Contractual relationships in the business require a fundamental understanding of the Contract Law. The five basic elements that constitute a binding contract are offer and acceptance, consideration, free consent, legal capacity and intention to create legal relations. If you are planning to set up a business, you need to establish many contractual relationships while dealing with builders, suppliers, employees, lease holders and so on. Therefore, to run your business successfully and to understand the functionality, operational knowledge of the Contract Law is essential.

Business Ownership and Succession

As an entrepreneur, you need to decide and plan on the type of business ownership you want to establish. Ownership can be broadly categorised into four types – Sole Proprietorship, Partnership, Company and Trust. All these types of ownership need different kinds of contract agreements which include, but are not limited to, Partnership Agreement, Shareholders Agreement, Joint Venture Agreement, Buy Sell Agreement, Lease Agreement and Franchise Agreement.

After the start up of your business you must be careful that it continues to be in existence without any contingency. For that purpose you need to plan your strategy for ownership succession. There are various strategies used which include:

(a) Transfers through Will;

(b) Buy/Sell Agreements; and

(c) use of employee share acquisition plans and other incentive arrangements.

Confidentiality and Non-Disclosure Obligations

It is imperative for every business to have a Confidentiality Clause while structuring the operations of the business. This Clause manages risks by limiting the information that you disclose. Confidentiality obligations under contract may involve employees or a commercial relationship with another business entity.

Franchise System Establishment and Ongoing Documentation and Compliance

Franchise system is regulated across Australia through the Franchising Code of Conduct. This Code is prescribed under the Regulations to the Commonwealth Trade Practices Act 1974. A franchisor enters into a contract with the franchisee and grants certain conditions, the right to use a business brand name or trade mark and the right to produce or distribute the franchisor’s product or service. If you have decided to expand your business by the way of franchising, then the following steps need to be followed:

(a) Franchise feasibility;

(b) Franchise program and system development;

(c) Franchise documentation; and

(d) Development, implementation and recruitment.

The Franchise Agreement should provide the franchisor with rights of inspection to ensure compliance.

Joint Ventures

To boost your business and help it grow, Joint Venture is one of the best suited options. Expanding your business via Joint Venture is an arrangement that involves an investor, usually a venture capitalist, given a share of the business in return for investment capital. There are a number of issues – financial and strategic – that you must consider before your business enters a Joint Venture arrangement.

Sale and Purchase of Businesses

You may be interested in buying or selling a business for a number of reasons including if:

(a) You are making a profit and thinking to expand;

(b) You are not so financially secured and looking to sell your business for a reasonable price;

(c) You are interested in joining hands (merger) with another business; or

(d) You want to invest in purchasing a reasonably priced business (acquisition) to help your business grow.

Whether you are buying or selling a business, drafting of the respective agreement is the most essential step. You should be very sure that all necessary terms and conditions are incorporated. This should include all of the business terms set forth in the signed Letter of Intent and also the following Clauses:

(a) Consideration and payments;

(b) Procedure of completion;

(c) Intellectual property protection;

(d) Warranties;

(e) Severability;

(f) Non-solicitation Clause;

(g) Assignment;

(h) Attorney’s fees;

(i) Governing law;

(j) Conflict of law; and

(k) Arbitration.

Employment Contract

It is essential for both the employee and the employer to have an Employment Contract. It generally sets out the parameters that both the employer and the employee must abide by. The important terms covered in this Employment Contract include:

(a) Position, duties, and working hours;

(b) Salary and additional benefits, overtime provisions (optional);

(c) Probation period (optional), notice period, annual leave and termination provisions; and

(d) Confidentiality provisions, intellectual property provisions and tax arrangements.

Terms of Trade

Terms of Trade are the terms and conditions on which a business buys goods and services from the suppliers and sells goods and services to the customers. It is on the basis of these terms that your business trades and therefore, every business Terms of Trade should be comprehensively drafted so as to ensure that your rights as a seller or buyer are properly protected.

If you have any queries or need any assistance, feel free to contact our team of experts at Owen Hodge Lawyers.

Acquisitions And Divestments Of Commercial And Industrial Properties
Businesses Outsourcing and Exporting
Directors Duties
Partnership Disputes
Reviewing Chinese Product Disclosure Statements
Shareholder Disputes
Types Of Business Structures
Business Sale and Purchase

– Buying Or Establishing A Small Business
– Purchase and Sale of a Business
– Sale Or Purchase Of A Business – The Contract Process

Business Succession Planning
Changes to the Liquor Act – Will there be Boutique Bars?
Contracts and Businsses
Debt Recovery

– Debt Recovery: The Process in NSW
– Steps To Prevent The Need To Recover Debt
– Once your Company has been Served with a Statutory Demand
– The debt recovery process
– Debt Recovery

Dissolution of Your Company
Estates & Trusts
Foreign Investment in Australia (The FIRB)
Franchising Your Business In Australia
How To Secure Your Loan, Credit Or Goods
Joint Venture Agreements
Land and Environment Laws Particular To Developers
Partnership Agreements
Self-Managed Superannuation Fund
Shareholder Agreements
Trusts and Trust Deeds
What to Know in Construction Contracts
Working Together Creating Solutions

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