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Are you a Tenant entering into a Commercial or Retail Shop Lease in Queensland? 

Are you a Tenant entering into a Commercial or Retail Shop Lease in Queensland? 

Are you a Tenant entering into a Commercial or Retail Shop Lease in Queensland? 

Found the perfect premises for your business and absolutely cannot wait to sign on the dotted line?

Pause.

Having negotiated with a landlord (or through the landlord’s agent) you will be asked to sign a Lease Offer (sometimes called Heads of Agreement or an Invitation to Lease) as part of your commitment to securing the premises.  

Here’s what you could do next:

a) Sign the Lease Offer and provide it to your solicitor

b) Ask your solicitor whether advice on your Lease Offer is an additional fee

Most businesses sign a Lease Offer before seeking legal advice. This is not wrong, although our experience is that seeking legal advice before you sign the Lease Offer often achieves better leasing outcomes, and can save you losing a non-refundable deposit.

Here are 5 reasons why seeking advice before you sign makes good business sense:

1. Every Lease Offer, just as every Lease, is different. Tailor it to your business needs. What you put in the Lease Offer forms the basis for the lease documents when drafted by the landlord’s solicitors.

2. Whether a Lease Offer is binding or not depends on its wording. Lease Offers generally bind a tenant by their wording but give the Landlord an “out” if they decide not to proceed for any reason, for example, they receive a higher rent offer. You can have the Lease Offer re-worded so that it is suits both party’s business interests before you sign.

3. You will be asked to pay a deposit, which you may be at risk of forfeiting to the Landlord if your lease does not go ahead. The Lease Offer wording can avoid this risk.

4. Your Lease Offer will also outline key elements of what you have negotiated to that point, which at a minimum will include:

  • the identity of the parties and identification of the premises
  • term of the Lease (how many years) – but consider whether an option to renew (or Options) should be negotiated and included it in the Lease Offer before you sign;
  • what you agree to pay under the lease – ie. base rent / outgoings / direct service charges / a deposit / bond or bank guarantee or other form of security / marketing or promotions charges / fit out approval fees.

Have you thought about how to negotiate these ? Have you considered whether a “gross lease” is available, which is where your outgoings are included in your base rent, providing certainty over the term of the lease. Does a net or a gross lease suit your accounting, cash flow and taxation outcomes ?

  • the permitted use of the premises (what you can and cannot do) – The permitted use should be broad enough to cover each of your possible uses. Here is an example: “a men’s barber shop” could be extended to “a barber shop and sale of related hair and beauty products and services”. With the extended definition you can include women and children, waxing, nail care etc.
  • whether exclusivity is granted or not – that is, can competing businesses let premises in the complex (or close to your store) ? Here is an example: a dance studio offering Pilates classes takes premises in a centre. Not long after, the landlord allows a gymnasium (offering the same group classes) a lease in the premises next door. In some instances clustering similar (even competing) businesses can be to the Tenant’s advantage, and in other instances it could be crippling.
  • what, if any, security (guarantees) are required for you to secure the premises? Providing a personal guarantee should not be considered ‘standard’ or even necessary. It may be that the landlord will not proceed without a personal guarantee, or you may be surprised to learn that not every landlord insists. Personal guarantees put personal assets at risk and for this reason are to be avoided where it is commercially viable to do so.

    5.  A Lease Offer is your opportunity to document what is important to your business and what promises or representations have been made to you. Promises made to you should appear in the special conditions to the lease but they are often overlooked. If the promise is written into the Lease Offer you have greater bargaining power when the lease documents arrive.

    Here are some case studies of how we have assisted our clients:

    • Negotiating incentives with a landlord, such as the landlord paying money towards the cost of your fit out and/or providing a rent free period to help you get your business established in that location.
    • Avoiding incentive repayment triggers. Many leases include provisions that say if you end the lease earlier than the full term, you have to pay back any incentive received from the landlord. This is because an incentive amount is usually worked out against the income the landlord expects to receive over the whole of the lease period. These triggers are often woven carefully into the fine print of the Lease, and we have seen examples of triggers in 6-8 different places in a Lease (it is not always easy for an untrained eye to spot). We aim to include a prohibition on repayment triggers in your Lease Offer, to help demonstrate why they should be removed from any lease documents.
    • Ownership of the fit out – We will ask you if you have spoken to your accountant or taxation specialist about the upside and downside of owning the fit-out at the end of the lease. If you know what is best for your business, then it should go into the Lease Offer. Fit out can be tricky, especially when you are taking over premises with an existing fit out from a previous tenant. We will also aim to clarify who is responsible for any faults in existing fit out during your tenancy. Why should you be responsible for an air conditioning unit that didn’t work before you moved in?
    • Negotiating clauses such as a mould clause – We have had success in drafting a mould clause that gives certainty to the parties if mould becomes an issue during the tenancy. Mould IS AN ISSUE in Queensland and commercial premises can face numerous problems (health risk to staff and public, wearing the cost of mould eradication (or perhaps worse, ending up in lengthy / costly court or tribunal proceedings about who is responsible for removing mould, the landlord or the tenant ?
    • Business Interruption – what might impact your business ? COVID mandates ? Floor vibration (for example, this is important if you run a wellness business) ? Having the ability to put overflow chairs out the front of a hair dressing store for overflow customers ? We need to ensure that it is included in the Lease Offer.

    Documenting what is important to you at the start of your lease journey and can provide greater certainty and negotiating power when the lease documents are prepared.

    The Lease Offer, while important, is ultimately overridden by the suite of lease documents that you will sign. It is CRITICAL that the lease documents prepared by the landlord’s solicitors are read word for word to protect your business.

    A Word of Caution

    A word of caution: Our experience tells us that you cannot assume or rely on drafted lease documents (or subsequent amendments) being accurate and complete OR matching the terms of your Lease Offer.

    Approach your business to “plan for success”. Make sure you know exactly what your rights and obligations are and if you need help, the team at Onyx Legal can assist.

    How can Onyx Legal help you?

    If you are about to enter into a lease, renew a lease, or take over business premises from someone else, take time to get them reviewed.

    Under the Finfluence: What Do Australian Regulators Think?

    Under the Finfluence: What Do Australian Regulators Think?

    Under the Finfluence: What Do Australian Regulators Think?

    Compliance and enforcement priorities for two of Australian regulators, ASIC and ACCC, are now firmly focused on the Digital Economy.

    Compliance and enforcement priorities for two of Australian regulators, ASIC and ACCC, are now firmly focused on the Digital Economy. Some might say “it’s about time!”

    The regulators will coordinate with each other on many matters including combined financial and non-financial issues, so there is potential to be explaining your actions on two fronts.

    What is ASIC doing with Finfluencers?

    ASIC started ‘cautioning’ finfluencers in April 2022. Prominent social media influencers attended a briefing about the need for a financial services licence from ASIC in early April 2022. It was invitation only and about 30 turned up, with some commenting vocally on social media that the briefing heralded the end of their business. 

    So, what is a Finfluencer, and why is ASIC suddenly so interested?

    $99 million dollars lost by Australians in 2021 on scams involving crypto assets (ASIC Commissioner Cathie Armour, March 2022) is why ASIC is interested. That’s just crypto and doesn’t account for other significant losses on financial platforms.

    From ASIC’s perspective, a Finfluencer is “a social media influencer who discusses financial products and services online”.

    If you wanted to have a technical legal argument, we could look at the meanings of ‘social media’, ‘influencer’, ‘discusses’, ‘financial products and service’. Unfortunately, that is a tortured road and only really necessary if you land in a position where you must defend yourself.

    Prevention is better than cure!

    What it really comes down to is whether, in the online environment (websites and email lists included) you promote a financial product or financial service.

    In Australia, if you are providing financial product advice or arranging for your followers to deal in a financial product, you must hold an Australian Financial Services Licence (AFSL). There is a huge compliance regime around it and its overly complicated. It can also take quite some time to get a licence; its not at all like getting a diver’s licence.  

    THE LAW

    Financial product advice is a recommendation or statement of opinion which is intended to influence, or which could reasonably be regarded as being intended to influence, a person making a decision in relation to financial products.

    ASIC Info Sheet 269, March 2022

    Earning an income from discussing financial stuff online “indicates an intention to influence the audience”, according to ASIC.  

    So, a Finfluencer is someone making money from discussing financial stuff online. If what you say is purely factual – “property investment and on market trading are the most common forms of investment in Australia”, then you are ok.

    If you say something like “you get way better returns on crypto than shares” alongside promotion of a crypto trading platform, then you are likely to get into trouble. Especially if you are earning revenue from the promotion of the crypto trading platform.

    According to ASIC, dealing in a financial product can be as simple as posting a unique affiliate link for a trading platform.

    Understanding What Finfluencers Can and Can’t Do Online

    Penalties from ASIC for providing financial advice online without an AFS licence can reach 5 years in jail for an individual and more than $1 million in fines.

    If you’re worried about what you are publishing, including historical posts, and whether that might put you in the line to be part of the ASIC Finfluencer crackdown, make an appointment  with us to help identify your real risks and whether continuing to operate your business is realistic, or not.

    There may be strategies you can implement (and rules to follow) so that you sit outside those needing an AFSL, including becoming a representative for an AFSL holder.

    What’s the Risk of Prosecution by ASIC for a Finfluencer?

    Part of the recent awareness campaign is to ensure the ASIC will hear about problems now that more people are aware of their concerns. You might not get a complaint from one of your followers, but in our experience, regulatory complaints are often generated by your competitors rather that your customers.

    “ASIC takes enforcement action where it is in the public interest”

    Right now, ASIC is likely to be focused on finding someone to prosecute and make an example of to warn Finfluencers of the consequences of non-compliance. It also helps them encourage industry compliance.

    ASIC takes enforcement action where it is in public interest. If you’re not already known by ASIC, don’t have much of a following or haven’t been complained about, ASIC probably doesn’t know you exist.

    Unless:

    • you have a huge following, or
    • enough people complain about losing money as a result of interacting with you, or
    • you are already on ASIC’s radar (due to past behaviour), or
    • they’ve come up with an algorithm to find you on social media without human eyes having to complete all the searches,

    you’re unlikely to get any attention from the regulator in the immediate future. ASIC only has so much funding.

    And then there is ACCC and consumer protection laws…

    Digital Marketing is one of ACCC’s 2022/23 Priorities 

    The digital economy is now front and centre with ACCC adopting a focus on:

    • Consumer and fair-trading issues relating to manipulative or deceptive advertising and marketing practices in the digital economy.
    • Competition and consumer issues relating to digital platforms.
    • Promoting competition and investigating allegations of anti-competitive conduct in the financial services sector, with a focus on payment services.

    So Finfluencers are potentially in the firing line with both ACCC and ASIC. The regulators will coordinate with each other on many matters including combined financial and non-financial issues.

     

    What’s the Problem with Marketing and Advertising Online?

    ACCC is concerned with techniques that are manipulative and generate sales as a result of FOMO (fear of missing out). Techniques of concern include:

    • false scarcity reminders such as low-stock warnings
    • false sales countdown timers
    • targeted advertising using a consumers’ own data to exploit their individual characteristics
    • pre-selected add-ons (no, I don’t want McAfee with that!), and
    • design interfaces that discourage unsubscribing.

    A scarcity reminder is false when you have the stock or capacity to provide services but have chosen to limit the number for sale at a given time for the main reason of creating urgency in purchasers.

    It’s that level of pressure experienced by the purchaser that is considered manipulative, and the higher the priced item, the greater the problem in ACCC’s eyes. Intent can be implied rather than stated. So even if you say it wasn’t your intent to be misleading, where the end result is higher sales due to a perception of the buyer that if they don’t buy then, intent may be implied.

    The pre-COVID seminar industry provided an excellent example of the type of sales pressure that is a concern for ACCC – that emotional pressure to rush to the back of the room to complete a purchase before you miss out. Where marketing includes emotional triggers (doesn’t it all, at least marketing that works?) and those triggers are considered unfairly manipulative, you may have cause for concern.

    ACCC has previously warned that high pressure sales tactics may be considered unconscionable conduct [https://www.accc.gov.au/business/anti-competitive-behaviour/unconscionable-conduct] and if sales commissions are structured around that type of selling, it will only emphasise the risk that the sales tactic will be unconscionable.   

    Other practices of concern include manipulation of online reviews and search results – using false testimonials is a specific breach of consumer law – and comparison websites and social media influencers who don’t disclose commercial relationships and paid promotions. As long as it is clear that promotions are paid promotions, an accusation of manipulation could be avoided.

    The failure to disclose payment for comment is a red flag because it is thought that the comments are more likely to be misleading to potential customers than they would be if there was a wholly independent review without benefit to the writer or publisher. It is also suggested that if you do have a ‘adv.’ or ‘sponsored’ tag or notice somewhere obvious on the review that customers can better determine how much weight they will give to the writer’s opinion. 

    What’s the Risk of Prosecution by ACCC?

    ACCC selects companies working in their current priority areas when deciding whether to pursue a matter. Again, ACCC doesn’t have the funding to follow up or prosecute every compliance complaint. They focus on those complaints that they believe will give them a win in court, or a negotiated resolution that can be published, and choose claims where the defendant can serve as an example for the rest of the industry.

    Despite having an online portal for collection of complaints, where a complaint is made about a small business, particularly one that does not operate outside state boundaries, it isn’t likely to get picked up by ACCC and the complainant may need to start their own legal action to get a remedy.

    ACCC has a range of enforcement remedies to address contraventions including litigation and court enforceable undertakings, which are designed to be proportionate to the conduct and the resulting or potential harm.

    Their stated first priority is to “achieve the best possible outcome for the community and to manage risk proportionately”.

    The main actions they use are:

    • encouraging compliance through educating and informing consumers and traders
    • enforcement using administrative processes or more formal processes such as court action
    • undertaking market studies
    • coordination with other government agencies.

    Regulators are slowly catching up to the way the digital economy works and taking an interest in consumer protection in that space.

    Now might be a could time to update your marketing strategies.

      How can Onyx Legal help you?

      If you have any concerns about a proposed campaign, or existing campaigns, and would like a review, make an appointment to discuss that with one of our team.

      Selling Your Business? 6 Common Mistakes to Avoid

      Selling Your Business? 6 Common Mistakes to Avoid

      Selling Your Business? 6 Common Mistakes to Avoid

      Before you make the decision to sell your business, you need to know how to avoid making the most common mistakes. 

      Before you make the decision to sell your business, you need to know how to avoid making the most common mistakes. A little thoughtful preparation can save you time and money and help you avoid making decisions you might regret later.

      For some people, going through the process of really thinking about what they are selling has led them to reconsider and make other adjustments in their business instead.

      1. Not knowing what you want to sell

      It sounds like common sense, doesn’t it? “I know what I want, I want to sell my business!”

      But what does that look like?

      We have worked with a few clients lately at different ends of the spectrum of preparation for sale. Some people know exactly what they are selling, have identified the assets to be sold and those not transferring with the sale, and know how much they want for it. They know whether the premises are part of it and what it looks like to transfer the premises.

      Surprisingly, other people come to us to prepare contracts for sale, and we spend weeks trying to get clarity on what is included, what is not included, and what is actually necessary to ensure that the sale is made as a going concern and will therefore not attract GST.

      And yes, if you didn’t get around to documenting a business sale when it occurred and would like it documented after the fact, that is still possible. Although it has its own peculiarities. 

      The Australian Taxation Office (ATO) guidelines for sale of a going concern are straightforward:

      • everything necessary to continue to operate the business, including staff, equipment and premises
      • continue to operate the business up until the sale date
      • buyer must be registered for GST
      • there is a written agreement showing that ‘going concern’ has been agreed between the parties, dated before the sale is finalised
      • both parties are to be a single purchasing entity and a single selling entity to claim the GST exemption – there can be multiple enterprises but these have to operate as separate sales (ie. land and business)

      To be a sale of a going concern you need to transfer everything that is necessary to the ongoing operations of the business. This still occurs in context. You might use certain software in your business (like Xero or MYOB) and consider that essential, but the buyer might have different software and no intent of changing. What is essential for the business is the customer and sales data, not necessarily the software.

      Prudent buyers will complete searches and due diligence before offering to purchase your business. Ideally, you will have anticipated and prepared all the information the buyer might want to see before promoting your business for sale; this makes the due diligence process much smoother and quicker.

      Apart from knowing what it is you want to sell and what you want for it, it is also important to consider whether it is important to you, or the continuation of the business, to sell the company or the assets.

      Obviously, if you are operating through a trust, it is an asset sale, but if you are operating through a company, there may be an option to sell the shares in that company. Lots of advisers will caution against purchasing shares because more due diligence is involved, and you may not be able to discover any skeletons in the company closet until after the transfer is complete. Yes, we can write in indemnities etc., but it is considered a higher risk position that purchasing assets. 

      However, there are regulated businesses where it may be much easier to transfer the company than attempt to transfer assets. For example, selling a business with government contracts, selling a business which has licenses or permissions that require an involved process, such as an RTO (Registered Training Organisation) if you are looking for potential buyers who do not already have that compliance set up.

      2. Not getting advice early, whether legal, financial or from a business broker

      Working with a business broker can help you identify what you are selling and the value of what you have to sell, before you go to market. Some business brokers are great, will work closely with you to achieve what you want and really look after your interests. Some aren’t.

      We’ve worked with business brokers in the past who are so focused on getting their commission that they write the sales contract in favour of the buyer, and insist on controlling the contract contrary to any legal advice to the parties. This is where it helps if you understand what you are selling and what you want to achieve. You’re not likely to be persuaded to just take any sale.

      Sellers don’t always consider planning for life after the sale of business (apart from much needed holidays) and may struggle to ensure they have adequately provided for their next venture, or even retirement. You want to be better off financially at the completion of the sale, instead of regretting your decision.

      Achieving the best possible price means that careful planning needs to be in place; a quick sale due to financial pressure or personal reasons is can potentially impact your ability to achieve the best price for your business.

      You can put processes in place to limit your risk and protect your interests. You can put boundaries around what you are prepared to commit as part of the sale in terms of your assistance to the buyer after settlement.

      If you get appropriate advice before you sign anything, you have the opportunity to walk away from a transaction that is only going to cause you grief in the future.

      Getting appropriate tax advice

      It is essential to consult with a tax professional to make sure you understand that tax implications of your sale and the amount of tax liability you will have to pay. GST, CGT and income tax may all need consideration depending on what you are selling, when and in what structure.

      We are not tax lawyers, and you will need to consult your tax adviser for advice appropriate to your circumstances.

      Ideally you will have your financial reporting for the past 2-3 years available for inspection by the buyer (after they have signed an NDA) and a business structure that is attractive to a potential purchaser. As part of the business purchase, the buyer will want to review the financial records of the business, because this supports the price you are asking the buyer to pay.

      Another consideration will be the way the selling price is determined and if the future performance of the business will generate a percentage to be paid to you as the seller.

      Stamp duty

      Depending on which state or territory you are located, and where the buyer is, there may be transfer duty or stamp duty on the sale of the business.

      Duty is usually calculated on the arm’s length value of the business sale. So, if you transfer the business to a friend or relative at a discount, you may need to submit an independent valuation with the application for assessment.

      Depending on the value, nature and place of business, an item like goodwill can still attract transfer duty. The sale of goodwill alone does not always attract stamp duty, but that type of sale is also not likely to be a sale of a going concern. Lots of different things need to be taken into consideration.

      Case Study

      An example of where goodwill was found not to be included in a sale was a case involving the sale of two McDonald’s restaurants in NSW. The Chief Commissioner for Taxation assessed stamp duty on the sale price and included an element for goodwill. The restaurant owner argued that the goodwill was not sold and instead remained the property of McDonald’s due to their licence agreement. The Court held that any goodwill the restaurant owner enjoyed would be terminated at the end of the licence agreement. In those circumstances it was determined that no goodwill was transferred, and no duty was payable by the restaurant owner in respect of goodwill.

      3. Not understanding the ownership of the assets in the business sale

      A little careful pre-planning for sale will ensure that the correct assets are in the correct business entity name and will attach to the sale.

      We’ve had interesting situations in the past where clients have, at the last minute and only after we’ve reviewed a contract from the potential buyer (it’s not always the seller who prepares the contract, although that is a good idea) that it was discovered some of the assets sat in a forgotten entity that was about to be deregistered by ASIC. The company was quickly reinstated and added to the sale contract as one of the sellers.

      In that instance it was a trade mark registration, but it could just as easily have been a motor vehicle, manufacturing machinery or office equipment.

      To help you think about your business, the assets of the business are defined in the Real Estate Institute of Queensland (REIQ) Business Sale Contract, under Clause 3.1 to include the following:

      • Goodwill
      • Fixtures
      • Fittings
      • Furniture
      • Chattels
      • Plant and equipment
      • Industrial and intellectual property
      • Work-in-progress
      • Stock in trade
      • Permits
      • Licenses
      • Any other assets listed by the parties

      There are usually warranties in the contract for sale of business that you as a seller give, promising that the assets are ‘unencumbered’ or not subject to the interests of another party, like a financier.

      It will be a necessary part of the sale to provide clear title for the assets, including paying out any lenders who hold the existing loans and securities registered under the Personal Property Securities Register (PPSR). If this does not happen before or at settlement, then if the buyer defaults on the payments, the financier can repossess the asset.

      4. Not understanding what is going to happen with your employees

      Do you tell them, or don’t you? And when?

      If you are about to list your business with a broker, then it’s a good idea to have a discussion with your staff beforehand. You don’t want to embarrass your employees by having them find out from someone else that their job might be at risk.

      Some buyers will be interested in all your staff. Some buyers may be interested in some of your staff and some buyers just want the assets and don’t want any people. The size of your business, and the size of the purchaser, are likely to make a difference.

      If you are listing with a broker, you can let the broker know what your expectations are around your staff – that they buyer will take them, or the majority of them.

      It is the option of the purchaser to make your employees an offer, or not. You can’t force a new owner to take all your employees. You also can’t force your employees to work for a new owner. Some careful negotiation may be needed.

      As a seller, you will be under an obligation to give all the employee details for transferring employees, their entitlements, any accrued leave and the pay rates and any Awards they might be employed under.

      If the purchaser does not take your employees, then you will need to pay out their entitlements, which may include accrued bonuses, annual leave, long service leave, notice or redundancy. If you are thinking ahead and have a year or so before you expect to put your business up for sale, you might consider reviewing what entitlements have been accrued and suggesting some people use their leave.

      Once offers and agreements with the employees have been made by the buyer, there is likely to be an adjustment to the purchase price for some entitlements, such as personal leave, annual leave, long service leave and accrued bonuses.  

      If you need advice on understanding what is going to happen and what your responsibilities will be, and even answering your employee’s questions, then let us know and we are happy to help.

      5. Not thinking about what you will do with the premises if not part of the sale

      Not every business requires an office and with the changes in working habits brought about by COVID, a buyer may not be interested in taking over any premises you have for your business. So where does that leave you?

      If the buyer does want your premises:

      • If you lease the premises, then you will need the landlord’s consent to a novation or assignment of the lease. A novation gets you out of any liability associated with the lease and an assignment means you are still on the hook (financially liable) until the lease ends, which may include option periods.
      • If you own the premises, you may be able to negotiate a sale in conjunction with the sale of business.
      • If you own the premises, you may be able to negotiate a lease with the new business owner, and yes, the lease still needs to be documented separately from the sale of business.

      Most landlords are prepared to agree to an assignment but not a novation. Why not have two people responsible for covering the lease when you have no obligation to let the first tenant out?

      If the buyer doesn’t want your premises:

      • Think about how much time you have left on the lease.
      • Think about alternate uses for the premises.
      • Consider whether you still have a use for the premises, or if you need to break the lease.
      • Instead of breaking the lease, you may be able to find someone else to take over the lease – again by novation or assignment, or you may be able to find someone to sublet some of the space from you to reduce your costs.

      It is not uncommon for a business to ‘hold over’ after the end of a lease on a month-by-month tenancy pending a sale of business to limit the risk of having to maintain a lease without a business to fund it. We’re happy to talk through your options with you.

      6. Forgetting to transfer licenses, permists and social media accounts

      Some businesses need specific licences and permits to trade.

      Think about:

      • food business licences
      • liquor licences
      • building trade licences
      • transport licences
      • commercial parking permits
      • and so on

      The buyer’s expectation will be that the business sale contract includes at least reference to necessary llicences and permits, and possibly your cooperation in transfer, if that is available. Some permits require a new application from the buyer and that takes time. The buyer might ask you to stay in the business as the licence holder pending their application. If so, you will need to think about your risks if their application is unsuccessful. It is possible that the sale will fall over if the purchaser cannot get the necessary permits or licenses.

      Online assets

      Business brokers don’t always consider your online assets when helping you prepare for sale. In our online world where people increasingly search online to find what they are looking for, online assets can have a significant impact on the continued operation of the business.

      Whatever you use to promote your business online is your intellectual property and needs to be part of the sale.

      Your domain name, business website (a domain name and website are different things) and social media accounts will also need to be transferred across to the new owner. Different platforms have different requirements and its important you understand what you have to do when settlement comes around.

      How can Onyx Legal help you?

      If you are thinking of selling, have a chat with us before the deal is done. If you’ve found a buyer and want to move forward, we can prepare your contract for sale and if you’ve somehow sold without any written agreement and would just like to clarify any remaining liability before anyone forgets what the agreement was.

      12 Common Issues with Privacy Policies

      12 Common Issues with Privacy Policies

      12 Common Issues with Privacy Policies

      1. Thinking a simple privacy policy template will do the job

      For many small business owners, protecting the privacy of personal information just isn’t a priority. There are lots of reasons for that.

      • Not placing any value in a privacy policy or the protection of personal information
      • Not knowing what makes up personal information
      • Not realising when the business is collecting personal information
      • Not understanding what the business is doing with personal data after its collected
      • Thinking that publicly accessible data, like through Facebook or a website, means its ok to collect it
      • Not understanding the difference between privacy and confidentiality, or the importance of privacy
      • Having competing priorities – like the need to make money – that mean privacy always sits on the back burner

      A template might work. It might not. If you never read it or attempt to understand it, it probably won’t help your business meet its legal obligations.

      I have heard of a company that copied and pasted their privacy policy from a crematorium, without having read it. One of their customers pointed out to them that it was a little weird to read about burial when that wasn’t their business.

      Are you prepared to put your credibility at risk?

      If you don’t know what your obligations are, how do you know a simple template will protect your business?

      2. Copying and pasting a policy from somewhere else

      It is easy to check out a friend’s website or a competitor’s website and decide to simply copy and paste what they have done. A friend might even offer it. The problem with getting help from friends like that is that they probably don’t understand their own privacy policy or the legal impact it can have on your business.

      I’ve even come across a business spruiking a service of theirs offering advertising through Facebook that simply linked the privacy policy of a random website they did not have any control over, not having read it, understood it or worried about the promises they were making by using that privacy policy and simply seeing it as a ‘hurdle’ to overcome to get their adds showing in as many feeds as possible.  That is potentially misleading and deceptive conduct offending both privacy law and consumer law.

      If you haven’t read it or don’t understand it or are looking at a website from outside your country, don’t put your business at risk by copying and pasting a privacy policy from someone else’s website.

      3. Thinking a cookie policy covers privacy obligations

      Having a cookie policy or a cookie choice pop up on your website doesn’t meet your obligations to protect the privacy of personal information.

      Cookies may not be classified as personal information. Cookies can be functional (you won’t get full use of the website without them), performance focused (like analytics), focused on personalisation (like advertising based on your search history), or marketing focused.

      Cookies are little data packets that store enough information to identify you when you return to a site for the purpose of say, pre-filling your username or password, or adjusting the display of a website, or advertising to better reflect your preferences. Cookies have to be matched with other data before they can be used to identify you and the information stored is not generally available for inspection. Cookie data may be collated to create a picture of who you are.

      There was a ‘horror’ story that went around some years ago about a pregnant teenager being discovered by her family because her search history meant her parents got served advertising for pregnancy help.  The cookies didn’t identify her, but enable her parents to put two and two together.

      Personal information is information about an individual which by itself identifies that individual, or with other information can be used to identify an individual. Types of personal information can include:

      • photo
      • name or alias
      • postal, street or electronic address
      • enrolment in a course
      • testimonial
      • biological samples
      • genetic data

      So, a cookie pop up by itself just won’t cut it.

      4. Never reading your own privacy policy

      If you don’t know what your privacy policy says, how can you possibly be implementing the protections necessary to protect the personal information you are collecting?

      How many businesses do you know have a blank page when you click on the privacy policy link in the footer of their website? Clearly they missed checking what was supposed to be written on that page. Your web developer or tech person is not responsible for you meeting your privacy obligations. They probably know marginally more than you do about your privacy obligations, are not lawyers and shouldn’t be uploading just anything for you.

      5. Not understanding your own privacy policy

      Privacy obligations only apply to information about real people – whether in their personal or business capacity – but do not apply to companies or other entities. Depending on where you are in the world, privacy obligation may also be limited to people who are still alive, and not the deceased.

      So, what do you do with the personal information you collect? Unless you use integrated technology, you probably have data about your clients and supplies in a variety of places:

      • your CRM
      • your finance software
      • your email marketing software
      • your email management system
      • a project management tool
      • other software used in your business

      Whilst the problem of keeping information consistent across databases is widely acknowledged, the type of protections each of those systems offer, and how you use them, probably isn’t.

      For many types of businesses, your privacy obligations mean that you can’t send data overseas without the consent of the person providing it. This is particularly so for financial or health data. Personal trainers, life coaches, psycho-therapy providers all collect health data and probably don’t realise that every email they send pushes personal information overseas.  

      I’ve also gone to privacy policy links on websites that don’t cover privacy at all, and in fact display the e-commerce terms of that business instead, which perhaps a throwaway line saying “we respect your privacy and will never sell your personal information.” That is not a privacy policy.

      6. Not considering any procedures to support your policy

      When you run a small business, the people who work with you, employees or contractors, need to understand your priorities around personal information and what can and cannot be done with it.

      Do you allow contractors to keep contact details on their mobile devices outside your systems?

      What controls or oversight do you have over what they are doing with their mobile device each day?

      How many times have you seen parents hand a mobile device to their child to keep them quiet or entertained? Do you know the personal data of others isn’t being accessed?

      For businesses in Australia which are obliged to comply with the Privacy Act 1988, there are now also mandatory data reporting obligations so that if any data is lost or accessed, it needs to be reported. Leaving a device on public transport can be a reportable event if that device cannot be remotely locked and contains any personal information that is supposed to be controlled by your business.

      7. Not knowing where you are collecting data or what you are doing it

      We’ve spoken with many small business owners who simply don’t realise how often or in what way they are collecting data.

      • a form filled through a website
      • an email received
      • a video conference recorded
      • a note made of a telephone conversation
      • a voicemail received
      • video feedback recorded and sent by a client
      • patient notes written and yet to be filed

      All these examples involve the collection of personal information. Does your business have protocols in place for the destruction of information that is no longer required for the purpose of your business? Privacy law generally requires that you only collect what is necessary, and destroy it after it is no longer required. Interestingly, many large organisations, like banks, appear to keep your information indefinitely.

      The GDPR (regarding information about EU residents) now requires that you monitor what you collect, how you collect it, and how long you keep it.

      We can help you put together policies to assist people in your workplace to manage how information is collected, stored, used and destroyed.

      8. Not updated to match data practices

      Laws are changing all the time. If you haven’t looked at your privacy policy for more than two years, it is probably time you did.

      Not only that, but if you’ve changed the software or technology you are using recently, that should also prompt a review of not only your privacy policy, but also the privacy policy of your new software or technology provider.

      You might be offering a new product or service that means you collect additional information from your clients, more than you did previously.

      You might have started working with another business in a joint venture, which means they now have access to some of your personal information, and vice versa.

      Take time to review your practices and procedures for managing personal information and privacy, as well as checking that you are legally compliant with your obligations.

      9. Doesn’t address all the different people affected – customers, partners, developers, general users

      You may or may not treat personal information from different relationships in the same way. By relationships, consider the different people you interact with in your business – your clients and customers, your suppliers, your employees and contractors, volunteers, etc.

      Consider: if you still have a business that uses paper forms, you might have collected similar or only slightly different data on different forms. You might scan that information and store it electronically, but then what happens to the paper copy? Is it securely destroyed? Is it stuck in a filing cabinet somewhere? Is that filing cabinet locked? Is any member of staff able to access that filing cabinet?

      Do you have forms to be filed sitting on someone’s desk without any security or privacy around that information?

      Do you have phone numbers written on a white board that can be seen from outside your office? This happened on a morning TV cross to a bank financial data room.

      You might have a list of supplier details stuck on a wall, or a piece of paper near the computer.

      If you treat the personal information you collect about different groups of people differently, all those scenarios need to be covered.

      10. Hiding the terms

      If your business has privacy obligations, you should share how you meet those obligations with the people whose data you collect. So, if you have employees, you should have an employment policy around how you manage their personal information.

      If you have customers, you should have a policy about how you manage their personal information and what you do with it.

      The easiest way to share a privacy policy with customers and suppliers is through your website and the convention is to have a link to that policy in your website footer.

      A link to a blank page is not helpful.

      11. Wrong laws or no laws

      A contract came across my desk the other day between two Queensland, Australia based small businesses. Goodness knows where they got it. The agreement was four years old and mentioned the laws of Ontario, Canada as the governing law. No, no, no, no. Not helpful at all!

      If you copy and past a privacy policy from someone else there is a risk that you have inadvertently referred to laws that don’t even apply to your business. Like COPPA, the Children’s Online Privacy Protection Act which is law in the United States. Reference to that law in another country is likely to be inaccurate and potentially misleading, or create obligations in your business that never actually existed until you voluntarily assumed them.

      If you’ve copied something from overseas, it is also possible that you’ve not complied with the laws that do apply to your business, putting your business at risk.

      Although there are certainly some similarities in obligations in different countries, law is not universal and there are often inconsistencies within countries, particularly federated countries, as well as between countries.

      Make sure you are undertaking to comply with the laws that apply to your business.

      12. Hard to read – legalese or no whitespace

      Lastly, don’t make your privacy policy so hard to understand that people don’t or won’t read it. If you write for the comprehension level of a child of around 12, then most people who read your privacy policy, whether customers, suppliers or staff, will understand it.

      You shouldn’t need a post-graduate degree to make sense of what has been written. It doesn’t help your business or anyone else you deal with. Back in 2019 The New York Times did an article about readability and found that Facebook’s then privacy policy was more difficult to read than Stephen Hawking’s ‘A Brief History of Time’. Don’t be that business.

      Simply headings like:

      • How we collect your personal information
      • What we do with your personal information
      • Where we store your personal information
      • Your rights regarding the personal information we have collected about you

      All make it easier for someone reading your privacy policy to make sense of what it is you do to help protect them. Short sentences, simple words, easy to follow headings, pleading of white space, all aid understanding.

      If you are not sure, get a child you know to read your privacy policy out loud and ask questions about anything they don’t understand. If they stumble over a sentence, or have loads of questions, go back to the drawing board.

      How can Onyx Legal help you?

      If you’d like help reviewing or updating your privacy policy, or perhaps having one tailored to fit your business and your business processes, sent an email to advice@onyx.legal with a link to your policy (if you have one) and let us know what you’d like to achieve.

      Your Quick Legal and Cyber Check on Your Website

      Your Quick Legal and Cyber Check on Your Website

      Your Quick Legal and Cyber Check on Your Website

      Start by completing our quick audit questionnaire to work out what are some legal issues when creating a website. Then read below…

      Domain Name Legal Issues

      Your domain name is like a post office box. You lease it, you don’t own it. Your registrar is like the post office. They will only talk the person who is authorised as the registrant of the domain name. That might not be you!

      If you don’t know where your website is registered – GoDaddy is a commonly known registrant – this could be a problem if you want to sell your online business and cannot transfer the domain name. If you don’t ensure your registration fees are paid regularly, then you could lose your domain name and it is not easy to get them back.

      When agencies first started building websites for businesses, a lot of companies registered the domain names to their agency rather than you, their client. This became a problem for people when their small web designer gave up their business, or their web designer held them to ransom, requiring a payment equivalent to purchase before releasing the domain name.

      We’ve had a prospective client come to us running a business using a specific domain name, and no part of that domain name was protected by trade mark or copyright. For whatever reason, they let their registration lapse. Of course, the domain name was sold to someone else. That someone else happened to be a local competitor to them. They came to use 2 years after the domain name had lapsed and their competitor was using it and asked us to help them get it back. We told them we couldn’t help. There was no basis for them to claim exclusive ownership, it took them two years to take any action and the time, money and effort required to even attempt to get it back was more than they were willing to invest.

      Trade marks are almost the only thing that can give you superior rights to anyone else for registration of a domain name, and even that won’t stop someone using the same domain name in a different industry from using your name. Just try searching ‘Onyx Australia’. We might be the only legal firm with that name, but we are not the only business with that name in the country.

      ACTIONS:

      • Identify your registrar and make sure you have login details
      • Confirm the registrant name (hopefully not a company you since closed – it has happened)
      • Make sure you have auto-renewal and up-to-date payment details in place

      Our team at Onyx Legal can help you find out who the registrant is and make sure you have control over your domain name.

      Hosting & Backup Legal Issues

      All of the information that people can watch and read on your website is stored and then accessed via the internet. You pay a hosting provider to store that content and make sure it is available when people look for it online. If you don’t know who your hosting provider is, who can you talk to if your website is ‘down’ and not visible? You might be working through an agency and contact them.

      There is a lot of factors that can impact your website hosting including whether your website is on a shared server or an individual server. On a shared server, one website with malware can have every website on the server temporarily shut down. If you site is impacted by malware and taken down, it can impact your results in advertising or search results when clients are looking for you. The responsibility for those things may sit with you, or your agency, or your hosting provider. Check your terms and conditions of hosting.

      The type and local of your hosting provider can also impact the speed of data upload to or download from your website. If you don’t have automatic payments set up on your hosting, you might find your website is down and if you don’t know where your website is hosted, any information you collect through your website, like personal data, may be going around the world before it comes to you – which could be an issue in managing your privacy obligations.

      Backups are important in reducing your cyber risks.

      There are lots of products that enable you to backup your website to the server where it is hosted. This might not be effective if you get hit with ransomware. If you have a separate backup on a system that you know works and can be reinstated quickly, then you have a better chance of a quick recovery from a ransomware attack. Always check that your backups work and your site can be quickly reinstated. Backup regularly.

      Like backups, password protection and sensible username application can also make a huge difference in managing the cyber risks to your website and your business.

      The team at Onyx Legal can help you find out who your hosting provider is and how to protect your content.

      Website relationships and the terms and conditions to manage them

      In a high street shop front, everyone is trained in the rules of what is considered appropriate behaviour in stores from a young age, so much so that we take it for granted. Things like – if you break something, you pay for it, if the shop is closed then you can’t come in, you have to pay for what you buy before you leave the store and so on. The common courtesies like don’t disturb other shoppers, if you are asked to leave then leave, and don’t steal are also taken for granted.

      Online, you sometimes need to remind people of the rules. You can also set some rules to control your own online space.  Think about the big sites like eBay, Craigslist, Facebook, and Google. If you don’t follow their rules, they can stop you from using their services and there is almost nothing you can do about it.

      You have the same ability to control how other people access and use your website and the information you provide. Every different interaction available on your website creates a different relationship that you may need to manage through terms and conditions.

      You will normally find a link to terms of use in a website footer. Following that, convention is sensible if you want to argue that your terms and conditions are binding on your website visitors or users.

      We’ve had a client who neglected to have terms and conditions on their website and had to pay a $125,000 claim for defective products because they failed to disclose that they were just the importing agent for the manufacturer and set any contractual terms around their supply.

      If you are working in any sort of industry that is regulated, either by government or a professional organisation, a disclaimer may help limit the risks to your business. Disclaimers can also provide a great opportunity to remind your clients of their responsibilities

      Onyx Legal can help you tailor terms and conditions that fit your business, your industry, and make sense to your customers.

      Legal Issues with Website Content

      What you publish on your website, whether you put it there or someone else did, is your responsibility. If you have been creative with the truth, copied something from someone else, used a form of software that allows you to ‘snip and spin’ other people’s content and publish it as your own (We were horrified! It was so obviously copyright infringement, and the client thought it was perfectly fine because they paid for the software and assumed the developer was doing the right thing around copyright. Wrong! It slowed their website development down a bit) then that’s on your head – no one elses.

      You need to be aware of any regulations applicable to your industry (for example – health services in Australia can’t use testimonials about the health service), stay within the bounds of consumer protection legislation, not infringe the intellectual rights (trademark, copyright etc) of others and protect the privacy of visitors to your website.

      Onyx Legal can help assess your level of compliance, where you might have risks and make some recommendations around improving your website from a legal perspective.

      How can Onyx Legal help you?

      If you scored badly on the website legal and cyber self-audit and would like us to carry out a more comprehensive audit and make some recommendations, make an appointment with the Onyx Legal team now..

      Legally Binding Contracts: What You Need To Know

      Legally Binding Contracts: What You Need To Know

      Legally Binding Contracts: What You Need To Know

      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.

        Want more information?

        We love writing contracts. Especially contracts you understand, so that your customers understand them too. Keep it simple. Let us know what contracts you would like to put in place in your business by completing our contact form or booking an appointment.