found unenforceable if it is found to be unreasonable or against public policy. 

It’s recommended to seek legal advice from qualified professionals when drafting or entering into agreements containing restraint of trade provisions and compensation arrangements in Australia to ensure compliance with applicable laws and regulations.

What type of action could be taken against somebody if they were to breach the restriction?

A breach of a restraint provision is usually challenged as a breach of contract in superior court. Depending on the way in which the claim is stated, it may be open to the court to make orders such as:

An injunction
A court order that requires the person who breached the restraint to stop the prohibited activity. Injunctions can be sought to prevent further breaches of the restraint and to protect the legitimate interests of the party seeking enforcement.

Damages
The party seeking to enforce the restraint may also seek damages, which are monetary compensation for the losses suffered as a result of the breach. Damages may be awarded to compensate for financial losses incurred due to the breach of the restraint, such as lost profits or other damages directly resulting from the breach.

An account of profits
In some cases, the party seeking to enforce the restraint may seek an account of profits, which requires the person who breached the restraint to account for any profits they have gained due to the breach. This can be a remedy to prevent unjust enrichment by the person who breached the restraint.

Specific performance
In certain circumstances, the party seeking to enforce the restraint may seek specific performance, which is a court order that requires the person who breached the restraint to fulfill their obligations under the restraint. This may be sought when damages are not an adequate remedy or when the party seeking enforcement wants to ensure compliance with the terms of the restraint.

Could a restriction of trade be seen as anti-competitive?

It is more likely that a court will consider a restraint provision to be unreasonable if it has the effect of limiting competition, rather than reviewing the restraint under competition law. This will depend on how a claim is structured when made to the Court. 

If mutually agreed by all parties, could the restriction be waived or amended?

Any contractual provision can be waived or amended by later mutual agreement between parties. 

This article contains general legal information and should not be relied upon without seeking appropriate legal advice specific to your circumstances. 

Distributor Agreements

As a small business operator in Australia, entering into a distribution agreement can be a beneficial way to expand your reach and increase sales. Distribution agreements are contracts between two parties where one party agrees to distribute the products or services of the other party in a particular territory or market. They are contracts that define the terms and conditions under which a manufacturer or wholesale supplier allows a distributor to sell or distribute its products. These agreements provide a framework for the relationship between the parties involved, including the roles, responsibilities, and obligations of each party.

For small business operators such as software providers or trade supply wholesalers, distribution agreements are particularly critical, as they provide a means of expanding their reach and increasing their customer base. They outline the terms and conditions under which the distributor is authorised to sell or distribute the manufacturer’s products. These agreements typically cover a wide range of issues, including pricing, payment terms, delivery schedules, marketing and advertising, and territory restrictions.

Key Terms in Distribution Agreements

Before we delve into the specifics of distribution agreements, it’s essential to understand the key terms that are commonly used in these agreements. The following terms are some of the most important ones:

1. Territory: This refers to the geographic area in which the distributor is authorised to sell the products or services. This will be particularly important to define when distributors use online marketing channels. 
2. Products: This refers to the products or services that are being distributed.
3. Term: This is the length of time that the distribution agreement will be in effect.
4. Minimum purchase requirements: This is the minimum amount of products that the distributor is required to purchase during a specified period. 
5. Exclusivity: This refers to the exclusive rights granted to the distributor to sell the products or services in the specified territory. Not all distribution agreements are exclusive. 
6. Termination: This refers to the circumstances under which the distribution agreement can be ended.
7. Intellectual property: This refers to the ownership and use of any intellectual property, such as trademarks and copyright, associated with the products or services.

Why are Distribution Agreements Important?

Distribution agreements are essential for several reasons. Firstly, they provide a legal framework for the relationship between the parties involved, including the roles and responsibilities of each party. This helps to ensure that both parties are clear on what is expected of them and what they can expect in return.

Secondly, distribution agreements can help to protect the interests of small business operators. By defining the terms and conditions of the relationship, they can help to prevent misunderstandings, disputes, and legal issues down the track. This is particularly important for small business operators who may not have the resources to fight protracted legal battles.

Finally, distribution agreements can help small business operators to expand their reach and increase their revenue. By partnering with distributors, they can reach new markets and customers, without having to invest significant resources in marketing and advertising.

Important Considerations for Small Business Operators

As a small business operator, there are some critical considerations you should take into account when negotiating a distribution agreement. These include:

Territory 

It’s important to define the territory clearly in the agreement to avoid any ambiguity. This will ensure that the distributor understands their specific rights and obligations within the designated area and there is no overlap with other distributors. 

Where distribution can be promoted online, particularly through platforms like Facebook, it is important to be clear about what distributors can and cannot do, and what happens if a purchaser falls within a different territory. 

Minimum Purchase Requirements

Be careful when setting minimum purchase requirements. The requirements should be reasonable and take into account the distributor’s ability to sell the products or services in the designated territory. A failure to meet a minimum can be a trigger for ending the contract. 

We’ve had a client in the past who was responsible for maintaining a minimum order on a product imported from overseas. Once COVID hit, the demand for their product decreased and they were in breach of their agreement. The manufacturer provided leeway in the circumstances but has declined to provide an exclusive distribution agreement going forward, which means our client’s business is now of little value for future sale, as a competitor can now import the same thing. 

Pricing and Payment Terms

Another important consideration is pricing and payment terms. This may be affected by which party holds stock pending sale. A manufacturer will usually want their production costs covered before allowing product to leave the warehouse, but a distributor may not be required to pay the full wholesale cost until the point of sale. The timing and method of payment, as well as any penalties for late payments or failing to meet minimum order requirements, need to be sufficiently clear that an independent third party (not necessarily an accountant) can work out what needs to be paid, and when just from reading the contract.

Marketing and Advertising

Marketing and advertising are critical to the success of any distribution agreement, and distributors are usually selected on the basis that they have an existing market that will purchase the product. Small business operators need to ensure that the distributor has a clear understanding of their products and target market and that they have the resources to market and advertise the products effectively. 

For online retailers, influencers are like distributors. They have an existing market, and that market likes specific products and expects to hear about them from the influencer. 

Exclusivity

Small business operators should carefully consider whether or not to grant exclusivity to the distributor. While exclusivity can provide the distributor with a competitive advantage, it can also limit the wholesaler’s ability to enter into agreements with other distributors in the same territory. If a distributor has exclusivity but is failing to meet minimum orders, then it may be possible to renegotiate terms to reduce their territory to open an area up to another distributor.  

Termination

Termination provisions in the agreement must be clear and reasonable. This will help to avoid any disputes or legal issues if the agreement is terminated. An area that is often overlooked is the right of the manufacturer or wholesaler to revoke the distribution rights in circumstances with the distributor could bring the manufacturer into disrepute. For example, if a business decides to publicly support a particular viewpoint – eg. Margaret Court opposed the Australian same sex marriage bill and Qantas publicly supported it – and the wholesaler does not agree with that viewpoint and believes it will cast them in a poor light, then the wholesaler should have the right to end the distribution agreement. 

Intellectual Property

Small business operators should be clear about their intellectual property rights and how they will be protected in the distribution agreement. The most common thing to be protected is usually a brand. There should be rules around how it can be used and displayed. It should also ensure that only legitimate products are sold and not counterfeits. 

Tips for Negotiating Distribution Agreements

Negotiating distribution agreements can be challenging, whether you represent the wholesaler or manufacturer, or represent the distributor. Here are some tips to help you negotiate a fair and beneficial agreement:

Understand Your Market

Before negotiating a distribution agreement, it’s essential to understand your market and the potential demand for your products or services. This will help you to determine the appropriate territory and minimum purchase requirements.

Be Clear About Your Expectations

Be clear about your expectations regarding sales targets and marketing efforts. This will help the distributor to understand what is required of them and ensure that both parties are working towards the same goals.

Seek Legal Advice

It’s important to seek legal advice before entering into a distribution agreement. A lawyer can help you to understand the terms of the agreement and ensure that your intellectual property rights are protected, as well as making sure that any termination provisions are balanced and realistic. 

Negotiate The Terms

Don’t be afraid to negotiate the terms of the agreement. Small business operators should be willing to compromise, but they should also ensure that the agreement is fair and beneficial to both parties.

Review The Agreement

Once the agreement has been negotiated, it’s essential to do some worked examples of what the terms provide so that all parties are happy the agreement meets their expectations. It is also important to ensure there are no unfair contract terms which could affect the enforceability and profitability of the agreement. 

Distribution agreements are useful for small business operators and work well for businesses such as software providers or trade supply wholesalers. These agreements provide a legal framework for the relationship between a manufacturer or wholesale supplier and a distributor, defining the terms and conditions under which the distributor is authorised to sell or distribute the products. You need to carefully consider the distribution territory, pricing and payment terms, marketing and advertising, exclusivity, and term and termination when entering into a distribution agreement. By doing so, the manufacturer or wholesale supplier can protect their interests and expand their reach, increasing their revenue and success in the market.

What Are Shareholder Agreements and Why Are They Important?

This is the same for the shareholders of a company.

If you have the chance to think through how you want to structure the company, what you want for the business, and the future in case unexpected events (like a death or disability) occur, and document those expectations, you create a situation where dispute is unlikely. 

Documenting these expectations in some form (usually a shareholder agreement) is important because even if there is a dispute, you will still be able to use the terms of the shareholder agreement to resolve it with the least amount of time, effort and fuss.

Why Do You Need Shareholders Agreement?

Clients spend considerable time and money with us to resolve disputes about what they are each entitled and not entitled to, how to exit or remove someone from the company, and what will happen to those shares, IF no shareholder agreement was ever entered into. 

When people stop agreeing and there is no effective mechanism to rely on to resolve the disagreement, they can be stuck in a deadlock that can only be resolved by a court.

A shareholder agreement can include a mechanism for dispute resolution that is quicker, easier and cheaper than court. Not to mention private. 

Think about it. 

If there are two shareholders who are also both directors (which is not an uncommon situation), then every decision about the company will have to be unanimous. It is rare for business partners to be on the same page 100% of the time, so situations will arise where the parties are deadlocked on a decision and there is no clear way forward. 

A shareholder agreement can provide the way forward. 

Without a shareholder agreement, court may be the only option. 

Does it make sense to ‘save’ $5,000 now to lose $100,000, or your house, later?

What Is The Difference Between a Shareholder Agreement, Partnership Agreement, and Joint Venture Agreement?

There are many different types of business structures –

1. Partnership

If you are a sole trader and have decided to collaborate with another individual without setting up a company or trust, that formation is a partnership. Different sorts of entities can set up in partnership, but it tends to be most common between individuals, or their family trusts. 

A partnership is not a separate legal entity, which means each partner is exposed to liabilities the partnership incurs. For example, if one partner commits fraud by stealing money from clients, whether the other partners know about it or not, the innocent partners may be required to repay the stolen money. The people who have suffered the loss don’t even have to pursue the defrauding partner first! 

You would need a Partnership Agreement to clearly set out the rights and obligations of each partner, and how to exit or dissolve the partnership.

2. Joint Venture

If you wish to pool resources and share expertise with another person or entity, that formation is a joint venture. A joint venture is very similar to a partnership. It may also not be a separate legal entity by itself, but it does not have the disadvantage of liability for the actions of the other parties.

You would need a Joint Venture Agreement to define each joint venture partner’s roles and responsibilities, and entitlements. 

Sometimes, a successful joint venture can lead to incorporation, or be established as a company from the start.

3. Company

A company is an incorporated entity which is separate to the people behind it (shareholders and directors). The most common structure for a company is a proprietary limited company, which means each shareholder is only liable up to the amount unpaid on their shares.

Here is the typical structure of a company:

In a company, the director is legally responsible for the company and its strategic direction, the people who work in the business are responsible for daily operations, and the shareholders own the company. 

Even with legal responsibility, there are some decisions a director or board of directors cannot make without approval of the shareholders. Some powers are reserved to the shareholders (eg. the power to replace directors) even though they rarely have any involvement in the day-to-day business activities. 

It is important to understand what ‘hat’ you are wearing in a small business and try and focus on the responsibilities of that role only, rather than trying to be everything all of the time. 

As an owner of the business, you should be interested in the finances and the risks the business is taking and feel confident the board has it managed. 

As a director, you should feel confident you understand your legal liability, and that the company is operating within the kind of risk tolerance appropriate to your industry, and you have a plan for where the business is headed.

Workers need to get the jobs done.

As an aside – 

What is the difference between a ‘board’ and a ‘director’ or ‘the directors’? 

Nothing. 

The ‘board’ is just the collective name for the directors working together. In a shareholder agreement, even if there is only one director at the time it is initially signed, the document will usually refer to the board, rather than a director alone to avoid having to make changes once another director is appointed. 

Whether your company has a sole director or a board, they each are responsible for making the same decisions and all members are legally responsible for the company.

What Is In a Shareholder Agreement?

As with all business relationships, it is important for all parties to understand the proposed arrangement, their contributions, entitlements, and rights and responsibilities. 

Essentially, a shareholder agreement is more specific than a constitution and can cover a broader range of topics such as:

• the business activity to be carried out
• what each shareholder owns
• whether, and if so, how new shareholders can become involved
• what rights shareholders have in appointing directors
• whether directors can act in the interests of their appointing shareholder
• dealing with shareholder loans
• outlining specific requirements for business operations, eg. business plans and budgets
• when distributions can be made
• how shares can be transferred
• valuing the company
• what happens if a director or shareholder exits
• what happens if a director or shareholder does something wrong
• rights if a buyer comes along
• what happens to assets and intellectual property if the company is wound up
• dispute resolution

How Do You Write a Shareholders Agreement?

A shareholder agreement needs to set out important matters relating to the shareholders including how they make decisions, their entitlement to dividends, and how they can exit the company or vary their interest in the company. 

Other important factors include bad leaver provisions, restraint provisions and funding provisions.

Consider a scenario where you no longer wish to collaborate with the other shareholder (say, if they have acted recklessly or even fraudulently) and you want to either exit the company or remove the other person from the company, how do you do that? We have seen many situations where the lack of a Shareholders Agreement (or an effective mechanism within the Shareholders Agreement) caused stress and detriment to the shareholders as well as the company which may have to cease operations

Who writes a shareholder agreement?

We strongly recommend you go to a lawyer to help you draft your shareholders agreement.

This is a document that needs to be tailored to your situation and is not a standard form document like the company constitution which can usually be prepared by accountants when setting up the company.

Is a Shareholders Agreement a Contract?

Yes. It is a contract between the company and the shareholders, as well as between each shareholder. 

It is possible, and common, to set different rights and obligations for each shareholder. For example, for a shareholder who has the knowledge and expertise to run the business or steer it in the right direction, it may be good for them to have the power to vote and make decisions for the company. On the other hand, if you have a shareholder who is an investor shareholder and purely contributes funds to the company, you may want to restrict their control over the company by giving them no voting power and only entitlement to dividends.

Does a Shareholder Agreement Need to be Signed?

Signatures are often the easiest way to prove that someone has had the opportunity to read and agree to the terms of a document. 

Shareholder agreements can be signed, or a resolution (also in writing) passed unanimously by all shareholders at the time, can be passed to prove agreement and approval of the terms of the shareholder agreement. This requires a poll of shareholders. 

Every shareholder, and the company, sign the shareholder agreement. If it is a resolution, then it is not passed without the unanimous approval of every shareholder.  

Is a Shareholder Agreement Legally Binding?

Yes, provided that it is either signed by the company and each shareholder, or adopted by unanimous agreement of the shareholders by passing a resolution.

What Happens If You Don’t Have a Shareholder Agreement?

Your business could still operate smoothly in the absence of a shareholder agreement.

Case STUDY

Two builders set up business together on a handshake. They establish a company where they and their respective life partners are directors (4 people all together) and their respective family trusts are the shareholders. Each family trust holds 50% of the shares. The shareholders must vote on the appointment or removal of directors and a decision must be a majority decision. Because each family trust holds 50% of the shares, that means every decision has to be unanimous. 

They each contribute equipment to the company. 

They buy computers and motor vehicles through the company. The vehicles are expensive, under finance and registered in the name of the company, even though each builder takes one for their exclusive use and one builder puts personalised number plates on the vehicle they use.  

A meeting with the company’s accountant highlights that there are unexplained transactions by one of the builders. The parties get into a dispute. As a result of the dispute, each of the life partners resign.

It takes 12 months for the builders to come to an agreement about the vehicles, equipment and jobs in the business. They cannot reach an agreement about the $300,000 + sitting in the business bank account, which was frozen by the bank pending their agreement. 

To resolve the dispute, it is likely the parties will have to go to court, with the likely result that the company is wound up and the money in the bank is used to pay legal fees in getting to that decision. 

If the parties had a written shareholder agreement, that dispute could have been resolved in a few short months, at a significantly lower cost.

However, not having a shareholder agreement would be problematic IF the shareholders cannot agree on a particular matter. It would be more difficult to resolve the dispute without a binding contract to rely on.

We strongly encourage you to put a Shareholders’ Agreement in place if you have not already done so, and have it regularly reviewed by a legal professional to ensure it remains up to date and compliant with regulatory requirements. 

What does a standard signing clause look like and what does it apply to?

Generally

A person will be bound by the terms of an agreement they sign whether or not they have read it, and whether or not they understand its terms. So, a signing clause can be very simple. The main purpose is to prove that a person has agreed to the contract they have signed.

In most cases in business, a person is entitled to reasonably rely upon the signature of the person signing as being authorised to bind the company they work for. This is not always the case. If you are dealing with a very junior person in a business, it is unlikely they have the required authority to sign something that binds the business, but the signature of a senior manager or director should be able to be relied upon.

For the purpose of proof, the best style of basic signing clause should include:

• the name of the person signing, in a legible form, which is why signing clause sometimes say ‘print name’ or ‘block print name’;
• a signature
• the date.

The reason to include a date is to easily track when the agreement was made. It is very common for signing parties to forget to enter a date on the first page of an agreement (where there is usually a space for the date) and then years later, anyone trying to work out when the document should be dated is trawling through emails and other records to try and figure it out. At least if the person signing has to also date the document, if it is missed on the first page, there will still be an easy reference within the document.

If you’ve been following our recent articles, you would probably know that although not all documents need to be signed to be legally binding, it is always a good idea to use a signature to indicate that an agreement was entered into between the parties. The signature can be a reliable form of proof of agreement.

Different types of documents have different execution requirements. (Execution in this context means the performance of something in a planned way, not the killing by legal punishment meaning.) For example, deeds have different execution requirements than agreements, and we will discuss those differences below. Other documents such as wills, powers of attorney or court documents also have different rules around proper signing.

Having an appropriate signing clause can help ensure that your document is correctly executed and is valid and enforceable.

So, what does a standard signing clause look like? Let’s start by looking at signing clauses for agreements.

Standard signing clause – agreements

A standard signing clause applies to all kinds of agreements (but not deeds). For example, services agreements, licence agreements, contractor agreements, and loan agreements.

The elements of a signing clause would need to be slightly adjusted depending on who is signing.

1. Individual

If you are signing as an individual, nothing more is required than your name and signature.

Although not legally required, it is good practice to have your signature witnessed by a third party. This is good evidence in case a dispute arises as to whether the agreement was properly signed, and particularly if the person signing argues that they did not intend to sign it.

An example signing clause would look like this:

When a signature does not need to be witnessed to be legally binding, then even though there is a section for a witness, the document will still be binding without it.

If someone signs a document without a witness, it is too late for their signature to be witnessed. A person can only witness a signature if they are present and watching as the person signs the document. We sometimes have people ask us to witness their already signed documents, and the answer is always, ‘no, we will have to reprint the page and do it again’.

2. Company

If it is your company that is executing an agreement, you should comply with the Corporations Act 2001 (Act); in particular, section 127 of the Act.

The signing clause for companies usually contains the words ‘signed on behalf of [company name] in accordance with s 127 of the Corporations Act 2001 (Cth)’.

Signing pursuant to that provision means that a person can rely upon the Corporations Act to state that the document was properly signed, however, if a document is not signed correctly in accordance with that section, it may still be binding on the company.

             a) With common seal

If your company has a common seal (which is basically an ink stamp that you can press onto an agreement as the company’s signature), that stamping must be witnessed by:

• 2 directors of the company;
• 1 director and 1 company secretary; or
• the sole director and secretary of a proprietary company.

The use of a common seal is becoming less common. Most companies execute without a common seal. Companies such as registered training organisations, that provide certificates of completion for students, are the types of companies that still adopt a common seal.

             b) Without common seal

Executing without a common seal is a very similar procedure, with the only difference being you do not have to stamp the agreement with a common seal.

It simply requires the signature of:

• 2 directors of the company;
• 1 director and 1 company secretary; or
• the sole director and secretary of a proprietary company.

These signatures do not need to be witnessed.

3. Trust

A trust is not a legal entity on its own and cannot execute agreements. Trustees are the ones that sign on behalf of the trust.

A trustee can be an individual or a company. The execution method is exactly the same as mentioned above, except that the signing clause would need to specify the signatory is signing in his/her/its capacity as trustee for (ATF) the trust.

If you are an individual trustee (witness is not legally required but is good practice):

If you are a corporate trustee:

4. Partnership

If you are in a partnership, you can sign an agreement on behalf of the partnership and bind the entire partnership to it.  Ideally you would have a very clear partnership agreement which identifies who is authorised to sign what type of document, rather than every person in a partnership signing without the knowledge of the other parties.

Again, witnesses are not legally required but it is good practice to have your signature witnessed by a third-party.

Signing clause for deeds

Different to an agreement, a deed will take effect from the time it is delivered (not physical delivery but where the executing party intends to be bound – ie. at the time of signing).

This is why the signing clause to a deed would need to contain the words ‘signed, sealed and delivered’.

Other than this, executing a deed is very similar to executing an agreement, with the only exception being if you are signing as an individual, you must have your signature witnessed by a person who is not a party to the deed.

There are some exceptions for signing documents under COVID legislation. 

It is important to also note that if you are a partner and want to sign a deed to bind the entire partnership, you must be given authority to do that under a deed (ie. partnership deed). A verbal or other type of written acknowledgement is not sufficient to give you that power. In addition, your signature must be witnessed by a person who is not a party to the deed.

To find out more about deeds, please read our article about Deeds v Agreements.

Trade marks and copyright: the difference explained

For many businesses, intellectual property is one of their most valuable assets. We often get questions from our clients on how they can best protect their intellectual property, but what we have noticed is that many of them struggle to identify what specifically they are trying to protect.

This is completely understandable because intellectual property comes in many different forms. The two most commonly used types of intellectual property protection are trade marks and copyright.

In Australia, we refer to trade mark in two words, consistent with the legislation. Overseas, it is common to combine the words to ‘trademark’. They each refer to the same thing.

Some of the frequently asked questions we get include ‘What can I trade mark?’, ‘Can I sue someone for using my trade mark?’ or ’How do I protect my copyright?’. In this article, we will answer these questions for you.

Firstly, let’s explore the difference between the two.

Trade marks – protection of your brand

If you have been running your business for some time and have established substantial goodwill and reputation, your business name becomes your brand. Your brand is your trade mark. Two of the fastest growing trade marks in 2020 were TikTok and Zoom. When you hear those names, you can immediately bring to mind the kind of services each platform offers, even if you haven’t used them yourself.

Think of a trade mark as a ‘badge of origin’. It is anything that distinguishes your goods and services from those offered by other traders in the market. It can be your business name, logo, slogan, colour or even a sound, or a smell – although scent marks are very rare.

Your trade mark is a valuable marketing tool. The purchasing decisions of consumers are often influenced by the brand, so the higher your brand recognition, the more you may want to prevent your competitors from using a similar brand to provide similar services and benefit from your hard-earned success.

Think about how people by cars, or shoes. Many people favour a particular brand of motor vehicle because it is either something they have always driven, or it has a brand promise that they believe in or relate to. For example, Toyota is known for reliability, and Ferrari is the world’s most well known racing car. In shoes, people will often favour a brand like Asics, or Adidas, or Nike depending on their preferred sport, or sports stars.

So, how do you gain the exclusive right to use your trade mark and take actions against those who infringe it?

The answer is by registration. We will talk about this further below, first lets look at how copyright is different from trade marks.

Copyright – protection of your original creative works

Copyright has more substance that a trade mark and is more likely to be judged on the amount of creative input required to develop the work to be protected. Where a word can be a trade mark, a word by itself won’t be protected under copyright.

Copyright protects the creation of literary, dramatic, musical, artistic, and certain other types of intellectual works.

When you write a book, you are the copyright owner of that book (unless you have agreed to transfer your copyright to someone else). When you create online education materials, all your materials, including videos or audios, are your copyrighted material.

Just like trade marks, your copyright materials can be extremely valuable to your business. But unlike trade marks, you do not need to register copyright to gain protection. Copyright is generated automatically upon creation of the work.

There is one exception to that rule, and that is the registration of digital works in the United States. If you want to claim protection of a digital representation of your work in the United States, you must first register that work with the Electronic Copyright Office.

To have copyright protection, you must document your ideas and have it in some sort of tangible form. The easiest way would be to write it down. A visual or audio recording is also sufficient. It is important to understand that a mere idea is not protected. This is part of the reason that businesses rely on non-disclosure agreements and confidentiality deeds. Those sorts of agreement can provide you with protection of an idea before it is discussed and before it has been documented or produced in some other form capable of copyright protection.

What protections do you need?

As you can see, trade marks and copyright are two very different types of intellectual property. What you can do to protect them is very different too.

Trade marks – protection by registration

A trade mark can exist without being registered; however registration gives you the exclusive right to use your trade mark and makes it much easier to defend.

What this means is that you will have the legal right to stop others from using your trade mark and when necessary, take legal action against them to defend your rights. Just be aware that it is your responsibility as the trade mark owner to keep an eye on the marketplace and identify any infringement or potential infringement of your trade mark. When you see someone using your brand, or something very similar to your brand, you should tell them promptly, and request that they ‘cease and desist’ the infringement.

From time to time, we have clients who have already contacted someone they believe to be infringing their mark without persuading that person to stop their infringement. Sometimes, this is because our client doesn’t have the rights they thought they did, and sometimes it is because they have stated their rights incorrectly. It is important to check what rights you have first, before making any claims. We have a number of strategies for communicating with infringers to bring about a quick resolution to your concerns.

In Australia, if you do not have a registered trade mark, it can be an offence for you to threaten legal action against someone for using your trade mark. If you do have a registered trade mark, you should be notifying infringers that you do, and asking them to stop infringing your trade mark. This is usually done with a cease and desist letter.

Copyright – protection by documenting your ideas and creating tangible material

Registration is not required to protect copyright. Copyright material is protected as soon as it is created (in tangible form, that is). As the copyright owner, you have the exclusive right to reproduce your work, commercialise it, and be recognised as its creator.

As already mentioned, the one exception is the requirement to register a digital work with the Electronic Copyright Office in the United States if you want to take action against someone in the United States for copyright infringement.

Unlike trade marks, we are not aware of any countries outside the United States that have official registers or databases for copyright, so in most cases, people won’t be able to conduct searches to see if something is an original creation.

Because there is no form of registration and in pursuing someone for infringement you might be required to demonstrate that you are the original creator of the work, it is especially important for you to use one or more of the following strategies to protect your copyright:

• keep a record of your evolution of ideas – as evidence of the progression of your work

1. drafts, sketches, rough recordings, plans etc

• insert footprints into your work (eg. deliberate mistakes or hidden data that identify you as the author)
• watermark your work
• use technology to make it harder to copy your work electronically
• include a copyright statement on your work – this alerts people to the fact that your work is subject to copyright and you intend to protect it © [your name] and [the year the work was created]
• include copyright use provisions in the terms of use or terms and conditions of your website that clearly set out what people can and cannot do with your published work
• provide your contact details so people can ask for permission to use your work
• if your work gets used regularly in educational institutions, government or big business, then register your work with the Copyright Agency to receive any royalty payments collected on your behalf
• have template cease and desist letters you can send to people you believe to be infringing your work, politely asking them to stop.

What happens if you don’t take steps to protect your interests?

Under both trade mark and copyright law, if you don’t take steps to protect your interests you can lose your rights.

For trade marks, you must use the mark in the form registered, and take steps to stop others using your mark in order to keep the protection that registration provides.

For copyright, if you don’t let people know that they are infringing your copyright, you can make it harder to prove that you created the work in the first place, and if you knowingly let things pass, you may be deemed to have given permission for use.

Consider creating an intellectual property register for your business so that you can keep track of your different types of intellectual property, when they were created, who created them, and what you have done to protect it. Your intellectual property is an asset to your business.

How long do protections last?

Trade marks – 10 years

A trade mark registration lasts for 10 years from when you first file your application. You can renew your trade mark registration by paying renewal fees any time before the expiry of six months after the date your registration is due to lapse.

Copyright – creator’s life plus 70 years

The duration of copyright can vary depending on the type of work and whether the owner is an individual or a company, but generally in Australia, it is the life of the author plus 70 years.

Summary

To summarise the differences between trade mark and copyright protection:

• your brand and logo are protected as trade marks, upon registration
• your content and materials are protected by copyright, upon creation
• you can and should take a variety of different steps to protect your intellectual property

LEGALLY BINDING CONTRACTS: WHAT YOU NEED TO KNOW

There is no doubt that running a business has risks. These risks may come from your employees, your contractors, your suppliers or customers.

As a business owner, you need to take control of your business by assessing these risks and determining how to reduce these risks. One of the best ways to protect your business is to understand contracts. The terms and conditions on your website document the contract between you and every user of your website. If you don’t have any written terms and conditions, you are guessing about the agreement you have with your website users. 

When you sell your product or services, you need a written sales contract to be certain that you are protecting your interests. If you operate an online platform to market or sell your products or services, you need a contract for use of your website (usually terms and conditions). Or, if you want to protect your confidential information such as your client list and trade secrets, then you need a confidentiality deed.

Contracts are an essential part of all businesses as they form the basis of the majority of business relationships and transactions. It is, therefore, crucial for you to know when you do and do not have a binding contract. A binding contract is something that is legally enforceable. So for example, having fun with your friends in a pub is not going to be a binding contract, it’s going to be a bit of a joke and a bit of fun. In order to get a binding contract, you have to have all of the essential terms agreed and an intent to create legal relations. You also need to be able to give evidence of the terms of the agreement.

CASE STUDY

We recently had a client who entered into a contra deal with another service provider, each expecting to complete between $3,000 – $5,000 of work for the other party. Our client wasn’t able to, or wasn’t prepared to trawl through historical emails to specify the details of what they had committed to provide, and they had not invoiced periodically. (An invoice with a credit applied can assist in evidencing that an agreement was made.)

The other party provided a written engagement for services and invoiced regularly. After 12 months, the other party claimed they had received nothing from our client and took legal action to seek payment in full of their invoices. Because our client was not organised, wasn’t able to specify the agreement made or clearly identify the work produced, they ended up in a position of having to either invest in legal services to defend a court matter, or compromise the claim and pay the other party.

A bitter pill to swallow!

For a contract to be legally binding in Australia, it must contain at least the following elements:

1. offer

A contract is essentially a promise between people to do or not do certain things, and it starts with an offer.

An offer must be clear, unambiguous, and contain the essential terms that are to be agreed upon between the parties. That might include the parties to be involved in the contract, the timing of the contract, payment terms under the contract, and any other essential terms necessary to make sense of the purpose of the contract.

When you communicate to another person your promise, you are making an offer. For example, if you promote your services in three different packages on your website, then you are making an offer to each person who views that webpage.

When thinking about business contracts, a company that prepares a proposal is making an offer. If the business looking at that proposal accepts it, that is the first step toward a binding contract, but if they come back and says, “we want something different,” then that offer no longer stands as the offer It’s a counteroffer and the counteroffer takes the place of the original offer.

This will go on until the parties reach a point where there is an offer that is capable of being accepted, and that’s where you get acceptance.

2. acceptance

There must also be acceptance of the offer through a clear statement or conduct in response to the offer. Acceptance can be evidenced in a variety of ways, so it could simply be an email, a telephone conversation, or the signing of a formal written contract.

For online services, acceptance will be when your customer clicks on that button that says, ‘Buy Now’. That is accepting the offer that has been made available on the website.

Contracts are commonly accepted by signature, or by checking a box next to a statement that says you agree to the terms and conditions.  Many contracts are binding without a signature, but not all contracts can be legally binding without being signed. Contracts for the sale of land must be in writing and signed. Wills must also be in writing and signed to be enforceable without needing court intervention.

A form of signature is preferred because even if the parties did not read the contract before signing it, their signatures indicate that they have read and understood and are bound by the terms.

However, this does not mean that if your contract is not signed, it is not valid and therefore not enforceable. Parties can also accept the contract terms through their conduct or other circumstances. It all depends on the circumstances and intention exhibited by the parties. As long as it has been sufficiently communicated, it will be valid acceptance.

For example, completing work referred to in the contract signals acceptance of the contract terms, and that person will be entitled to seek payment under the contract.

A counteroffer is not acceptance, it is a new offer that needs acceptance.

3. consideration

A person must give some value in return for a promise to create a legally binding contract. In other words, each party must receive a benefit.  The most common form of consideration is payment in exchange for goods or services.

With the online example, you’ve clicked the ‘Buy Now’ button. The consideration is the payment of money, and as soon as that consideration has passed, there is a binding contract in place.

Using the example of a proposal, once the terms of the proposal are agreed and accepted by one party, either the payment of money or the start of work or both, will be consideration. The essential terms of the contract must be agreed before the point of consideration to be binding.

So, if you ask a client to pay first and then give them terms and conditions after payment, then the terms and conditions won’t be binding because the consideration has occurred before those elements of the contract are agreed. This can be different where a deposit is conditional upon certain terms being accepted.

Terms and conditions of a contract given to a purchaser only after the contract was formed will not be binding.

4. Intent to create legal relations

As entertaining as it might be to dare a friend in a pub to do something, if they do it, your payment to them is only enforceable based on your goodwill and is not legally enforceable.

This is different to a restaurant promising that a huge meal is free if you can eat it all. That can be enforceable because the restaurant intends people to rely upon that promise in ordering the meal in the first place.

other elements of a binding contract

Aspects of contracts that can affect whether or not a contract is binding include capacity, mistake, illegal intent, fraud, misrepresentation, duress or no intent to create a legal contract.

capacity

Capacity is whether somebody has the legal capacity to make a contract. Only an adult can enter into a contract; that is somebody over the age of 18 years. A person under 18 years does not have legal capacity to form a binding contract.

A person with a disability or an older person who has lost capacity through dementia or Alzheimer’s disease may not have capacity to make a contract, or may have only intermittent capacity.

mistake

A mistake in a contract can sometimes invalidate a contract. Typographical errors are generally not fatal mistakes.

Usually, a party will be bound by the documents they signed, whether or not they’ve read or understood them. However, where a party signs a contract that they fundamentally believe to be something different to what it is, this may be a mistake sufficient to affect the binding nature of the contract. For example, if a person believes that they are purchasing a copyright work (say a painting) where in fact, what they’re signing is only a limited license to use that copyright work for a limited purpose (hanging  the painting in their office). In those circumstances, there is quite a significant difference between what the first person understands they are paying for, and what they are actually getting under the contract.

That may give rise to a doctrine of what’s called a non est factum, which means, ‘it’s not my deed’ or ‘it’s not my contract’ or ‘I didn’t agree to this’. It is very rare to argue this type of mistake.

There are other types of mistakes, for example, one party could be mistaken about what it is they are buying. A party might think they are buying a website with all the existing content and so on, where in fact, what they’ve done is entered into a contract to buy a domain name.

Now, it is likely that the seller in that circumstance knows that they are only selling a domain name and they probably have a level of awareness that the purchaser is mistaken as to what they are actually getting.

In those circumstances the purchaser may not be able to end the contract, there might not be a remedy under contract law or common law, but there may be a remedy in equity. In equity, the party who knew the other party was mistaken as to what was involved in the contract, may be required to allow the other party to revoke the contract or to have rectification of the contract.

Rectification is amendment to the contract to make it reflect what was understood to be the terms of the contract. Occasionally, both parties to a contract have mistaken some aspect of the contract, but different aspects.

There have been some recent cases in Queensland regarding property development, where two parties to a development contract had different understandings of different aspects of the contract and they were ventilated when it went to court. Again, it is rare to have a circumstance where there is a unilateral mistake by both parties about different issues to the contract.

A common mistake is where both parties are mistaken about something to do with the contract. A good example is where both parties think a description of a property refers to a visual address they agree upon, only to find in a property title search that the property they thought they were transacting is the property next door.

For online content, the contracting parties might both think that the website is built with a particular programming language, for example, HTML, when it is built on a different system or with different programming language.

Where there is common mistake, all party’s expectations around the contract are altered because something has risen that none of them were aware of when they first went into the contract. Again, the remedy is more likely to be an equity in terms of a rescission of contract or rectification of the contract, rather than a specific ability to terminate the contract. However, if all parties are mistaken and they have a mutual agreement to end the contract, then that is not a problem at all. It is only a problem when the parties are in dispute.

illegal purpose

Another aspect that will affect the binding nature or enforceability of a contract is whether or not it’s for an illegal purpose. A contract for the purpose of committing a crime is not enforceable. There are differences in criminal law in the different states and territories of Australia.  There are also proposed changes around Australia regarding slavery laws at the moment.

Consider modern slavery, such as people immigrating from overseas and then having their passports taken from them and essentially going into indentured labor services. An offer to find work for someone in exchange for their payment to get help in immigrating will not be enforceable if it results in indentured labor.

fraud or misrepresentation

If there is misrepresentation or fraud before the contract is made, which influences one party to enter into the contract, then the contract may be challenged. Fraud is a deliberate untruth that can be relied upon to void a contract. Misrepresentation is something less.

Consider an IT Service Provider. They say that they will be able to provide you a secure computer system and a phone system (being very simplistic, obviously), for a set monthly fee and an installation cost. Then you find out halfway through installation that it simply will not work with your existing systems, unless additional products or services are purchased, or there is some variation to what needs to be done.

This may be misrepresentation, particularly if you have asked the service provider to review what your requirements are and tender on that basis, then you have accepted the tender and they can’t deliver what they said they would deliver. A remedy for misrepresentation is likely to be damages.

duress

Coercive control is a form of domestic violence that is very topical at the moment, and difficult for the legal system to articulate. Duress or coercive control is putting someone in a position where they feel they have no choice but to enter into the agreement.

In a business situation, holding up payment pending an agreement can be a form of duress if the party withholding payment knows that it will have an adverse effect on the party due to be paid, and they intend to use that as leverage for future negotiations. It is effectively holding the company that is owed money to ransom for money it is already owed.

Although the creditor company might have remedies in terms of taking the debtor to court for recovery of payment, the time involved in recovering that payment may be sufficient to effectively put the creditor out of business without the payment due being received.

A threat can also form duress, unless there is a term of the contract that was agreed which supports it. “If you don’t sack that person, we will terminate this contract” is a threat unless the contract includes a provision that you can require the contractor to replace people if you are not happy with them.

spoken contracts, or partly spoken and partly written

An oral contract can also be valid and enforceable. A contract can be partly written, partly verbal and partly included in an exchange of emails. [https://onyx.legal/articles/contract-dont-have-to-be-in-writing/]

For this reason, you need to be aware of when you’re making promises to other people and when you might be creating binding contracts, whether you intended to or not. Having a formally written contract with signatures on it is proof of the contract that was agreed. The documentation is not what is required to make it binding.

Evidence obviously becomes an issue when contracts are oral. That is when disputes end up in courts, with different people claiming perfect, and differing, recollection of what was agreed.

contracts and deeds are different things

There is a difference between deeds and contracts. Contracts need consideration, which is the doing or giving of something in exchange for understanding that the other party to the contract or the other parties to the contract have obligations that they will fulfill in exchange.

A deed is binding without consideration, and as a result, there are specific rules around the signing of a deed before it can become binding.  

remedies

Once a contract is formed, the nature of the remedy depends upon the nature of the problem in the contract and can include a variety of remedies from voiding the contract from the beginning through to payment of damages, specific performance, damages for losses occurring within the contract and so on. These all depend on the terms of the contract agreed between the parties.

WITNESSING A SIGNATURE: WHAT YOU NEED TO KNOW

Getting a document signed is all about proof. It is a lot easier to show that someone has agreed to a contract if you can show that they applied their signature to that document, and a witness helps to identify the person signing.

Most legal documents do not have to be witnessed. A commercial agreement between businesses does not need to be witnessed to be binding.

For documents that do need a witness, different rules apply as to what type of witness is required, and how they are to do the witnessing. By watching you place your signature on the document and signing their own name next to yours, witnesses help verify the authenticity of your signature and help prove that it was signed willingly.

Signing a document is also called ‘executing’ a document and often you will see that the signing page is called the ‘execution page’. In this usage, ‘execution’ is used in a manner similar to ‘performance’ or ‘giving effect to’ an agreement.

Before we start, it is important for you to first understand the difference between a company and an individual when it comes to signing documents.

COMPANIES VS INDIVIDUALS

In most cases, when a company executes a document, no witnesses are required.

Under s.127 of the Corporations Act 2001, a company without common seal can execute a document by having it signed by 2 directors, or a director and company secretary, or the sole director and secretary of a proprietary company. Their signatures do not need to be witnessed.

For a company with common seal, the fixing of the seal must be witnessed by 2 directors, or a director and company secretary, or the sole director and company secretary of a proprietary company. An independent witness is not required.

Most companies no longer use a common seal.

Be aware also, that even if the document is not signed in accordance with s.127, the signature may still be binding; the parties simply can’t rely upon the provisions of s.127. It does not invalidate the signature.

This is not the case for individuals.

Depending on the type of document, the law sets out different requirements for an individual’s signature to be witnessed. Not all documents require witnessing. Examples of documents that do need witnessing include affidavits, statutory declarations, deeds, Wills and powers of attorney.

Who can be a witness also depends on the type of document. Sometimes it can be any independent party, and sometimes it must be an ‘eligible witness’ who hold specific qualifications.

We will discuss these different requirements below, using Queensland legislation as an example.

Regardless of whether signed by a company or an individual, when a document is signed, whether read or not, or understood or not, the signing party is bound. This principal was reiterated by the Australian High Court in the case of Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52, after reviewing prior case dating back to the 1800s. The Court held that:

“Legal instruments of various kinds take their efficacy from signature or execution. Such instruments are often signed by people who have not read and understood all their terms, but who are nevertheless committed to those terms by the act of signature or execution. It is that commitment which enables third parties to assume the legal efficacy of the instrument. To undermine that assumption would cause serious mischief.”

agreements

You are not legally required to have your signature witnessed on an agreement. However, the agreement itself may contain a clause to require the parties to have their signatures witnessed. This may be beneficial for evidentiary purposes and to avoid dispute later. For example, if one party alleges that they were not the ones who signed the agreement, the witness of their signatures can confirm that they were.

The witness can be any independent party and does not need to hold specific qualifications. A spouse, family member or close friend is unlikely to be considered independent.

deeds

Unlike an agreement, you are legally required to have your signature witnessed if you are signing a deed. You will be able to tell if a document is a deed, because the signing page is likely to be titled ‘Executed as a Deed’.

In Queensland, the Property Law Act 1974 (Qld) sets out the witnessing requirements for a deed. Other Australian states and territories have similar legislation so that execution of deeds in Australia is covered by uniform requirements.

At least one independent party must witness your signature. It is not a requirement that the witness holds specific qualifications. It is a requirement that they are independent.

If your deed is not properly witnessed, it may not be enforceable.

There are flexible signing provisions in place during COVID restrictions, but they all have time limits.

wills and powers of attorney (poa)

The Succession Act 1981 (Qld) governs the signing of Wills.

When the maker of the Will (male – testator/ female – testatrix) signs the Will, two witnesses must be present at the same time to witness their signature. The witnesses can be any independent parties, that is they can not be a beneficiary under the Will. Usually, everyone will use the same pen to sign the Will.

When a Will does not meet the witnessing requirements, it will be invalidly made. You may still apply to the Court to have it declared a valid Will, but it is easier to have the Will properly witnessed the first time, rather than having to go to court to prove it.  

The Power of Attorney Act 1998 (Qld) requires an enduring power of attorney to be signed in the presence of an eligible witness.

An ‘eligible witness’ means a person who is:

• a justice of the peace
• a commissioner for declarations
• an Australian lawyer
• a notary public.

land registry documents

If you need your signature to be witnessed on a document that is to be registered with the Queensland Land Registry, the witness must be either:

• a justice of the peace
• a commissioner for declarations
• an Australian lawyer
• a notary public
• a licensed conveyancer from another state
• another person approved by the Registrar of Titles.

The Land Title Act 1994 (Qld) and Land Act 1994 (Qld) requires that a witness comply with the following requirements:

1. take reasonable steps to verify the identity of the signatory;
2. take reasonable steps to ensure the individual is entitled to sign the document; and
3. retain records for 7 years (which includes a written record of the steps taken to verify identity and entitlement, and documents or other evidence obtained during the process of verification).

What this means for you as the signatory is that:

1. you will have to produce evidence that verifies your identity; and
2. passport, driver’s license
3. you will have to produce evidence that you are the person entitled to sign the document.
4. if you are selling a property, a current rate or valuation notice addressed to you and identifying the property, or a current title search
5. if you are signing under a POA, you must produce the registered POA

covid-19 legislation

There is temporary COVID-19 legislation around the country which has changed some of the witnessing requirements mentioned above by offering greater flexibility.

For example, in Queensland, deeds can now be signed electronically without a witness. Wills and powers of attorney can be witnessed through audio or visual link.

The Queensland COVID-19 legislation will expire on 30 April 2021.

deeds vs agreements: what’s the difference?
 

Contracts are an essential part of running a business, and they often come in different forms. You may have noticed that some documents are called ‘agreements’, and some are instead called ‘deeds’. So, what exactly is the difference between the two?

Although both are legally binding documents that indicate a party’s promise to do something, the requirements and effect of these documents are very different.

It is important for you to understand these differences and use the most appropriate one for your commercial transactions. We will highlight some of the key differences below to help you avoid being confused between the two.

what is a deed?

A deed is a special type of binding promise or commitment to do something. It indicates the executing parties’ intention to make a solemn and binding promise. 

People often use a deed when substantial interests are at stake, such as when a person passes an interest, right or property. Deeds are also used when a unilateral promise is being made and there is no consideration from another party for that promise. For example, a unilateral confidentiality deed.

Common types of deeds:

• Confidentiality Deed/ Non-Disclosure Deed

This is when you want to ensure that another party (for example, a consultant) does not share your confidential information. Typically, no consideration is provided under this type of arrangement because the consultant is not giving you anything in exchange for your  disclosure of confidential information.

• Deed of Termination

This is a document signed by the parties to confirm that a legally binding contract previously entered into is to be brought to an end.

• Deed of Release and Settlement

This is often used in legal proceedings to formalise an agreement between the parties to settle the dispute. Formal legal proceedings need not have been started. A deed of release is often used by parties wanting to avoid a court action starting.

• Deed of Indemnity

This is used by one party to protect and hold harmless another party as a result of a specific type of relationship, or for a specific purpose. For example, companies provide an indemnity to their directors against liabilities or legal costs incurred in the directors’ capacity as a director of the company, with some limitations.

• Letter of Credit / Guarantee

For example, when you purchase a property through a company or trust, the seller may require you to provide them with a personal financial guarantee to secure the obligations of the buyer.

Another example is where you are asked to provide a bank guarantee to secure the landlord’s rights to recover payment of rent. Your bank may then provide a bank guarantee or letter of credit to the seller on your behalf. There is no consideration between your bank and the seller for this guarantee. So, to ensure that it is binding, the guarantee is set out in the form of a deed.

What is an agreement?

An agreement is another name for a contract. 

It is formed when the following elements are met:

1. offer;
2. acceptance;
3. consideration; and
4. intention to be legally bound.

If you are selling goods or services in exchange for money, then what you need would be an ‘agreement’ instead of a deed because consideration is provided.

If you are providing those goods or services to the other party and does not ask for anything in return, then you should draft the arrangement as a ‘deed’.

So, what are the key differences between a deed and an agreement?

1. Consideration

The most distinct difference between a deed and an agreement is the commercial exchange between the parties.

Under an agreement, one party must provide ‘consideration’ to the other party to show that they have reached a bargain, and that they have ‘bought’ the promise by providing something of value in return. This is usually in the form of payment but can also be in the form of starting an action, such as starting a design, or construction, or delivery of goods.

However, a deed requires no such payment or consideration to be legally binding.

2. Formalities

Another significant difference between the two types of documents is the formalities required.

A deed must be:

• in writing
• signed
• expressed to be a deed
• delivered to the other party
• where an individual (not a company or trust) executes a deed: witnessed by at least one person who is not a party to the deed

However, an agreement can be more flexible in form and does not need to meet the above requirements to be legally binding. An agreement can also be made up of multiple documents. Please see our article [link] on what you need to know about legally binding contracts.

In determining whether a document is a deed or agreement, the Queensland Court of Appeal has found that by using the words ‘executed as a deed’ or ‘by executing this deed’ unequivocally expresses an intention that the document was a deed rather than an agreement.

Another factor is whether or not the signing parties intended for the document to be immediately binding. If the answer is yes, the document is more likely to be construed as a deed.

3. Execution (Signing)

Importantly, a deed is binding on a party when it has been signed, sealed and delivered to the other party. That is, even if the other party has not yet signed the deed.

On the other hand, an agreement must be signed by both parties before the agreement is formed, although with electronic signing, the actually application of a wet signature to a document may not be necessary, and an exchange of emails with a clearly identifiable and reliable signature on the email may be sufficient.

Different states have different legislation, so you need to ask about your local state requirements to make sure your deed is properly executed.

If you are an individual:

Under the Queensland legislation, you must have your signature witnessed by at least one person who is not a party to the deed.

If you are a company:

S.127 of the Corporations Act 2001 governs execution of documents by corporations. For example, a company without common seal can execute a document by having two directors or the sole director and secretary to sign it. This applies to both deeds and agreements.

4. Limitation period

Both deeds and agreements are legally enforceable documents but be careful because they have different limitation periods.

‘Limitation period’ is the time frame you have available to enforce your deed or agreement against someone for breaching it. Each state has different limitation periods.

In Queensland, you must action a breach of an agreement within 6 years. In contrast, you have 12 years to action a breach of a deed.

This is the reason why it may be a good idea to draft non-disclosure deeds to protect your confidential information instead of non-disclosure agreements. For example, if your employee breaches a confidentiality agreement written into their employment agreement, you will be able to action against them for breach within 6 years, but if you have a separate confidentiality deed, you will be able to initiate a claim within 12 years instead.

With these core differences between a deed and an agreement in mind, you should be able to carefully consider your needs and figure out the most appropriate document to use for your business.