Why your business needs a contract playbook?

Why your business needs a contract playbook?

Commercial Law, Employment Law

A contract playbook sets out your company’s position on contract clauses.

A contract playbook is a single place where you set out your organization’s position on common contract clause categories such as indemnities, confidentiality, and warranties. It sets out what clauses can be accepted, rejected or amended and who has the authority to accept, reject or amend different types of clauses.

Your playbook should include:

  • A description of your contract processes and contact roles and responsibilities
  • Your organization’s risk profile
  • Your negotiation strategy – goods, services or both? What are important deal terms to focus on? Where are you comfortable compromising? Who handles negotiations?
  • Decision making authority levels – who can sign off on what decisions?
  • A list of standard clauses (accepted/rejected/amended) included in your template contracts

A contract playbook allows you to review contracts quickly and to remove bottlenecks in contract review.

A Contract Playbook allows you to review contracts quickly, and it helps remove bottlenecks in contract review. A contract playbook allows you to identify the areas of a contract that your sales team does not always know. You can then figure out how to make those parts of the contract easy for your sales team to understand by providing guidance on how they should respond when faced with those items in a contract.

Additionally, you can use your understanding of common items in contracts to structure your playbooks so that they automatically move contracts forward based on completed actions. For example, if all issues have been addressed and approved for a given section of the contract, your playbook could start the final approval phase automatically instead of requiring someone to manually do this step every time.

Your company needs to have a standardised approach to reviewing contracts.

A standardised approach is particularly important when you have several people reviewing contracts. It means you’re more likely to achieve consistent outcomes, which reduces the risk that the company will be in breach of a contract.

It also helps protect against commercial risks. For example, if your company enters into contracts under which it will pay a software vendor for its services on an ongoing basis and that vendor has a clause entitling them to early termination for convenience (i.e. without cause), then this may create a risk that the vendor could terminate the contract and effectively walk away from any long-term commitment to your company. This can be mitigated by agreeing upfront that the vendor won’t be able to terminate for convenience unless it’s prepared to pay compensation to your company for any costs incurred as a result of early termination.

When dealing with vendors who have standard template agreements (for example, software vendors or banks), it’s beneficial to prepare a set of comments or even suggested amended clauses so there’s less back and forth during negotiations over each individual contract.

Your contract playbook can be used to inform sales-people what clauses will be accepted, rejected or amended.

A contract playbook can be used to inform your salespeople what clauses will be accepted, rejected or amended.

Your sales teams can use the playbook to negotiate better deals and to get contracts signed faster.

A contract playbook is a good way to increase the speed at which contracts can be reviewed.

Contract playbooks are a great way to increase the speed at which your contracts can be reviewed. They include a list of clauses that your sales teams can accept, reject or amend as standard, which makes them much quicker to review than going through each clause from scratch.

A contract playbook allows you to standardise the approach taken when reviewing contracts and means that your sales people will know what clauses are acceptable without having to change their pitch for each new customer.

Negotiating: how to respond to an unreasonable offer

Negotiating: how to respond to an unreasonable offer

Commercial Law

Negotiation is a key life skill, and it is a skill that can be life changing. We’ve worked with clients across multiple industries—from restauranteurs to real estate agents—and we’ve encountered just about every negotiation tactic under the sun. In this post, we look at the unreasonable, the stubborn, and the cantankerous counterparty, and we seek to answer the question ‘how should you respond to an unreasonable offer or unreasonable negotiating position’.

Have you been in a negotiation with someone who just kept… asking for more or who could not move past an unreasonable position? Negotiations can be everything from productive and useful to a complete waste of time. If you’re working a deal with someone who won’t budge, it can feel like they’re deliberately making the negotiation process difficult.

How do you respond? Well, there are a number of points to understand about this situation, and we’ll cover them below.

1. Don’t respond to unreasonable offers in an unreasonable manner.  Most offers are not there to be taken, they are clues, part of the communication and negotiation process and no more. See each offer for what it is, information that you can use to understand the counterparty, their concerns and their level of understanding of the negation. Oftentimes an unreasonable offer is a clear sign that your counterparty does not adequately understand the respective positions of the parties. It may also be a sign that they are angry and frustrated. 

2. To respond to an unreasonable offer made due to a lack of information: give the counterparty what they need to make a reasonable assessment. That may require specialist help, such as reports from advisors, accountants and others. In response the counterparty may then seek to distance their position from that independent information, a further sign that they are approaching the negotiation in an irrational way. 

3. Take time out. Aggressive negotiators believe that they get can an upper hand by their tone, and by pure rage. They can’t. When faced with aggression, take a break, slow down the process and don’t respond in kind. It is important to realise that everyone will need to ‘save face’ if a negotiation is to succeed, so don’t embarrass the angry chihuahua too much. 

4. Re-frame the discussion. Negotiations should be principles-based and the principles at play should be those that matter to the parties. Oftentimes negotiations get side tracked. Refocus discussion to state succinctly what each party is trying to achieve and then look to find creative ways to achieve that. 

Finally: Realise that not every negotiation will be successful. Sometimes it is time to concede and other times it is time to press on.

Complying with Australian Privacy Law

Complying with Australian Privacy Law

Commercial Law

Many businesses believe that once they have a privacy policy in place, they are compliance with Australian privacy law including the Privacy Act and Australian Privacy Principles. This is not the case.

Who is bound by the Privacy Act 1988?

The first step in determining your obligations under privacy law is to determine if you are required to comply with the Privacy Act.

Businesses that have had annual turnover of more than $3 million in any year since 2002 must comply with the Privacy Act. Annual turnover is calculated by including income from all sources but excludes assets held, capital gains, and the proceeds of capital sales. The Privacy Act also covers a number of business regardless of turnover where, for example, that business is a health services provider or trades in personal information.

What are your obligations under the Privacy Act?

if your business is required to comply with the Privacy Act, it must comply with the Australian Privacy Principles (APPs).

The APPs include various obligations setting out how you must collect, store, de-identify, use, and disclose personal information.

The concept of personal information is broad and it can be difficult to determine whether information is personal information. Personal information is defined in the Privacy Act to be information or an opinion about an identified individual, or individual who is reasonably identifiable: whether the information or opinion is true or not; and whether the information or opinion is recorded in a material form or not.

Personal information is further categorised into sensitive information, health information, credit information, employee record information, and tax file number information. Additional obligations apply to each of these further subcategories. If you would like to understand this area better, contact us for a complete guide. 

Is a Privacy Policy All that is Needed?

A business that is required to comply with the Privacy Act must have a clearly expressed up-to-date privacy policy pursuant to APP 1.3. Our sister business Compliance Quarter has developed a tool that reviews privacy policies against the requirements set out in APP 1.4 giving you a report with recommendations in a matter of seconds. To access the privacy policy tool, click here.

Businesses obligations under the APPs do not end with the publication of a privacy policy. The business must ensure that it takes reasonable steps to implement practices, procedures and systems so as to comply with the APPs. In practice this means ensuring that you, for example,  must only collect personal information that you require and for the purposes disclosed, that you securely store personal information, that you destroy or de-identify personal information when it is no longer needed, and that you are careful about how you disclose personal information.

GST clauses

GST clauses

Commercial Law

GST clauses are an essential feature of a contract as they allow a vendor/supplier to claim GST from its purchaser/customer.  Despite their significance and the fact that these clauses are found in almost every contract, they are frequently ill-drafted, and insufficient consideration is given to the wording and whether it properly reflects and protects the GST position of the party.

When GST clause is missing

When a GST clause is missing from a contract then the vendor’s duty to pay GST and the purchaser’s entitlement to claim GST is reliant on GST legislation. Without such a clause the vendor does not have a contractual right to a GST reimbursement nor the purchaser the right to a GST credit.

The inclusion of the GST clause recognises that GST is a matter that the parties are conscious of and can make an informed assessment on.

Drafting considerations

When a GST clause is badly drafted, it may not be defended in court.  As a consequence, one of the parties may end up incurring an additional 10% charge of the purchase price which may lead to further unintended charges such as stamp duty.

The following points should be considered when drafting a GST clause:

  • The basis of the clause will depend on the parties entering the contract, so give careful consideration to the parties’ roles before drafting.
  • Ensure that the contract is clear on whether the contract price is inclusive or exclusive of GST.
  • Ensure that the specific requirements of the GST Act are considered. For example, ensuring that requirements that satisfy exemption have been included if the sale is being treated as GST free supply of a going concern.
  • Include a provision which allows the price to be increased by 10% if it turns out that GST is applicable; and the vendor to issue a tax invoice to the purchaser at such time. This will provide the vendor with the opportunity to recover GST from the purchaser if it becomes payable (in addition to the contract price).

However, it is a good idea for practitioners to draft on the basis that the transaction is subject to GST until it is otherwise satisfied.

IP Assignment clauses

IP Assignment clauses

Commercial Law

IP Assignment clauses are featured in contracts when an owner’s intellectual property rights are to be assigned or transferred to another entity or individual, usually in return for some type of consideration.

When an IP Assignment clause is missing

IP Assignment clauses are a valuable contractual provision employed to enable the assignment of IP.

Unlike the licensing of intellectual property, which may be terminated, once assignment occurs it effectively brings to an end the original owner’s involvement with the assigned intellectual property.

Drafting considerations

When drafting an IP Assignment clause, the following points should be considered:

  • Confirm that the assigning party is the owner of the IP or has been assigned the rights to it. If rights were assigned, confirm that there are no limitations on their ability to assign the acquired rights.
  • Confirm whether the assignor will warrant its rights and necessary third party consents.
  • Decide what consideration (payment) is being provided for the intellectual property and whether payment will be made in lump sum or periodic payments.
  • If consideration is by way of periodic payments, consider and ensure that the clause is clear in relation to when the title will transfer.
  • Outline the logistics of when, where and how the intellectual property will be delivered.
  • Confirm whether the assignment will be a full or partial assignment. If only partial rights are being assigned ensure that the clause is clear in relation to which part/s.
  • Verify whether there will be any limitations on the assignment.
  • Confirm whether the assignor will provide indemnification in the event the rights are disputed or for any other terms or conditions.

Finally, it should be noted that most assignments need to be recorded with the relevant intellectual property office and the relevant register updated to indicate the new owner’s details.

An introduction to section 18 of Australian Consumer Law

An introduction to section 18 of Australian Consumer Law

Business Sale, Commercial Law

Section 18 of Australian Consumer Law provides that a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. The objective of section 18 is to act as a catchall provision that can apply to objectionable conduct. The provision has been interpreted widely in a large number of cases involving different factual circumstances. We’ve examined the application of this section to electricity retailers.

Section 18 prohibits misleading or deceptive conduct but does not, by itself, create a cause of action. The remedy provisions are found in other provisions of the Competition and Consumer Act 2010. This was described by Justice Fox in the decision of Brown v Jam Factory Pty Ltd (1981) 53 FLR 340 at paragraph 348 as follows the section “does not purport to create liability at all; rather [it creates] a norm of conduct, failure to observe which has consequences provided for elsewhere in the same statute, or under the general law.”

While there has been significant caselaw on the interpretation of the misleading and deceptive provisions of Australian Consumer Law it is important to note that it is a statutory text and the factual circumstances of each individual case that is of paramount importance. This was described by Justice Hayne in the case of Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435 as follows “when considering what was said in the reasons for decision in a s 52 case, the description of the relevant conduct is as important as are the facts and circumstances identified as bearing upon whether that conduct was misleading or deceptive.”

For a court to find a breach of section 18 of the ACL, it is not necessary that there has been any loss or damage. However, as the court noted in the case of Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd (2006) ATPR 42-106 “evidence of actual misleading or deceptive and steps taken in consequence thereof is… both relevant and important on the question of whether the relevant conduct is” misleading or deceptive.

What is misleading or deceptive conduct

There is no definition of the term misleading or deceptive conduct in Australian Consumer Law. The term has been interpreted by the courts to mean conduct that leads, or is likely to lead, a person or persons into error. Consequently, it is necessary to consider the target audience to whom the representation was directed. There are exceptions, but the general rule is that a party who engages in misleading or deceptive conduct will fall foul of a section 18 regardless of whether or not they intended to deceive and even where they have acted reasonably and honestly.

Section 18 prohibits conduct that not only actually misleads or deceives but conduct that is likely to mislead or deceive. Examples provided by the Australian Competition and Consumer Commission of claims that may mislead or deceive include claims relating to:

  • the quality, style, model or history of a product or service
  • whether goods that are on sale are new
  • the sponsorship, performance characteristics, accessories, benefits or use of products and services
  • the need for the goods or services
  • any exclusions on the goods or services.

Examples of misleading or deceptive conduct provided by the ACCC include:

  • a mobile phone provider signing a consumer up to a contract without telling them that there is no coverage in their region; and
  • a company misrepresenting the profits of a work at home scheme or other business opportunity.

It is very common to see ‘fine print’ i.e. terms and conditions usually in small print at the end of an advertising page or bottom of a TV commercial. When considering whether conduct is misleading or deceptive, the overall impression of the representational advertise meant will be considered and as such where that overall impression is misleading, ‘fine print’ will not save conduct from falling foul of section 18.

You can find more information about Consumer Law on the ACCC website. Contact us if you have any questions or require assistance.

Misleading and Deceptive Conduct by energy retailers

Misleading and Deceptive Conduct by energy retailers

Commercial Law, Energy Law

There have been a number of cases of energy retailers’ non-compliance with s 18 of Australian Consumer Law. These cases are useful for retailers looking to assess the adequacy of the controls that they have in place to reduce the risk of a contravention of s 18.

Australian Competition and Consumer Commission v EnergyAustralia [2015] FCA 274 is a case that was heard in the Federal Court of Australia with a decision handed down on 27 March 2015. This case concerned conduct by a company called Bright Choice Australia Pty Ltd who were engaged as a tele-sales agent of EnergyAustralia.

From 4 April 2012 until 23 April 2013, EnergyAustralia engaged Bright Choice under a Services Agreement to sell, by way of telemarketing, plans for electricity and gas in defined sales territories. The relevant sales territories included consumer premises located in New South Wales, Queensland, Victoria, South Australia and the ACT. Pursuant to the Services Agreement, EnergyAustralia agreed to pay Bright Choice on each occasion that a consumer contracted to enter into a new plan to purchase electricity or gas from EnergyAustralia as a result of Bright Choice’s marketing. Representatives from Bright Choice where remunerated on the basis of a wage plus commission.

Obligations to comply

Within the Services Agreements were a number of obligations on Bright Choice relating to compliance. These included an obligation to exercise the standard of care, skill and judgement that would be expected of a professional contract experience in the performance of services of a similar nature, to comply with all applicable laws and standards necessary to perform the services, and to ensure that its team members conducted outbound telemarketing calls in accordance with scripting approved by EnergyAustralia. Further, Bright Choice was required to establish, implement and maintain a quality assurance and control program that was subject to EnergyAustralia’s approval.

Bright Choice was required to implement a training program that utilised training materials developed by EnergyAustralia. The relevant training materials developed by EnergyAustralia outlined the requirements for compliance with the applicable laws and standards.

The Services Agreement made reference to the requirements to obtain explicit informed consent. Bright Choice was required to make call recordings of all outbound telemarketing calls and all telephone discussions with customers in which explicit informed consent was obtained and to retain such call recordings for a minimum of two years after the applicable call was made or for a longer period as may be required by any applicable law.

In addition, Bright Choice was required to listen and evaluate a sample of call recordings made for the purposes of recording explicit informed consent with an express obligation to listen to at least 2% of the total number of call recordings that were created every calendar month.

Following the appointment of Bright choice, EnergyAustralia conducted ‘train the trainer’ sessions for Bright Choice senior sales managers in March 2012 and provided training material in March 2012 and updated material in July 2012. The relevant training material covered legal and regulatory compliance topics relating to explicit informed consent and the law of misleading and deceptive conduct. The training material also included instructions in relation to sales techniques to be used, and to be avoided by sales representatives, including ensuring that customers had a full understanding of what they were agreeing to.

EnergyAustralia provided Bright Choice with questionnaires that were designed to test the adequacy of Bright Choice’s training program and which were required to be successfully completed by personnel before they conducted any telemarketing.

The bonus commissions

On 28 March 2013, the Services Agreement was amended whereby EnergyAustralia agreed to pay an additional bonus fee to Bright Choice upon Bright Choice achieving 9,000 new sales per month for five months from 1 April 2013. The base fee for electricity sales, of $120, increased by $35.

Between August 2012 and May 2013, Bright Choice representatives contacted consumers in a number of states and did not obtain the consent of consumers to enter into an EnergyAustralia electricity or gas plan but did submit sale reports to EnergyAustralia for each consumer.

The actual misrepresentation centred on Bright Choice advising consumers that they would be sent an information pack or welcome pack and that they would be able to consider the information to decide whether or not to receive a supply of electricity and/or gas from EnergyAustralia. Consumers were told that if they wanted to accept the offer, they would need to contact EnergyAustralia and unless they did make contact, they would not be treated as having entered into a plan for the supply of electricity and/or gas.

These telephone representations were false, misleading and deceptive because following each telephone conversation, Bright Choice acted and EnergyAustralia dealt with each consumer as if they had agreed to enter into a plan with EnergyAustralia for the supply of electricity and/or gas, when in fact they had not.

Further specific instances of conduct were discussed in the case. For example, on around 18 February 2013, a representative of Bright Choice contacted a certain consumer by telephone and said words to the effect that they were calling because EnergyAustralia had a new offer of a discount of 13% off bills and that this offer was not offered by AGL. The consumer responded that the last time she had been signed up to EnergyAustralia and did not want to be with EnergyAustralia.

The investigation

On 7 December 2012, EnergyAustralia commenced an investigation into Bright Choice’s telemarketing practices. On 28 March 2013, EnergyAustralia received details of concerns with Bright Choice’s telemarketing practices including a failure to obtain explicit informed consent. In April and May 2013, EnergyAustralia identified an increased number of customer complaints and cancellations from telesales made by the Representative. EnergyAustralia commenced an investigation into Bright Choice’s conduct and the investigation included a review of sample call recordings. EnergyAustralia identified that representatives were not obtaining explicit informed consent from customers nor were they following the scripts provided to them.

On 23 September 2013, EnergyAustralia terminated the services agreement with effect from 23 October 2013. EnergyAustralia required that Bright Choice cease all marketing sales calls from 23 September 2013.

In accordance with section 274 of the National Energy Retail Law, EnergyAustralia reported the non-compliance to the Australian Energy Regulator. In or around November 2013, EnergyAustralia voluntarily implemented a consumer remedial program at its own cost of $958,085.00 under which EnergyAustralia sought to contact remaining customers of EnergyAustralia originating from Bright Choice.

EnergyAustralia also implemented a process to safeguard against new customers being transferred without explicit informed consent. This process involved EnergyAustralia sending an SMS or email to every new customer that is entered into a contract with EnergyAustralia following an unsolicited outbound telemarketing sales call. This correspondence included a mobile number or email address to confirm the customer had in fact requested the transfer to, and entered into a market retail contract with, EnergyAustralia.

The court noted that following the termination of the Services Agreement and reporting of the conduct subject to the proceedings, EnergyAustralia made significant improvements to its compliance program to align it with the principles of the Australian standard for compliance programs AS3806.

The improvements made by EnergyAustralia included:

  • undertaking a quarterly certification and risk assessment of explicit informed consent compliance across the business, including by, each quarter, reassessing the effectiveness of business practices and processes against the explicit informed consent obligations.
  • Providing regular, at least annually, practical training for directors, officers, employees, representatives and agents of EnergyAustralia whose duties could result in them being concerned with conduct that may contravene EnergyAustralia’s obligations to obtain explicit informed consent;
  • appointing a compliance officer with responsibility for ensuring compliance and for overseeing its compliance program;
  • establishing a monthly scorecard process to assess the performance of third-party vendors in relation to complaints, cancellations and compliance with EnergyAustralia’s ACL and NERL obligations; and
  • ensuring that all third-party telesales calls are recorded in their entirety with random telesales call recordings provided to EnergyAustralia for quality assurance review.

When considering sections 18 and 29(1) of Australian Consumer Law, his honour noted the well-defined applicable legal principles that conduct is likely to mislead or deceive if there is a real or remote chance that it will do so and that the conduct must be capable of leading a person into error and the error or misconception must result from the conduct.

EnergyAustralia and Bright Choice admitted that the representations that were made were made in trade or commerce and in connection with the supply or possible supply of electricity and/or gas. They further admitted that the conduct was misleading and deceptive or was likely to mislead and deceive in contravention of section 18 and that they were false and misleading representations concerning the existence, exclusion or effect of a condition or right in contravention of section 29(1)(m).

Section 38 of the National Energy Retail Law provides that a retailer must obtain the explicit informed consent of a small customer for certain transactions including the transfer of the customer to the retailer from another retailer and the entry by the customer into a market retail contract with the retailer. Section 39 of the National Energy Retail Law provides that explicit informed consent is given where the retailer, or a person acting on the retailer’s behalf, has clearly, fully and adequately disclosed all matters relevant to the consent of the customer, including the purpose or use of the consent, and the customer gives consent. Consent by the customer must be given in writing signed by the customer, verbally (provided that it is evidenced in such a way that can be verified), or by electronic communication generated by the customer.  

The penalty

In considering the appropriate penalties to be applied, the court considered the case of Ministry for Industry, Tourism & Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72. The relevant principles included that it is the responsibility of the court to determine the appropriate penalty to be imposed in respect of a contravention. Determining the quantum of a penalty is not an exact science. Within a permissible range, the courts acknowledge that a particular figure cannot necessarily be said to be more appropriate than another.

After considering all of the applicable principles, the court ordered that EnergyAustralia pay a penalty of $1,000,000.

Where did EnergyAustralia fall short?

In examining where EnergyAustralia fell short, the court accepted the submissions of the Australian Competition and Consumer Commission and the Australian Energy Regulator that the presence of a significant financial incentive at least increased the risk of sales calls to consumers occurring without proper processes being observed.

The court noted that there was a flaw in EnergyAustralia’s internal processes in that even though the Services Agreement provided for an audit mechanism, EnergyAustralia did not, or did not adequately, exercise its audit powers. The court concluded that “given the size of the commissions being paid by EnergyAustralia and the number of telesales made by its agent, Bright Choice, EnergyAustralia’s internal procedures were deficient.”

Case Note: Bendigo and Adelaide Bank Limited (ACN 068 049 178) & Ors v Kenneth Ross Pickard & Anor

Case Note: Bendigo and Adelaide Bank Limited (ACN 068 049 178) & Ors v Kenneth Ross Pickard & Anor

Commercial Law

Bendigo and Adelaide Bank Limited (ACN 068 049 178) & Ors v Kenneth Ross Pickard & Anor [2019] SASC 123 concerned a claim for money that was said to be owed under a guarantee. The plaintiffs in this case sought to enforce a guarantee that they said was provided by the directors of a company Kenrop Pty Ltd (the Borrower). Kenrop was in liquidation at the time of the judgement.


The loan amount was $505,250 and the purpose of the loan was for Kenrop to invest in plantation, wine grape, and cattle schemes.  Kenrop made payments in the order of $350,000 until it became apparent that the schemes in which it was investing had failed.

The key issue in the case was whether the directors of Kenrop had signed the loan application documentation in the name of Kenrop or also personally as guarantors. Great Southern Finance Pty Ltd (GSF), purported to execute the personal guarantees under power of attorney.

The plaintiffs claimed that GSF had executed the loan documents for Kenrop and the defendants as guarantors on or about 17 November 2008. The defendants contended that the power of attorney could only be conferred by deed and that the loan application that they executed was not a valid deed. Further, the defendant submitted that the loan deed, which purported to be a deed, was not a valid deed.

The plaintiffs claimed that Kenrop’s failure to make payments under the loan deed resulted in an acceleration event under clause 11. The lender then became entitled to demand immediate repayment of all monies payable including interest under a rate of 13.5%.

The power of attorney

The loan application, in Part 6, contained a power of attorney clause. The signature page was signed by the defendants, and each of their signatures were witnessed. Their signatures appeared below the words signature of ‘applicant/guarantor.’ The loan application referred to the need for independent legal advice to be sought both in the checklist for applicants and the signature clause box.

The power of attorney in Part 6 of the application provided that GSF, its directors and its secretary were appointed jointly and severally as the attorneys for the borrower and the guarantors. It further provided that GSF was authorised to enter into and execute a loan deed in the form attached to the application on behalf the borrower and the guarantors and that it was authorised inter alia to fill in the blank spaces in the schedule to the loan deed consistent with the provisions of the application.

On 17 November 2008 the loan deed was electronically signed by directors of GSF under the power of attorney for Kenrop pursuant to section 127 of the Corporations Act 2001 (Cth). The loan deed attached list of the repayment dates and listed an interest rate of 10.5% per annum. On 22 April 2009, the defendant signed an application for variation to loan deed. That document included a checklist that provided that the declaration at Part 7 of the application must be signed and dated by all applicants and guarantors. This was signed by the defendants.

Was the Loan Application a deed?

The Honourable Justice Stanley examined whether the loan application was a deed. ‘A deed is the most solemn act that a person can perform with respect to a particular property or right. At common law there are three requirements for a deed. First, it has to be written on paper, parchment or vellum. Second, it has to be sealed by the party or parties executing the document. Third, it has to be delivered and is not enforceable until delivery had occurred.’ His Honour considered the intention of the parties which he noted could be discerned from extrinsic evidence concerning the words or acts of the parties, or from an examination of the words contained in the document itself.

Statutory considerations

The Honourable Justice Stanley went on to examine modifications to the common law by the Property Law Act in Queensland and Western Australia.

The Honourable Justice Stanley found that the loan application was to be interpreted according to Queensland law as it was signed by the defendants in Queensland. Section 45 of the Queensland Act sets out the formalities of deeds executed by individuals. The effect of section 45 is to deem a document to be sealed if it is expressed to be a deed.

Section 45(2)(b) is subject to section 47. Section 47(1) provides that the execution of an instrument in the form of a deed shall not of itself import delivery, nor shall delivery be presumed from the facts of execution only, unless it appears that execution of the document was intended to constitute delivery of the document. In the case of Interchase Corporation Ltd (In Liq) v Commissioner of Stamp Duties (Qld) (1993) 27 ATR 154 it was found that section 47(1) displaces a common law presumption that the execution of an instrument in the form of a deed imports delivery but nonetheless the section contemplates that a document may evince an intention that delivery should be inferred from execution.

The Honourable Justice Stanley rejected the defendants’ submission that the loan application was solely intended to be an application for finance rather than a deed and found that it satisfied the requirements of section 44 and section 45 of the Property Law Act in Queensland.

Dual effect signatures

The Honourable Justice Stanley considered whether the application could be signed by the directors both in their capacity as directors of the company and as individuals. He referenced the South Australian Supreme Court case of Burrell & Family Pty Ltd v Harris [2010] SASC 184 where Justice White noted that the court must consider the contract as a whole and not just the manner of execution.

The Honourable Justice White held that it is possible for a person to intend his signature to have a dual effect so as to bind a principal and to accept personal responsibility. In that case the relevant provision provided that the “director of the borrowing entities also acknowledges personal liability for all debt remaining after the loan repayment date inclusive of all interest and recovery costs.”

Was GSF’s actions within the scope of the power of attorney?

The terms of the appointment of a power of attorney will determine the extent and scope of the power. Powers can be conferred by express terms or by necessary implication.

The defendants submitted that the loan application did not specify any interest rate that applies to the loan. In addition, the defendant submitted that they selected to inconsistent options in the loan application and in electing for one of the options, GSF made an election that was beyond the scope of its power. The Honourable Justice Stanley noted that the power of attorney in Part 6 of the loan application permitted GSF to make and initial any necessary alterations to the loan deed provided that such alterations were not prejudicial to the interests of Appointor.

Electronic signature of the loan deed

The defendants submitted that the loan deed was not enforceable against them as a guarantee as the loan deed was signed by GSF as the defendants’ attorney by electronic signature. The defendant submitted that the loan deed, by virtue of being signed electronically, did not meet the common law requirements that a deed be written on paper, parchment, or vellum. The plaintiff submitted that section 127 of the Corporations Act 2001 overrides all other requirements for a deed, including the paper requirement. The plaintiff submitted that section 127(3) expressly gives effect to the document as a deed when it is signed in accordance with section 127(1).

The Honourable Justice Stanley then went on to consider whether the loan deed had been executed in accordance with section 127. His Honour noted that the Corporations Act 2001 excludes the operation of section 10 of the Electronic Transactions Act 1999.

In considering this question, the Honourable Justice Stanley examined the findings of Justice Croft in Bendigo and Adelaide Bank Limited v DY Logistics Pty Ltd [2018] VSC 558. In that case there was no evidence as to the identity of the person who affixed or personally authenticated the affixing of the officer’s facsimile signatures on the relevant loan deed. Justice Croft held that section 127 requires a deed to be physically signed by the relevant company officer or for the person to authenticate the mark appearing on the document as his or her signature. He concluded that the loan deeds in that case had not been validly executed and noted that there was no evidence that either the director or secretary who signatures were purportedly affixed to the deeds authenticated the signatures in any way nor was there evidence in the form of board minutes authorising or authenticating each signature.

The Honourable Justice Stanley noted that GFS’s director did not review the loan deeds to which his electronic signature had been applied and that a standard form signature page was likely used. The plaintiff submitted that this did not mean that the electronic signatures were applied without authorisation. They also submitted that a board resolution existed which had the effect of authorising the relevant act of authentication. Justice Stanley noted that the relevant board resolution was limited to the approval of loans other than bank originated loans, i.e. did not applied to the loan in question.

The Honourable Justice Stanley noted that ‘given section 127 (1) contemplates a document being executed by two officers signing it, there is good reason to consider there must be a single, static document rather than a situation where to electronic signatures are subsequently applied to an electronic document.’

His Honour then went on to find that the plaintiffs cannot rely on provisions of section 127 to prove that the loan was validly executed and therefore the guarantee is contained in the loan deed were invalid. The plaintiffs then sought to rely on the application being a contract. Justice Stanley found that the purported deed would fail as a binding contract for want of consideration.


in considering the subsequent ratification of the documents by the defendants, Justice Stanley found that ‘ratification does not transform something that has not been done into something else. The loan document was void at its inception because it was not validly executed by the party against whom it is now sought to be enforced. The doctrine of ratification cannot be applied to this case to validate the ineffective execution of the loan deed.’

Key Lessons

The key lessons from this case are:

a. Power of attorney clauses should be carefully reviewed to ensure that they provide sufficient power to the attorney appointed;

b. To avoid disputes about dual execution clauses, separate execution clauses should be included where directors are signing a document both on behalf of a company and in a personal capacity;

c. Where a company seeks to rely on electronic signatures, it should carefully examine this case and consider whether it needs to amend its processes and authorising board approvals.

Contract Clauses: Rent Review

Contract Clauses: Rent Review

Commercial Law

Mechanisms for rent review are important components of all commercial leases. Typically leases provide for rent review at regular intervals during a lease often in relation to a set percentage or the consumer price index.

CPI increases

It is common to see rent reviewed in line with movements in CPI which is a compilation of indices by the Australian Bureau of Statistics representing the change in cost of living. A CPI increase clause should specify the base date from which the index applies or a range of possible dates i.e. the date of the lease, the date when it was signed, or the date when it was delivered by the lessor to the lessee. Such a clause should consider the possibility that CPI will be discontinued. Where there is uncertainty a court will generally look to interpret such a clause fairly and broadly without being too astute or subtle in finding defects.

Other mechanisms

There are a range of other mechanisms that may be used as a means of varying rent. These include:

Current market rent: In determining current market rent, it would be expected that rents of comparable premises be reviewed.

Rent as a fraction of turnover: The parties will need to consider the process by which turnover is determined and the processes to be followed should there be a dispute.

Retail Leases

When considering rent review clauses, it is important to examine applicable statutory obligations. In New South Wales and South Australia base rent in relation to a retail shop lease is defined as rent or a component of rent that comprises a specific amount of money whether or not that amount is subject to change. In those states a retail shop lease must not provide for a change to base rent less than 12 months after the lease is entered into and must restrict successive changes to that rent in the 12 months after any previous change except where there is a change to the base rent specified by a specific percentage.

In New South Wales, Queensland and South Australia any term of a retail shop lease is void to the extent that it provides for the rent of a shop to change on the basis of whichever results in the highest rent out of two or more methods. In New South Wales, Queensland, South Australia and Victoria, ratchet clauses, which provide that rent review must not result in rent that is less than the amount payable before the review, are void.

When does the Unfair Contract Term law not apply?

When does the Unfair Contract Term law not apply?

Commercial Law, Private Law

In our previous article we examined the situations in which unfair contract term law applies. While unfair contract term laws apply to most standard form contracts and contractual terms, there are a number of excluded contracts and excluded terms. We discussed these below.

Excluded contracts:

  • Contracts entered into a date prior to the commencement of the unfair contract term laws, as applicable between consumer and business contracts, are excluded from the operation of the unfair contract term laws.
  • Contracts which are expressly excluded by section 28 of Australian Consumer Law: including contracts of marine salvage or towage, ship charter contracts, contracts for the carriage of goods by ship, constitutions of a corporation, managed investment scheme or other kind of body.
  • Contracts for financial services. Financial services are excluded from Australian Consumer Law by section 131A of the Competition and Consumer Act. Financial services are regulated separately under the ASIC Act.
  • Insurance contracts that are regulated by the Insurance Contracts Act 1984 (Cth). This act does not apply to private health insurance contracts, state and Commonwealth government insurance contracts, reinsurance contracts, and others.

Excluded terms:

  • a term that defines the main subject matter of the contract;
  • a term that sets the upfront price payable under the contract; and
  • a term required, or expressly permitted, by law of the Commonwealth, a State or a Territory.

Upfront price and subject matter are considered matters which parties exercise choice in deciding to proceed with a contract and are, therefore, excluded. This was explained in the second explanatory memorandum to the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010:

where a party has decided to purchase goods, services, land, financial services or financial products that are the subject of the contract, that party cannot then challenge the fairness of a term relating to the main subject matter of the contract at a later stage, given that the party had a choice of whether or not to make the purchase on the basis of what was offered.

In deciding whether a contract or term type is excluded from the unfair contract terms law, it is important to consider the law as of the date that the contract is entered into as an assumption that the law does not apply may be incorrect with serious consequences.