Understanding Trade Promotions: A Deep Dive into How to Run Compliant Trade Promotions

Understanding Trade Promotions: A Deep Dive into How to Run Compliant Trade Promotions

Private Law

Facebook, Pinterest, Instagram, LinkedIn, Twitter – these are the playgrounds where businesses are actively connecting with their loyal customers and attracting new ones in a flash. So what are the Australian laws around running a promotion online?

What is a trade promotion lottery? 

A trade promotion competition is a free-entry competition that a business conducts to promote their goods or services.  It can be a contest, a raffle, a sweepstakes, or any other promotion that has prizes and winners determined by chance. Businesses run trade promotions to encourage sales and increase engagement. 

The three elements to a trade promotion are that they are:

  1. free to enter;
  2. promoting goods or services; and
  3. conducted by a registered business.

While trade promotions are designed to create excitement and incentivise consumer participation, they must adhere to specific rules and regulations set forth by the Australian government to ensure fairness, transparency, and consumer protection.

Permits

Imagine planning the most glamorous fashion show, only to realize you forgot the VIP invitations. That’s the importance of permits in the world of trade promotions. It’s important to obtain the right permits, especially when your promotion involves lotteries or games of chance. 

Trade Promotion Tips: Breaking Down the Legal Runway

Here are the key takeaways:

1. Game of Skill vs. Game of Chance: Firstly, you need to work out what type of promotion you are running. If your promotion involves an element of luck – like drawing winners randomly – you’re wading into lottery territory. It’s a delicate balance that requires the right legal finesse. 

A game of skill is a promotional activity whereby the winner is determined by a skill-based assessment (for example, entrants submit an answer to a promotional question which can then be judged in order to determine a winner). 

A game of chance is one where random winners are picked and it does not involve an assessment of any skill. This could be a Facebook ‘Share to Win’ promotion, lottery ticket, bingo game or a scratchie.

2. State-Specific Permits: Each state in Australia has its own set of rules and requirements. It’s like tailoring your legal outfit to fit perfectly in each jurisdiction. You do not need a permit for a game of skill. However, you still need to comply with any state or territory laws or regulations that deal with trade promotions generally, as well as the Australian Consumer Law (ACL). 

For example, in Western Australia, a trade promotion lottery must be free to enter, and the prize must not be a cosmetic surgical or medical procedure. In South Australia, if you are using instant scratch or break open tickets (where the number, letter or symbol is hidden) it is an instant prize trade promotion lottery and you must apply for a licence regardless of the prize amount and remember that each of the states have their own rules about ticket draws and prizes, etc. 

Be mindful of the laws in each of the states and remember that permit numbers need to appear on your trade promotion creative so give yourself ample time to apply for the permits.

You may need a permit or authority for a game of chance, depending on a number of factors including where you operate your business and the dollar value of the total prize pool.  For example, if the prize pool for a game of chance is:

  • less than $3,000, you do not need a permit;
  • between $3,000 and $5,000, you only need a permit in the ACT;
  • $5,000 or over, you need a permit in the ACT, SA and NT; and
  • $10,000 or over, you need a permit in the ACT, SA, NT and NSW.

Queensland, Tasmania and Victoria do not require businesses to acquire Trade Promotion Lottery permits. Despite this, each business is required to comply with a variety of state specific mandatory conditions.

Here’s a list of the some of the laws and regulations that apply in each state (non-exhaustive):

New South Wales:
– Community Gaming Act 2018
– Community Gaming Regulations (NSW) 2020

NSW trade promotions are reviewed by the following regulatory body:

– NSW Fair Trading

Australian Capital Territory
– Lotteries Act 1964

ACT trade promotions are reviewed by the following regulatory body:

  • ACT Gambling and Racing Commission

Victoria
– Gambling Regulation Act 2003
– Gambling Regulations 2015

VIC trade promotions are reviewed by the following regulatory body:

  • Victoria Commission for Gambling and Liquor Regulation

South Australia
– Lotteries Act 2019
– Lotteries Regulations 2021

SA trade promotions are reviewed by the following regulatory body:

  • SA Consumer and Business Services

Queensland
– Charitable and Non-Profit Gaming Act 1999
– Charitable and Non-Profit Gaming Regulation 1999

QLD trade promotions are reviewed by the following regulatory body:

  • Business Queensland

Western Australia
– Gaming and Wagering Commission Act 1987
– Lotteries Commission Act 1990

WA trade promotions are reviewed by the following regulatory body:

-WA Department of Government, Sport and Cultural Industries

Tasmania
– Gaming Control Act 1993

TAS trade promotions are reviewed by the following regulatory body:

  • TAS Department of Treasury and Finance

Northern Territory
– Gaming Control (Community Gaming) Regulations 2006
– Gaming Control Act 1993

NT trade promotions are reviewed by the following body

  • NT Department of the Attorney-General and Justice

3. Transparency: Front-Row Access for All: In the fashion world, inclusivity is a trend that never goes out of style. Translate this into your trade promotion by ensuring that the entry process and winner selection are as inclusive and transparent as possible. You should clearly communicate the terms and conditions to participants. You should also maintain good record-keeping, manage any privacy issues and consider what specific rules exist for the applicable social media platform (for example, Facebook terms state that personal timelines and friend connections cannot be used for promotions).

Let everyone feel like they have front-row access to the fashion extravaganza. It’s not just about legal compliance – it’s about creating an atmosphere of trust, confidence and credibility.

Penalties for Non-Compliance

Each state and territory has its own penalties for not complying with their laws.

  • Breaches of the Competition and Consumer Act 2010 and the Australian Consumer Law attract fines and pecuniary penalties.
  • Some breaches are civil and can result in monetary penalties.
  • Some breaches are criminal, and can result in monetary fines and/or jail time. 

The introduction of the Treasury Laws Amendment (More Competition, Better Prices) Bill 2022 on 10 November 2022 resulted in a new maximum penalty for a corporation that breaches the Competition and Consumer Act 2010 (CCA) – $50 million. This is a significant rise from the previous maximum penalty of $10 million. For individuals, the maximum penalty has also increased from $500,000 to $2.5 million – an increase of 500%.

Leaving aside the hefty possible fines and penalties for non-compliance, not staying in line with trade promotion regulations can severely damage your business’s reputation. Negative publicity and customer backlash can be hard to recover from, making it crucial to follow the rules meticulously.

Compliance Checklist

Running trade promotions are like throwing a party for your brand, where you get to showcase your latest products, dazzle your audience, and boost your brand’s street cred all at once! But before you dive headfirst into the promo pool, let’s make sure you’re doing it right:

  • Know the Lay of the Land: Before you unleash your marketing magic, take a peek at the rules in each state or territory. It’s like scouting the terrain before going on a treasure hunt – you gotta know where you’re stepping!
  • Legal Eagles to the Rescue: Don’t worry, you don’t have to navigate this jungle alone. Seek advice from legal experts who specialize in trade promotion regulations. We’ve represented many businesses in this space and helped them craft the right trade promotion terms and conditions. We can make sure your campaign is sailing smoothly from the get-go.
  • Paperwork Party: Keep those records in check. Permits, terms, conditions – it’s like organizing the ultimate guest list for your promotion bash. The more detailed, the better.
  • Transparency is Key: Nobody likes a mystery, especially when prizes are involved. Lay it all out for your participants – how winners will be chosen, what they’re winning – the whole shebang 🙂 No smoke and mirrors here, please.
  • Privacy Matters: Last but not least, play nice with personal info. Follow Australia’s privacy laws when collecting and handling participant data.

So there you have it – your recipe for a rockin’ trade promotion that’ll have everyone talking about your brand for all the right reasons! 🚀

If you’d like help setting up your trade promotions and drafting the terms and conditions, here at Law Quarter, our lawyers work with clients across a range of industries from technology and retail to beauty, healthcare and wellness. We also run a sister business, Compliance Quarter so we can help you stay compliant as you manage your promotions.

You can also reach out to me directly at jacqui@lawquarter.com.au or call me on 0411 659 671.

Influencer Marketing: The Legal Essentials for Influencers and Product-Based Businesses

Influencer Marketing: The Legal Essentials for Influencers and Product-Based Businesses

Commercial Law, Private Law, Regulatory Updates, Social Media Law

There are more than 64 million influencers’ accounts on Instagram all over the world. 

And it may seem like a sparkly, selfie-obsessed, sunkissed swathe of inspirational posts and weight loss tips where the only rule is that there are no rules.

But, of course, there are rules. Knowing what could land you in hot water (for both influencers and product-based businesses reaching out to influencers) will mean you’re a legally savvy influencer and not just there for the hype. 

Ready to dive into the wild and wonderful world of influencer marketing? Grab your virtual popcorn as we explore the drama, glamour, and the legal intricacies of influencer marketing.

The Legal Framework

A number of laws apply to influencers in Australia. Firstly, the Australian Association of National Advertisers (AANA) has a Code of Ethics that applies to all advertisers which sets the standard for advertising in any medium.

The Code of Ethics is the cornerstone of the AANA self-regulatory system and is supplemented by a Code of Advertising and Marketing to Children, Food and Beverages Code, Environmental Claims Code and Wagering Advertising & Marketing Communication Code. 

The self-regulatory system is underpinned by an independent, transparent and robust complaints-handling system administered by Ad Standards. Its’ object is to ensure that advertisements and other forms of marketing communications are legal, honest, truthful and have been prepared with respect for human dignity, an obligation to avoid harm to the consumer and society and a sense of fairness and responsibility to competitors.

The Code applies to all kinds of content, cinema, internet, outdoor media, print, radio, telecommunications, television or other direct-to-consumer media including new and emerging technologies. Which means Instagram, Tik Tok, Snapchat and all social media platforms are all fair game.

Influencers are also bound to comply with the Competition and Consumer Act 2010 (Cth) known as the Australian Consumer Law (ACL), which prohibits businesses from misleading or deceiving consumers. This applies to influencers engaging in trade or commerce, as well as brands and marketers using influencers to advertise online. The Australian Competition and Consumer Commission is the competition regulator, watchdog and national law champion (ACCC).

And don’t forget that if you’re in the therapeutic goods game, section 24 of the Therapeutic Goods Advertising Code 2021 (TGA Code) sets out the specific requirements for using endorsements and testimonials in advertisements about therapeutic goods. (Watch this space for our comprehensive to the TGA Advertising Code in the next week.)

So let’s take a look at some of the key legal areas influencer should wrap their head around:

1. Disclosure Dazzle: Let’s Play ‘Spot the Sponsorship’

Let’s talk about sponsored posts. If a brand offers you free products or pays you to post about them, you have to disclose it to your audience. Think of disclosure like a secret handshake – only cooler. 

Of the 118 social media influencers reviewed in the ACCC’s influencer sweep, 81 per cent were found to be making posts that raised concerns under the ACL for potentially misleading advertising

The ACCC is due to release guidance in early 2024 for influencers and businesses to remind them of their obligations under the ACL to disclose advertising in social media posts.

So be transparent about those sponsored posts, gifts, or any cash flowing into those influencer pockets. Think of it as a trust exercise for your followers. Your influencers have gotta spill the beans with a nod to the laws so hashtags like #Ad, #Sponsored will denote that they know their legal game.

2. Influencers and the Deceptive Mirage: Don’t Mislead Your Fans

Let’s talk about the FYRE Festival Fiasco of 2017. 

Picture this: a luxurious three-day music festival on Pablo Escobar’s private island, promising A-list celebrities such as rapper Ja Rule and models Kendall Jenner and Bella Hadid, 5-star cuisine, and non-stop celebration. And festival goers forked out thousands for it. 

What could possibly go wrong? Well, as it turns out, everything. The FYRE Festival, orchestrated by the infamous Billy McFarland (aged 26), became the epitome of a party that never happened. Disgruntled festivalgoers found themselves stranded in the Bahamas, facing hurricane tents, cancelled performances, and a scant supply of cheese sandwiches.

The festival’s downfall wasn’t just due to logistical nightmares; it was fuelled by the misleading promotion orchestrated by social media influencers. 

High-profile models and actresses were paid to post idyllic photos and videos on their private Instagram accounts, creating a mirage of the ultimate party destination. Little did their fans know, these influencers had no intention of actually attending the event. 

The aftermath left both disappointed festivalgoers and a legal conundrum in its wake. The disastrous Fyre Festival spawned lawsuits against the event’s organizers, who included Ja Rule and Billy McFarland, the latter of whom is now serving a six-year prison sentence for fraud.

As the FYRE Festival unfolded, legal questions arose, especially regarding the responsibility of influencers for promoting misleading content. 

In Australia, consumer protection laws, like the ACL, make it clear that deceptive advertising practices won’t be tolerated. While there’s no specific legislation targeting social media, the general laws on false and misleading claims in the ACL apply to businesses and influencers alike.

3. The Fine Print Finesse: Contracts Are the New Black

Contracts are your legal safety net in the unpredictable world of social media. 

An Influencer Agreement is a legal document which sets out the agreement between the Influencer and the Brand in relation to the rights and obligations of each party. Things like the length of the contract, confidentiality, permitted use of content, agreed fees and payment terms, exclusivity and restraints and the circumstances in which the agreement can be terminated should all be mapped out clearly in the contract. 

Make it clear who’s the boss, who’s getting paid, how to handle disputes, how to exit the arrangement if necessary and who’s in charge of the creative chaos.

4. The Age-Old Challenge: Mastering the Influencer Game when Marketing to Children

Stricter rules apply to advertising to children as of 1 December 2023, when the new Children’s Advertising Code came into force.

Advertising to Children must not contravene prevailing community standards, including by promoting products or services unsuitable or hazardous to children or encouraging unsafe practices. Advertising to Children that encourages bullying or promotes unhealthy ideal body image may also breach this rule.

AANA CEO Josh Faulks has said the new Code recognises the distinct vulnerability of children and provides a robust framework for the advertising industry:

“The Code is no longer limited to advertising for children’s products and will provide critical protections around any advertising directed at children,” Faulks said.

“It places a clear ban on directing advertising of hazardous products to children such as vapes, kava or highly caffeinated drinks. It also prohibits the encouragement of unsafe practices, including bullying or promoting unhealthy body image, and the use of sexual appeal or imagery when communicating to children.”

The new Code pays special attention to the rise of ‘kidfluencers’ and influencer advertising directed at children.

“The rules go beyond Australian Consumer Law recognising the subtle, embedded nature of influencer advertising directed at children which research says lowers children’s ability to recognise it as advertising. It must now be immediately clear to a child that they are interacting with advertising content,” Faulks said.

The new Children’s Advertising Code complements AANA’s Food & Beverage Advertising Code which already bans advertising of occasional food and beverages to children. This applies to all advertising, across all media channels at all times of the day.

Complaints about advertising that raise issues under the Children’s Advertising Code are handled by Ad Standards and are determined by the independent Ad Standards Community Panel, whose members are representative of the Australian community.

Keep it legal, keep it real, be sensitive and remember, kids are the toughest critics.

5. Endorsement Etiquette: Honesty is Punk Rock

Fake reviews are so 2010. Let your influencers be the punk poets of authenticity. Real talk, real opinions, and maybe a little rebellion in the mix – that’s the influencer code.

A 2022 ACCC analysis of more than 130 online businesses found 37% were manipulating reviews to have fake positive reviews published or negative reviews scrubbed. The ACCC found the sectors with the highest proportions of potential fake or misleading reviews were household appliances and electronics, beauty products, and home improvement and household products.

Misleading endorsements are a breach of the ACL and a no no.

6. The Data Dilemma: 

In this crazy world of tweets, snaps, and double-taps, we’re all navigating a sea of personal information. Remember, you’re not just posting pics – you’re the captain of your data ship! ⚓️ 

So influencers have certain responsibilities! 🕵️‍♂️ To stay on the good side of the Privacy Act 1988 (Cth), here’s the lowdown:

  • uncheckedHave a clear Privacy Policy: Lay it all out – how you scoop up, use, and share personal data. Your followers need to know what’s up, so keep it real.
  • uncheckedLock it down with ninja-level security: Fortify that data fortress with strong encryption, secure data storage, No unauthorized peeping, no sneaky business. Use Fort Knox-level storage, unbreakable encryption, and multi-factor authentication.
  • uncheckedSound the alarm on data breaches: If the ship’s got leaks, don’t keep it quiet! Tell your customers ASAP and take all reasonable steps to mitigate any harm.
  • uncheckedStay in the privacy policy loop: The Privacy Act is like a constantly updating playlist – you’ve gotta stay tuned. Be in the know about the latest reforms and keep your privacy game strong.

The evolving landscape of consumer protection laws and influencer regulations suggests that influencers must tread carefully in the #instaworthy realm. 

So, next time you see your favorite influencer promoting paradise on Earth, remember: the law is watching, and the party might just be a legal minefield. Stay savvy, stay legal, and keep scrolling!

🤘😎

If you’d like help setting up your legal foundations as a product-based business, or influencer, here at Law Quarter, we advise clients on all areas of business, marketing and consumer law, and our lawyers work with clients involved in beauty, healthcare and wellness throughout Australia. 

We also run a sister business, Compliance Quarter, so we’re set to help you build a big glowing business empire with the strongest of foundations 🙂

You can also reach out to me directly at jacqui@lawquarter.com.au or call me on 0411 659 671.

The Problem with Termination for Convenience Clauses in Construction Contracts

The Problem with Termination for Convenience Clauses in Construction Contracts

Private Law

Termination for convenience clauses are contractual provisions that allow one party, usually the principal, to terminate the contract without cause or default by the other party, usually the contractor. These clauses are common in construction contracts, especially in large-scale or complex projects, where the principal may want to have flexibility and control over the project’s scope, budget, or timeline. However, these clauses can also pose significant risks and challenges for the contractor, who may incur costs and losses that are not recoverable under the contract.

What are the benefits of termination for convenience clauses for the principal?

Termination for convenience clauses can provide several benefits for the principal, such as:

  • Reducing the risk of litigation or disputes with the contractor, as the principal does not have to prove breach or fault by the contractor to terminate the contract.
  • Enabling the principal to adjust the project’s scope, budget, or timeline according to changing circumstances, such as market conditions, stakeholder preferences, or regulatory requirements.
  • Allowing the principal to switch to a different contractor or subcontractor if the principal is dissatisfied with the performance, quality, or price of the original contractor.

What are the problems with termination for convenience clauses for the contractor?

Termination for convenience clauses can create several problems for the contractor, such as:

  • Losing the expected profit or revenue from the contract, as the contractor may have invested time, money, and resources in preparing and performing the contract.
  • Bearing the costs and liabilities of demobilising and terminating the contract, such as paying off subcontractors, suppliers, or employees, or disposing of materials, equipment, or waste.
  • Not being able to recover the costs and expenses incurred in the overall management of the contract, such as site visits, inspections, meetings, or administration, unless the contract expressly allows for the recovery of those amounts.

How can contractors protect themselves from termination for convenience clauses?

Contractors can take some measures to protect themselves from the adverse effects of termination for convenience clauses, such as:

  • Negotiating the terms and conditions of the clause, such as limiting the grounds or circumstances for termination, requiring notice and consultation, or specifying the compensation or reimbursement for termination.
  • Keeping accurate and detailed records of the work done and the costs and expenses incurred under the contract, such as invoices, receipts, timesheets, or reports, to support any claims for payment or damages.
  • Seeking legal advice from a construction lawyer before entering into, performing, or terminating a contract that contains a termination for convenience clause, to understand the rights and obligations of the parties and the remedies available in case of termination.
Glow Up Your Business: A Guide to Building a Radiant Legal Foundation for Your Beauty or Skincare Venture in Australia

Glow Up Your Business: A Guide to Building a Radiant Legal Foundation for Your Beauty or Skincare Venture in Australia

Commercial Law, Private Law

So, you’ve decided to dive into the glamorous world of beauty and skincare. 

And it’s all fun and games when you’re dreaming up that perfect perfume scent or creating the perfect booty cream, but there’s a whole lot of legal stuff you need to know before you can build a thriving brand.

Well, buckle up, because we’re about to embark on a journey to set up a legal foundation that’s as flawless as your favorite foundation 🙂

Firstly, before diving in, most personal care, skin care, beauty, make-up and cosmetic products may be described as ‘cosmetics’. 

A cosmetic is defined in our legislation as a substance or preparation intended for placement in contact with any part of the human body, including the mucous membranes of the oral cavity and the teeth, with a view to:

  • altering the odours of the body
  • changing its appearance
  • cleansing it
  • maintaining it in good condition
  • perfuming it
  • protecting it

Cosmetics include soap, shampoo and conditioner, moisturiser, ‘bath bombs’, hair dye, perfume, lipstick, mascara, nail polish, deodorant and many other products.

What laws and regulations govern the beauty and skincare industry?

The regulation of cosmetics in Australia is administered by three government regulators – the Therapeutic Goods Administration (TGA), the Australian Government, Department of Health under the Australian Industrial Chemicals Introduction Scheme (AICIS) and the Australian Competition and Consumer Commission (ACCC).

The Therapeutic Goods Administration (TGA) is responsible for regulating chemicals in personal care, skin care, make-up and cosmetic products that are medicines or marketed as having therapeutic effects

This includes most skin-whitening lotions, primary sunscreens, disinfectants, complementary medicines and blood products.

The second regulatory body is the Australian Industrial Chemicals Introduction Scheme (AICIS).  AICIS is a regulatory scheme that regulates chemicals that are imported or manufactured (introduced) for industrialuse and it’s part of the Australian Government, Department of Health.

It’s basically responsible for regulating the chemical ingredients in personal care, skin care, make-up and other cosmetic products that are not medicines or marketed as having ‘therapeutic effects’ and are considered to have an ‘industrial’ use.

The final body, the ACCC, regulates cosmetic product labelling or product safety in accordance with the Consumer Goods (Cosmetics) Information Standard 2020. The ACL also provides for penalties for false or misleading claims and representations about products.

So remember: one of the most important first steps is figuring out whether your products are cosmetics or therapeutic goods. 

Here’s a (non-exhaustive) list of laws and regulations you should pop on your radar if you’re operating a skincare business:

  • Therapeutic Goods Act 1989 (Cth)
  • Therapeutic Goods (Excluded Goods) Determination 2018 (Cth)
  • Australian Consumer Law (Competition and Consumer Act 2010 (Cth))
  • Consumer Goods (Cosmetics) Information Standard 2020
  • National Measurement Act 1960 (Cth)
  • National Trade Measurement Regulations 1989 (Cth)
  • Industrial Chemicals Act 2019 (Cth)
  • Fair Work Act 2009 (Cth) 
  • Good Manufacturing Practice (GMP)
  • Agricultural and Veterinary Chemicals Act 1994
  • Privacy Act 1998 (Cth)
  • Spam Act 2003 (Cth)
  • The Poisons Standard (also known as the Standard for the Uniform Scheduling of Medicines and Poisons (SUSMP)
  • The Mandatory Standard for Labelling Cosmetics (regulated by the ACCC)
  • General Data Protection Regulation (GDPR)

OK, so that’s the general framework for the beauty industry – now let’s get down to the nitty gritty of laying your flawless legal foundation:

1. Slay the Business Structure Game

First things first, let’s talk business structures. 

It’s like choosing the perfect shade of lipstick – you want something that suits you and makes you feel fabulous. In Australia, you can opt for a sole trader setup, a partnership, a company, or a trust. Each has its own perks and quirks, so get some solid legal advice and choose the one that aligns with your business goals and ensures you’re strutting down the right legal runway.

2. Registrations and Compliance: Because You’re Worth It

Now that you’ve picked your business structure, it’s time to register your baby. 

Start by getting yourself an Australian Business Number (ABN) with ASIC. 

Think of it as your business’s VIP pass to the exclusive party that is the Australian business scene. 

Next step: compliance

It’s not always the most glamorous field but the beauty world has its own set of rules, and it’s crucial to play by them. Complying with regulations is not only responsible but also adds a layer of trust to your brand – consumers love transparency.

You don’t need to register cosmetic products like you do in the EU, for example, but you will need to think about what other licences, registrations or permits you need, depending on what area of the beauty and skincare industry you’re operating in. 

Here are some of the registrations you need to consider in different categories:

Therapeutic Goods

If you’re in the game of selling therapeutic goods, make sure to register with the TGA – consider it your product’s exclusive red carpet moment ⭐

Importers

If you plan to sell any cosmetics in Australia that you bought from overseas, you must register your business with AICIS before you import (introduce) into Australia. Imagine your business as a jet setting beauty guru, and the entry stamp on your passport to the ultimate beauty destination comes from the AICIS. There is no threshold value or limit so you must register regardless of how much you sell.

Manufacturers (including home-based and small businesses)

If you intend to make cosmetics for sale in Australia where one or more ingredients were purchased from overseas, then you must also register your business with AICIS. Again, there’s no threshold value or limit so you must register regardless of the quantity and how much you sell.

If you purchase all ingredients locally and you blend these together to make your cosmetics, then you don’t need to register with AICIS. But if your process of mixing ingredients results in a chemical reaction, then they consider this to be manufacturing and you must register.

Take soap making, for example. If you’re a chemical maestro, whipping up soaps through the process of ‘saponification’, then you’re not just a soap maker: you’re a chemical magician! This means registering with AICIS is essential.

Local Council – Your Business’s Neighborhood Watch

If your business is setting up shop at home, your local council is like the neighborhood watch – keeping an eye out for all things business-related. Check out your local council’s website for the lowdown on any registrations or permits needed. It’s like getting the thumbs up from your local squad.

Insect Repellent – Keep Bugs at Bay, the Legit Way

Planning to whip up an insect repellent potion? Smart move – bugs are so last season 🙂 Make it official by registering your bug-be-gone creation with the Australian Pesticides and Veterinary Medicines Authority (APVMA).

3. Taming the Tax Beast

Taxes – the necessary evil that keeps the beauty industry glowing. Familiarize yourself with the Australian Taxation Office (ATO) and their guidelines (and find yourself a great accountant). It’s like contouring – a bit tricky at first, but once you get the hang of it, you’ll be sculpting your financial success with finesse.

4. Protecting Your Magic Formula: Intellectual Property

Your beauty and skincare creations are your magic potions, so guard them with all your might. 

Just like a signature fragrance, you want your brand to be unmistakably yours. 

One of the most important ways that you can protect your cosmetic brand and keep copycats at bay is by registering a trade mark

You can register your business name, logo (or a combo of both) and cosmetics brand, and you can also trade mark the distinctive packaging of your products and their distinctive scent. 

A registered trade mark will provide you with the exclusive right to use, licence and sell your mark, which means no one can use or misappropriate your trade mark without your permission. 

You might also want to apply for a patent to protect your product formulas. A patent is a type of intellectual property that gives its owner a legally enforceable right to exclude others from making, using or selling their innovative device or process. 

With a patent, you’re not just creating products; you’re crafting a legacy. It’s a legally enforceable declaration that says, “This genius is mine, and no one else’s!” Whether it’s a groundbreaking skincare formula or a haircare concoction that’s pure magic, a patent makes it yours – and yours alone.

5. Employment: Hiring and Contracts

As your empire grows, you might need to bring in some glam squad members. 

When hiring, ensure you’ve got the legalities covered with proper employment contracts (you can check out our post on contract playbooks and employment considerations here). 

It’s like having a beauty agreement that keeps everyone on the same page – no messy breakups, just a flourishing business relationship.

6. Insurance: A Beauty Business’s Best Friend

Accidents happen, my beauty friends. That’s why insurance is your BFF in the beauty biz. 

Whether it’s public liability, product liability, or professional indemnity insurance, make sure you’re covered. It’s like having a nice big beauty umbrella, protecting you from unexpected downpours.

7. Staying Ethical and Sustainable: A Trend That Never Fades

In the era of conscious consumerism, consider weaving ethical and sustainable practices into your business model. It’s not just good for the planet; it’s excellent for your brand image. Showcase your commitment to beauty that cares, and watch your customer base flourish.

There you have it – a laid-back guide to navigating the legal and regulatory scene in the beauty and skincare business.

If you’d like help setting up your legal foundations or drafting your contracts, here at Law Quarter, we advise clients throughout the cosmetics supply chain, including product and packaging manufacturers, importers, exporters, wholesalers, distributors and retailers and our lawyers work with clients involved in beauty, healthcare and wellness throughout Australia. 

We also run a sister business, Compliance Quarter, so we’re set to help you build a big glowing beauty empire with the strongest of foundations 🙂

You can also reach out to me directly at jacqui@lawquarter.com.au or call me on 0411 659 671.

Now, go forth and conquer the beauty world – stay fabulous 💄✨

How do I protect my assets and wealth?

How do I protect my assets and wealth?

Business Sale, Private Law

The start of a new year is a time for reflection and planning for all of us. You might be setting some big, dreamy, personal goals that will outlast the hangover of New Year’s Day. 

But if you’re a business owner, you’re likely also in goal setting mode too and putting your ‘blue ocean strategy’ thinking hat on to create long term success. This is why asset protection should be a top priority for you in 2023. It’s a perfect time to think about what will happen to you and your business if things don’t quite go as planned.

What is asset protection?

If you’re a business owner, your assets may be at risk to creditors, which include lenders, suppliers, the trustee in bankruptcy, the ATO, and any other people or organizations you owe money to. You also need to consider any statutory obligations that come with your role as a director and/or employer.

Asset protection is the process of legally safeguarding your assets from creditors, lawsuits, and other types of claims. For example, what will happen to your assets if an unexpected event occurs, such as a litigation or a personal accident? What happens if your business falls into tough times and the creditors come calling? 

Strategies for asset protection

There are several ways to protect your wealth and assets. Some common strategies include:

  1. Creating a trust: A trust can be used to protect assets such as property, investments, and cash from creditors and litigants.
  2. Setting up a company: By transferring assets to a company, you can limit your personal liability and make it more difficult for creditors to access those assets.
  3. Superannuation funds: Superannuation funds can provide protection against creditors as long as they are set up correctly.
  4. Offshore structures: Some individuals may consider using offshore structures, such as foreign companies or trusts, to provide an additional layer of asset protection.
  5. Insurance: Obtaining insurance for assets can provide protection against risks such as theft, fire, and other types of damage.
  6. Estate planning: This is the process of organising and preparing for the distribution of your assets after you pass away. It involves creating a plan that takes into account your financial situation, your goals, and the needs of your loved ones (including creating a will, potentially setting up trusts, naming beneficiaries, having a lawyer draft up powers of attorney (giving a person, or trustee organisation the legal authority to act for you to manage your assets and make financial and legal decisions on your behalf) and appointing an enduring guardian to make decisions about your health and lifestyle in the event you cannot make these decisions for yourself.

Protecting the Family Home

One of the primary concerns of most people is protecting the family home. The family home is often one of the most significant assets a person can own but as it is generally held in an individual’s name, it can 
be at risk.

There are several ways a business owner can ‘ring-fence’ the family home from his or her business activities. However, there are some risks and misconceptions about protecting the family home. 

Establishing a business in a company or trust structure gives the owner the protection of the corporate veil and generally creditors only have access to the company’s or trust’s assets. But if a company or trust can’t pay its debts, there is a risk that creditors will be able access the personal assets of the director or trustee to pay some or all of the debts.

One strategy is to give majority ownership of the home to a person who is not at risk from any bankruptcy or litigation procedures, for example, your spouse. This might lead to some stamp duty exemptions and doesn’t usually result in any capital gains tax (CGT) liabilities.

However, under the presumption of resulting trust, a party can be treated as a beneficial owner of property under the law of equity, despite the fact they are not the legal owner of the property.  The presumption generally arises where a person contributes purchase money to a property but is not registered on title as an owner, or where a person transfers a property or part of a property to another for no payment.

If a resulting trust can be established, the creditors of the at-risk party may be able to lay claim to an interest in the family home – even if the home is solely in the name of the other partner – unless evidence shows the transfer was intended as a gift (referred to as the ‘presumption of advancement’). There are a number of other factors to consider under the Bankruptcy Law as to whether or not a presumption of advancement would arise, and it ultimately comes down to the intention of the parties.

Currently, the “presumption” of advancement applies only in cases of gifts or contributions made by a husband to a wife, or by a parent to a child, however the High Court in Bosanac v Commissioner of Taxation [2022] HCA 34 indicated that it is open to expanding the categories to align with current values.

An alternative strategy to signing over the home to the unexposed spouse is to borrow against the property and to allow a related charge to be made over the primary residence, meaning there is very little equity left for creditors to pursue. These are not the only options for business owners, however, so it’s best to obtain advice on the most appropriate strategy for you.

Next Steps

Prior to making any changes to your business structure and other asset protection decisions, it is important to review the potential costs or tax implications that may arise from such alterations in order to effectively protect your assets.

You should consider seeking advice from a legal and financial professional before implementing any of these strategies to make sure that you are complying with all applicable laws and regulations.

For advice on business structure and asset protection, contact us at info@lawquarter.com.au or call us on 

Navigating Commercial Disputes in Australia: A Guide for Businesses and Organizations

Navigating Commercial Disputes in Australia: A Guide for Businesses and Organizations

Private Law

Commercial disputes are an unfortunate reality of doing business, and they can be both time-consuming and costly. In Australia, commercial disputes can arise in a wide variety of contexts, and they can be challenging to navigate, particularly for those who are unfamiliar with the legal framework surrounding them. In this blog post, we will discuss the key concepts and considerations surrounding commercial disputes in Australia, and provide an overview of the legal framework that governs them.

A commercial dispute is any disagreement or conflict between two or more parties involved in a commercial transaction. These disputes can arise in a wide variety of contexts, including contracts, partnerships, joint ventures, and intellectual property. Common examples of commercial disputes include breach of contract, fraud, and misappropriation of trade secrets.

Commercial disputes can have a significant impact on businesses and individuals, both financially and emotionally. We wrote about the impact of litigation here. The cost of legal fees and the time involved in resolving a dispute can be substantial, and disputes can also cause significant disruption to the normal course of business. Additionally, commercial disputes can damage relationships with customers, suppliers, and business partners, making it more difficult to do business in the future.

In Australia, the legal framework surrounding commercial disputes consists of both state and federal legislation.

In the (NSW) court system, disputes are resolved through the courts, starting from the Local Court, moving to District Court and ultimately to the Supreme Court and the High Court, if the matter is escalated. The Federal Court system can also apply. Commercial disputes can also be resolved through alternative dispute resolution methods such as mediation, arbitration and conciliation, which are often considered to be faster, less formal and less expensive than court proceedings.

When it comes to commercial disputes, one of the key considerations is to understand your legal rights and options. This includes understanding the relevant laws and regulations that govern the dispute, as well as the legal remedies that may be available. Additionally, it is important to understand the strengths and weaknesses of your case, and to develop a strategy for resolving the dispute that is in your best interests. This is where it is critical to consult with a good lawyer.

Another important consideration is to understand the costs and benefits of different dispute resolution methods. While court proceedings may be necessary in some cases, alternative dispute resolution methods such as mediation or arbitration can often be faster and less costly. It is important to evaluate the specific circumstances of the dispute and to select the method that is most appropriate for your needs.

It is also important to consider the potential impact of the dispute on your business or organization. This includes assessing the potential financial impact, as well as the impact on relationships with customers, suppliers, and business partners. In some cases, it may be more advantageous to settle the dispute out of court, even if it means accepting less favorable terms, in order to preserve relationships and avoid further disruption to the business.

In conclusion, commercial disputes are an unfortunate reality of doing business, and they can be both time-consuming and costly. In Australia, commercial disputes can arise in a wide variety of contexts, and they can be challenging to navigate, particularly for those who are unfamiliar with the legal and regulatory framework surrounding them. It is important to understand your legal rights and options, the costs and benefits of different dispute resolution methods, and the potential impact of the dispute on your business or organization. By working with experienced legal professionals and carefully evaluating the specific circumstances of the dispute, businesses and organizations can navigate commercial disputes effectively and resolve them in a manner that is in their best interests.

Common Law Claims for False Imprisonment

Common Law Claims for False Imprisonment

Criminal Law, Private Law

We are running a series of posts for law students and junior lawyers looking at legal basics. In this first post, we examine common law claims for false imprisonment.  If you are looking for legal advice on the following area, please consult a lawyer.

False imprisonment is an unlawful restraint of a person by another within a fixed area and can give rise to a civil claim. This is a sub-category of the tort of trespass to the person.

There are some areas of law that cross into both civil and criminal law. One such area is false imprisonment. In the criminal realm, false imprisonment is often alleged alongside assault and battery. That being so, false imprisonment is not merely a subcategory of assault.  In NSW, false imprisonment is a common law offence.  

The right to not be the subject of false imprisonment and to liberty more generally has been described as:

the most elementary and important of all common law rights and is protected by the common law doctrine of false imprisonment”: Ruddock v Taylor (2005) 221 ALR 32; [2005] HCA 48

What are the elements

The elements of false imprisonment are:

  1. The defendant must have been restrained directly (a positive/ voluntary act) against their will by the plaintiff. Note that a physical restraint is not required, restraint can occur as a result of a mental coercion. This may result from a threat of force (see Symes v Mahon [1922] SASR 447).
  2. The defendant must have been restrained within a fixed area. It is not sufficient, for example, to claim false imprisonment within Australia. (see Meering v Grahame-White Aviation Co Ltd (1919) 122 LT 44 at 53)
  3. The restraint must be total. Where there is a physical restraint, it must be total and not merely an obstruction. Whether or not restraint is total is a question of fact (see Bird v Jones (1845) 7 QB 742).

Who must show what?

The plaintiff must first prove that his or her imprisonment was caused by the defendant. It is then for the defendant to show lawful justification (see Ruddock v Taylor (2005) 221 ALR 32; [2005] HCA 48 at 140).

The duration of the false imprisonment is not an element but will be relevant to the question of damages (see White v State of South Australia [2010] SASC 95).

Consent is another potential defence to a claim of false imprisonment (see Myer Stores Ltd v Soo [1991] 2 VR 597).

Recent matters

Recent matters

Private Law

On this page, we will explain the work that we have recently completed, including the results of Court matters.

Federal Court Australia: Urgent Orders (22 November 2021)

This week we lodged an urgent application in the Federal Court of Australia seeking orders to prohibit respondents from dealing with the assets (cryptocurrency). Our client, had been denied access to the accounts of the funds and was unable to verify whether the cryptocurrency had been transferred.

Outcome: we were successful in obtaining orders restraining the respondents from dealing with the cryptocurrency and in requiring them to provide further information to our client. Urgent court orders can be obtained in limited situations where action is required immediately to preserve the status of the parties. 

What Employers Need To Know about Unfair Dismissal Claims

What Employers Need To Know about Unfair Dismissal Claims

Private Law

In 2020, unfair dismissal claims shot up by almost 70% during the coronavirus crisis with the Fair Work Commission dealing with an “unprecedented” caseload.

Recently, the NSW District Court awarded a former Aussie Toyota employee and Dad a damages award of $276,000 on the basis that the company could not prove he had engaged in serious misconduct and had unlawfully terminated him only one day before he was to due to receive a massive redundancy package.

So what if you need to dismiss an employee and want to minimise the risk of those consequences? 

In a challenging economic climate, it can be overwhelming as an employer to consider terminating an employee when you may face the complexities of an unfair dismissal application.

Here’s the lowdown for employers on unfair dismissal claims:

Who can make an unfair dismissal claim?

In order to bring an unfair dismissal claim in Australia, a dismissed employee must have been employed for a minimum period of time, which period depends on whether the employer is considered to be a small business employer.

A small business employer is defined by the Fair Work Act 2009 (Cth) as an employer that employs fewer than 15 employees at that time.  

The Fair Work Act says that when calculating the number of employees at the time of an employee’s dismissal, all employees are to be counted including employees of associated entities (as defined under section 50AAA of the Corporations Act 2001 (Cth)), the employee being dismissed, and any other employee(s) being dismissed at the same time.

You don’t count casual employees unless at the time of the relevant employee’s dismissal, the casual employee(s) are working on a regular and systematic basis.

If the employer is a small business employer, the employee needs to have been working for the employer for at least 12 months before they are eligible to make a claim under the legislation.

If you’re not a small business employer, the employee needs to have worked for your business for a minimum period of 6 months before becoming eligible to bring an unfair dismissal claim. 

If there’s been a change of business ownership, service with the first employer may count as service with the second employer when calculating the minimum employment period.

The employee must also be either covered by a Modern Award or an enterprise agreement, or if not, have an income less than the high-income threshold (see s 382 and 332 of the Fair Work Act).  

The high income threshold is currently $153,600 however this figure is adjusted annually on 1 July. For a dismissal which took effect on or before 30 June 2020, the high income threshold was $148,700.

If an employee does not meet the above eligibility requirements, they cannot bring a claim for unfair dismissal under the Fair Work Act however they may have a potential claim under the ‘general protections’ (otherwise known as ‘adverse action’) provisions of the Fair Work Act

What other type of claim can an employee bring?

Employees may also have other options available than just an unfair dismissal claim, some of which may entitle them to a lot more compensation because, unlike unfair dismissal claims (where you can only claim up to 6 months of your wages as compensation), the compensation available in relation to other common law claims may be ‘uncapped’ or subject to a higher jurisdictional amount. These include:  

  • Breach of Contract Claim;
  • Adverse Action Claim (General Protections Claim);
  • Discrimination Claim; or
  • Unlawful Termination or Wrongful Dismissal Claim.

What constitutes an unfair dismissal?

Under s 385 of the Fair Work Act 2009 (Cth) (FWA), a person has been unfairly dismissed if the Fair Work Commission is satisfied that the dismissal was harsh, unjust or unreasonable. The Commission must also be satisfied that the dismissal was not a case of genuine redundancy. If the employee worked for a small business employer and they failed to comply with the Small Business Fair Dismissal Code, this can also be grounds for dismissal under the Act.

Criteria for unfair dismissal

In considering whether it is satisfied that a dismissal was harsh, unjust or unreasonable, the Fair Work Commission must take into account the following (s 387 of the Fair Work Act):

  • whether there was a valid reason for the dismissal related to the person’s capacity or conduct (including its effect on the safety and welfare of other employees)
  • whether the person was notified of that reason
  • whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person
  • any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal
  • if the dismissal related to unsatisfactory performance by the person—whether the person had been warned about that unsatisfactory performance before the dismissal
  • the degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal
  • the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal, and
  • any other matters that the Commission considers relevant.

What should an employer do if it receives a Fair Work Commission claim?

An employee has 21 days to file an unfair dismissal claim before the Commission, from the date the dismissal took effect. Once you receive a claim form, before filing a response to the claim, the first thing you should do as an employer is seek legal advice. 

You may be able to lodge an objection to the matter being dealt with by the Fair Work Commission, such as the claim being lodged outside of the requisite 21-day time frame. You could argue that the employee is not eligible to make a claim for unfair dismissal, or that the claim is vexatious, frivolous or has no prospects of success.

An employer is otherwise required to file a response after which time the matter proceeds to a conciliation conference with a Fair Work Commission conciliator. This gives both parties a chance to state their case and try and resolve the dispute. 

Fair Work Commission stats show that approximately 80% cases are resolved before ever getting in front of a Commissioner, being either “resolved informally by agreement of the parties” or because the applicant dropped the claim.

If a claim is not resolved on or before the Commission conciliation conference, upon request, the Fair Work Commission has the authority to conduct a hearing and make a determination in the matter after hearing the evidence of both parties.

If a resolution cannot be achieved, the employee will receive a certificate from the Fair Work Commission stating that the parties have attempted conciliation and the employee will then have access to the Fair Work Commission, the Federal Court of Australia or Federal Circuit Court of Australia to seek a determination in the matter.

Once the matter has proceeded to a hearing in the Fair Work Commission, Federal Court of Australia or Federal Circuit Court of Australia, the parties will be provided with a written decision which contains reasons for the decision

Next Steps

At Law Quarter, we’re experienced in providing employers with pre-dismissal guidance and advising and representing employers in relation to unfair dismissal claims and employment-related claims. We’d love to help. Contact our team on 02 8324 1333 for a free consult today.

The articles on this website comprise legal general information and not legal advice. It is general information presented and must not be relied upon without specific legal advice being sought in each individual case. In the event that you wish to obtain legal advice on the contents of this general information, you may do so by contacting our office to discuss.

Jacqui Jubb

Law Quarter

Email: jacqui@lawquarter.com.au

PS Need more advice as an employer in managing employees in the new flexible working climate? Check out our COVID-19: Working from Home Guide here

Construction of Commercial Contracts

Construction of Commercial Contracts

Private Law

This post is part of our contract law series. If you are interested in understanding some of the common clauses found in commercial contracts, refer to the following:

In an ideal world commercial contracts would be perfectly drafted, setting out a clear path for the parties for performance and the achievement of their commercial objectives. Certainty in construction should lead to predictability in the outcome of any dispute about its terms and performance.

In the real world however, the quality of a commercial contract is a function of the time and cost expended on drafting it. Businesses do not have unlimited time to enter into contracts nor unlimited budgets to engage suitably qualified lawyers. As a consequence, a good proportion of commercial contracts are poorly drafted and are littered with ambiguity and error.

Oftentimes a poorly drafted contract becomes the centre of a legal dispute between parties in court. Courts are tasked with the responsibility for untangling competing potential meanings. Below we discuss some of the methods used by courts in Australia in the construction exercise.

Mount Bruce Mining

The High Court in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37 set out the ‘current state’ of the law of contract interpretation. In this case, the High Court found that:

“rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.” 

and further:

“that enquiry would require consideration of the language used by the parties to the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.” 

In summary, Mount Bruce Mining confirmed the need to look at the text and context of the contract itself as well as the purpose evidenced by the language used by the parties, the contract itself and any other document referred to in the text of the contract.

The Mount Bruce Mining decision is important but should be read alongside other decisions, some of which are discussed below.

 Ecosse Property Holdings Pty Ltd

The above principles were affirmed in Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12 where the majority of the High Court stated as follows at paragraphs [16]-[17]:

“[16] It is well established that the terms of a commercial contract are to be understood objectively, by what a reasonable businessperson would have understood them to mean, rather than by reference to the subjectively stated intentions of the parties to the contract. In a practical sense, this requires that the reasonable businessperson be placed in the position of the parties. It is from that perspective that the court considers the circumstances surrounding the contract and the commercial purpose and objects to be achieved by it.

[17] Clause 4 is to be construed by reference to the commercial purpose sought to be achieved by the terms of the lease. It follows, as was pointed out in the joint judgment in Electricity Generation Corporation v Woodside Energy Ltd, that the court is entitled to approach the task of construction of the clause on the basis that the parties intended to produce a commercial result, one which makes commercial sense. It goes without saying that this requires that the construction placed upon cl 4 be consistent with the commercial object of the agreement.”

Ordinary, natural meaning

A court will start by looking at the ‘ordinary, natural meaning’ of the terms in dispute. The general approach followed by judges is to interpret commercial contracts ‘fairly and broadly, without being too astute or subtle in finding defects.’[1]  The construction exercise will not necessarily cure a bad deal. Looking at the ordinary natural meaning of the words used may result in a ‘poor bargain’ inconsistent with what one may expect that commercial parties would expect.[2]

It has been recognized that while words have a natural meaning that applies in most situations, meaning is not derived in isolation from the context in which words are used. An interpretation that focuses on semantic and syntactical analysis leading to a construction that is contrary to business common sense will generally be avoided.[3]

When interpreting a contract, a court will have regard to the words used ‘so as to render them all harmonious with one another.’[4] In other words, a court will prefer a construction of the disputed terms that is congruent with the various other components of the contract. Words in a commercial agreement will be construed by reference to what a ‘reasonable business-person’ would have understood those terms to mean.[5] The relevant context in which the meaning of the words will be construed includes the terms of the contract and the objective facts surrounding the formation of the contact provided that those objective facts are known to all of the parties to the contract.

The rule that words should be given ordinary natural meaning is reflective of the proposition that parties to a contract are presumed to be capable of expressing their intentions. Where words are ambiguous, resort may be had to the surrounding circumstances to determine the meaning when choosing between two inconsistent meanings. Generally speaking, however, if the language used in a contract is unambiguous, a court will give effect to that language unless to do so would be to give the contract an absurd operation.[6] As you can imagine there have been a number of cases where the tension between the ordinary and natural meaning comes up against the business common sense.

Tools to assist in understanding the meaning of the words used

Courts may use a number of aids to assist in the interpretation of a contract. Firstly, where language is used that enjoys a settled meaning, courts will endeavor to adhere to such a meaning. Secondly, courts may use dictionaries and other materials to determine the conventional meaning of a word.[7] However, a dictionary whilst potentially used as a guide, will not be used as a substitute for the interpretive processes.[8]

Where a word is given meaning by statute, subject to a contrary provision in the contract, the meaning of the statutory term at the time of the contract will usually be accepted.[9]

Finally, where a word has both an ordinary meaning and a technical meaning, it will be given the ordinary meaning unless there is evidence that the parties intended to use the word’s technical meaning.[10] However, where a word has a technical legal meaning, it will usually be given that technical legal meaning unless there is a clear indication in the contract or the context of the contract that this is not what was intended. This presumption is particularly strong where a contract has been drawn up by lawyers.

Canons of construction

There are a number of widely accepted maxims or canons of construction that courts use to assist them in ascertaining the meaning of a contract. These canons can be considered as guidelines or aids in the construction process.[11] Some of the commonly used canons of construction are set out below.

The contract should be construed as a whole: this is a principle often cited in judgments which says that the meaning of a term should be considered against the context provided within the contract as a whole.[12]

A court should give effect to all parts of the contract: this means that each part of a contract must be considered when determining the meaning of the contract as a whole.[13] In applying this maxim, a court will endeavor to resolve internal inconsistencies by both giving effect to provisions capable of being read together or by qualifying one against the other.[14]

Express mention of a part of a subject matter implies that other matters are deliberately admitted: this means that where a contract expressly mentioned something but ommits others within the same class, it can be implied that the matters not mentioned are excluded.[15]

An expressed term excludes implication of a term on the same subject matter: this means that a term will not be implied if it is inconsistent with the expressed terms of the contract.

Noscitur a sociis: a word of ambiguous meaning may obtain meaning from the surrounding words if they have a common characteristic. This rule will apply where a genus for the words is identifiable by if words fall within a particular class then the word that is potentially ambiguous can be assumed to form part of that class.

Contra proferentem rule: where the meaning of a contract is ambiguous the words that are in dispute will be construed against the party who drafted the contract. There are conflicting views as to whether this maxim means that construction should favor the party who prepared the contract or should favor the party against whom benefit is provided. Courts have expressed the view that the contra proferentem rule applies only when having applied all other aids to construction and ambiguity remains.[16] In other words, this maxim is only used as a last resort when seeking to interpret a contract. This maxim commonly applies in the interpretation of guarantees and indemnities where courts have found that ambiguous provisions should be construed in favor of the guarantor.

A party may not take advantage of their own wrong: a contract will not be interpreted in such a manner as not to permit one party to take advantage of their own wrong. In other words, it will be presumed that a contractual entitlement arising from the occurrence of a particular event will not be enlivened if the event came about through the breach of the party seeking to rely upon it.[17]

Saving the document: where there are two possible constructions of a document, a court will favor the interpretation that retains rather than destroys the bargain.


[1] Hillas & Co Ltd v Arcos Ltd [1932] All ER 494.

[2] Cherry v Steele-Park [2017] NSWCA 295.

[3] Breakout Barrier Release Systems Pty Ltd v Breakout Barrier Release Systems Australasia Pty Ltd [2013] NSWSC 1815

[4] Australian Broadcasting Commission v Australasian Performing Rights Association Ltd (1973) 129 CLR 99, 109

[5] Wilkie v Gordian Runoff Ltd [2005] 221 CLR 522, 529

[6] Jireh International Pty Ltd [t\as Gloria Jean’s Coffee] v Western Export Services Inc. [2011] NSWCA 137

[7] House of Peace Pty Ltd v Bankstown City Council (2000) 48 NSWLR 498

[8] Provincial Insurance Australia Pty Ltd v Consolidated Wood Products Pty Ltd (1991) 25 NSWLR 541.

[9] Smith v South Wales Switchgear Co Ltd (1978) 1 WLR 165.

[10] CCOM Pty Ltd v Jiejing Pty Ltd (1992) 36 FCR 524, 528

[11] Ferdinands v Commissioner for Public Employment (2006) 225 CLR 130.

[12] Australian Broadcasting Commission v Australasian Performing Rights Association Limited (1973) 129 CLR 99.

[13] RE Media Entertainment and Arts Alliance; Ex parte Hoyts Corp Pty Ltd (1) (1993) 178 CLR 379.

[14] RE Media Entertainment and Arts Alliance; Ex parte Hoyts Corp Pty Ltd (1) (1993) 178 CLR 379.

[15] ABB Power Plants Limited v Electricity Commission of New South Wales (1995) 35 NSWLR 596.

[16] Sandbank Holdings Pty Ltd v Durkan (2010) WASCA 122

[17] Ruthol Pty Ltd v Tricon (Aust) Pty Ltd (2005) 12 BPR 98.