Contracts

An agreement to buy and sell a business can be formed in a multitude of different ways. You should have thoroughly reviewed the financial history of the business and ensure appropriate warranties and guarantee are in place. You should also ensure the seller is restrained from competing with you in the future, that all plant and equipment is unencumbered and is in full working order and that customers will come across to you. Don’t sign anything before speaking to a lawyer.

A contract requires fundamental factors to be a valid contract:

• An offer;
• Acceptance;
• Consideration;
• Intention to enter into a legally binding arrangement.

It will depend on the contract and the nature of the breach. Some contractual breaches are considered to be material breaches that will give a right to termination and damages. Some breaches will require you to issue the other party with a notice giving them a right to rectify the breach. If the breach is not rectified, then the contract can usually be terminated, and damages sought. Each contract is different, and we always suggest seeking legal advice before taking precipitous action.

Operating your business or investments through a company provides a lot of protection for those operating the company, known as directors. However, increasingly, in Australia the protection of directors is being wound back. Directors can be liable for some company’s debts, such as, PAYG and staff superannuation. Also, if the company trades insolvently and certain occupational health and safety penalties.

Australian Consumer Law is the law that governs the sale of goods and services in Australia. It is federal law and, therefore, it is the same across Australia. There are many aspects to Australian Consumer Law, from misleading and deceptive conduct, adversity rules, consumer guarantees, unfair contract terms and many more.

If you are considering becoming a franchisee, before entering into any franchise agreement it is vital that you seek legal advice. In addition, a prospective franchisee should obtain financial advice in relation to the financial viability of the venture.  You should be aware of rights to introduce other franchisees in locations near you, ongoing costs, obligations to buy stock off the franchisor, marketing costs and term of the franchise amongst other things. Franchise agreements can be complex and cover many key aspects to the agreement like fees, intellectual property and equipment.

Franchises are regulated under the Franchising Code of Conduct (the Code), which is given the force of law under the Competition and Consumers Act 2010 (Cth). The Code specifies both the franchisors and franchisees’ rights and responsibilities, and it serves to regulate such agreements. Franchise agreements cover the rights and obligations of both the franchisee and the franchisor. You should see legal advice before entering into a franchise agreement.

Once a company goes into administration or liquidation, creditors can have limited recourse against the debtor. You will join the queue with all other creditors unless you have security such as a mortgage, a caveat or a PPSA registration against assets of the company. If you have security, you will have rights to those assets before other unsecured creditors.