agreement

Why use an IP License Deed?

Any forms of intellectual property (IP), whether they be trade marks, copyright or others, can be licensed for use by third parties. It is effectively renting them out, like an asset hire arrangement for physical assets. So why use an IP License Deed?

A licensing arrangement is advantageous to the holder of the IP as royalties, licensing fees or other forms of payment can generate revenue for the benefit of the holder of the IP, in addition to confirming that the IP remains held by the holder even though it may be used by the licensee.

Another common reason for the use of an IP License Deed is to aid in asset protection, such as where one entity may hold assets (such as IP) and another entity may trade (and hence incur liabilities and hold risk). The licensing arrangement means that the “at risk” entity that is using the IP can do so without putting the IP itself at risk. If the trading entity finds itself in financial difficulty or ends up in external administration or liquidation, then the license can be terminated and the IP returns to the control of the asset holding entity.

Licenses do not have to be written, but it is strongly recommended as it can prevent arguments and uncertainty.

License Agreements can cover things including:

  • term and territory
  • whether the use is exclusive or not
  • obligations when using the IP (eg, not to adversely affect the IP)
  • matters that result in termination
  • obligations on termination (such as return of all forms of IP and stop all further use)

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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Properly executing documents

When it comes to properly executing documents, depending on the type of document and the parties executing it, there are different requirements for it to be valid.

The manner of execution depends on matters such as:

  • Party – whether a party is an individual, a partnership, the Government, an association or a corporation (and whether those signatories are parties in their own right or as a trustee of a trust or a superannuation fund;
  • Document – whether it is a Deed or just a contract or an Agreement; and
  • Physical/Electronic – whether it to be signed online or in person, or a combination of both.

PARTY TYPE

Individuals

An individual may execute a document by simply signing it with their signature witnessed by a person who is not party to it.

Partnerships

For a partnership to be bound by a document or a deed, either all partners to the partnership or an individual authorised by all the partners (whether or not the individual is a partner) should execute the document or deed.

Often, documents will be executed by a partner on behalf of a partnership. This authority may be set out in the partnership deed or a power of attorney. If you cannot obtain a copy of the relevant authority, you should consider obtaining a warranty from the individual in the relevant execution clause that they have authority of the partnership to so execute the document.

Companies

Section 127 of the Corporations Act (Corporations Act) sets out the ways in which a document may be executed by a company. If a company executes a document in this way, anyone will be able to rely on the protection in other sections of the Corporations Act for dealings in relation to that company. A company may execute documents under seal or choose not to have a company seal and even if the company has a seal, it need not apply it.

A company may execute a document with or without a seal if the document is signed by:

  • 2 directors; or
  • a director and a company secretary o; or
  • a sole director (there is no requirement for a private company to have a secretary).

Companies can also sign via an agent under s.126 of the Corporations Act.

For more information on how companies can becomes bound by the actions of its agents and employees, click here.

Associations

Usually an incorporated association signs documents by having 2 committee members sign it but often the Rules of Association need to be examined to confirm this.

An unincorporated association is not a legal entity and so cannot contract in its own right so be careful entering into any contract of value with them.

Trusts

A trust is not a legal entity and as such, it cannot contract in its own right so all acts relating to a trust must be undertaken by its trustee or trustees.

The type execution clause that should be used will depend on what type of entity the trustee is (eg a company  or one or more individuals) execution clause should be used if the trustee is a company).

Although a trust is not a legal entity, it may be a tax entity so may have its own ABN. You should therefore confirm that the ABN being used is the ABN of the trust and not the ABN of the trustee. An ABN is a great identifier.

If you are unable to confirm that the trustee has the power to enter into the arrangement (which can usually be ascertained by examining the trust deed), you should consider obtaining a representation and warranty from the trustee that it has the power to execute the document or deed on behalf of the trust.

DOCUMENT TYPE

There are various reasons for choosing between the different types of document. such as greater (often double the length) limitation periods for enforcing obligations in deeds compared to just agreements. Sometimes legislation requires transactions by deed, but oftentimes deeds are used as they are the most solemn act a person can perform in relation to an item of property or any other right.

Agreement / Contract

Generally, a contract is in place and is valid if the following conditions are met:

  1. Intention to create legal relations
  2. An offer
  3. Consideration (price) being agreed
  4. Acceptance

A written signature is not necessarily required for a valid contract to exist. The terms of the agreement also can be agreed verbally.

Contracts can be signed electronically (even with the click of a mouse) since the Electronic Transactions Act 2000 (NSW) (ET Act) and corresponding legislation in Australia’s other States and Territories.

Deed

Traditionally, to be a valid, as a deed the document had to be “signed, sealed and delivered” and thus it had to be:

  • written (on paper or parchment);
  • signed and the parties’ seal/s applied); and
  • delivered (physically to the other party),

however now, there is no requirement for a seal (where it is described as a deed or expresses that is is ‘sealed’ and it is witnessed appropriately), the parties are presumed to have ‘delivered‘ it on execution and the parchment requirement has also been dispensed with given the ET Act, amendments to the Conveyancing Act 1919 (NSW) and, in relation to companies, the passing of the  Corporations Amendment (Meetings and Documents) Act 2022, which from 01 April 2022 (after the temporary COVID-19 pandemic measures ended on 30 March 2022), amended the Corporations Act to permanently allow things such as:

  • director or member meetings virtually, such as through Zoom or Teams meetings etc (regardless of the requirements under their constitutions); and
  • documents, including deeds, to be executed electronically.

As Deeds do not require consideration like a contract, often it can be sensible to include a nominal item (such as $10) as consideration just in case the document isn’t valid as a deed – as it can still be relied on as a contract, possibly even if not signed by the other party but part performed.

WET INK OR ELECTRONIC?

Documents now can either be signed:

  • in physical form with ‘wet ink‘ signatures;
  • electronically; or
  • a combination of both.

Either way, the method of signing must clearly and reliably identify the part and indicates the party’s intention in respect of the information recorded in the document.

Obviously, special care needs to be taken with parties that are not Australian residents and to consider the governing law and jurisdiction of the arrangement.

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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Buying a property with others: Co-Ownership Agreements

Given the increasing cost of buying real estate, many potential purchasers are having to pool their resources to buy property together.

This can be good for many reasons as the costs can be shared and you may be able to own or live in better premises than you may otherwise be able to afford on your own, but there are risks.

Co-ownership often is a joyful experience at the beginning but often, disputes can arise such as each co-owner has differing views on the approach to be taken on various matters, from the important to the quite petty.

If you have bought, or are thinking of buying, a property with others, then you should really have a Co-Ownership Agreement in place.

Co-Ownership Agreements often cover the following maters (and others):

  • Ownership proportions
  • Amounts contributed for acquisition costs
  • How improvements to the property are made
  • Agreed valuation mechanism for exit purposes
  • Rights of first refusal / pre-emption
  • Parts of the property / premises either co-owner may have exclusive use of (and those for common use)
  • Contributions to expenses (insurance, rates, utilities etc)
  • Responsibilities for tasks like mowing, maintenance, upkeep etc
  • Dispute resolution procedures
  • Estate planning considerations (for example a couple’s interest may be held as joint tenants, rather than tenants in common).

Other articles of interest regarding this topic include:

FURTHER INFORMATION

For further information on co-ownership of property and the benefits of Co-Ownership Agreements, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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What is the difference between Deeds and Agreements?

You may have noticed that some documents you have signed have been expressed to be a Deed and others as an Agreement (or a Contract). You may wonder – is there a difference?

At law, the essential ingredients to have a binding agreement are:

  • Offer – what is being sold and purchased
  • Consideration – the ‘price’ paid
  • Intention to be legally bound by the arrangement
  • Acceptance of the Offer

The main difference between a deed and an agreement is that there is no requirement for consideration for the deed to be binding. The fact that something is executed as a “deed” means that it is a most solemn promise that you mean and intend to do what you promise to do.

Obviously, contracts can be written or verbal, but a deed must be in writing.

Often the choice of executing as a deed is due to there possibly being no actual consideration passing or a difficulty in quantifying it (such as the mutual exchange of promises do do or refrain from doing something, rather than a payment of money).

Common examples of deeds include:

  • Deed of Guarantee
  • Deeds of Release & Indemnity
  • Deeds of Settlement
  • Trust Deeds or Superannuation Deeds
  • Confidentiality Deeds

Some documents must be in the form of or to take effect as a Deed to be valid, such as for the transfer of real property in NSW.

Signed, Sealed & Delivered

Traditionally, to be a valid deed, the arrangement had to be “signed, sealed and delivered” and therefore:

  • on paper or parchment,
  • signed by the parties and their seal applied; and
  • it had to be physically delivered to the other party,

however now, there is no requirement for a seal and the parties are presumed to have ‘delivered‘ it on execution.

It must also still be witnessed for individuals signing however in modern times, the law in NSW (since 22 November 2018) allows for electronic execution. Further, the Regulations made during the COVID-19 Pandemic were updated to allow remote witnessing by audio-visual link* (although we always prefer “wet ink” signatures as the lowest risk option for execution of deeds).

Subject to the terms of the document (which may allow or prohibit it, and whether or not execution in counterparts is provided for), a deed may be binding on a party, irrespective of whether the other party or parties to the deed have also signed it.

As with all documents, the correct attestation clauseshould be used depending on whether the party is an individual, company, trustee or a partnership.

As Deeds do not require consideration, often it can be sensible to include a nominal item as consideration just in case the document isn’t valid as a deed – as it can then be relied on as a contract.

Also, limitation periods for enforcing obligations in deeds are longer than for agreements.

*Note – changes to company signing arrangements took effect on 01 April 2022 with the Corporations Amendment (Meetings and Documents) Act 2022.

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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Coronavirus: Remote witnessing of legal documents

On 22 April 2020, the Electronic Transactions Amendment (COVID-19 Witnessing of Documents) Regulation 2020 (NSW) came into effect.

The effect of the Regulation is that the signing of legal documents in New South Wales such as Wills, Powers of Attorney, Deeds, Agreements, Appointments of Enduring Guardians, Affidavits and Statutory Declarations can be witnessed by audio visual link, rather than having to be physically present, as is normally the case – that is the law (during the COVID-19 pandemic) now allows the remote witnessing of legal documents.

Some documents have other additional requirements, like Wills which require 2 witnesses, not just one, as is provided for in s.6(1)(c) of the Succession Act 2006 (NSW).

Audio visual link includes Zoom, WhatsApp, Skype, HouseParty, FaceTime and the like.

The witness must sign the document either:

  1. by signing a counterpart of the document as soon as practicable after witnessing the signing of the document; or
  2. if the signatory scans and sends a copy of the signed document electronically, the witness may countersign the document as soon as practicable after witnessing the signing of the document.

The witness must endorse the document, or the copy of the document, with a statement that specifies the method used to witness the signing and that the document was witnessed in accordance with the Electronic Transactions Regulation 2017.

All copies of the document should be stored together so they can be read as the one document.

The Regulations do not change what documents may or may not be executed electronically in NSW – only how documents may be witnessed and attested.  The Regulations also do not affect the laws or requirements of any other jurisdiction, including the Commonwealth (such as company execution of documents under the Corporations Act 2001 (Cth).

Under the COVID-19 Legislation Amendment (Emergency Measures) Act 2020 (NSW), the Regulation were to operate for a maximum period of 6 months from 22 April 2020 however, on 18 September 2020, the Stronger Communities Legislation Amendment (COVID-19) Regulation 2020 came into effect such that, among other things, the operation of the electronic witnessing regulations was extended to 31 December 2021.

Similar regulations are in place in the other States and Territories, such as Queensland’s Justice Legislation (COVID-19 Emergency Response – Wills and Enduring Documents) Regulation 2020 (Qld).

FURTHER INFORMATION

For further information in relation to legal issues arising from Coronavirus, if you had previously held off arranging documents such as for your estate planning due to not wanting to attend our office physically due to social distancing concerns or if you need to discuss how to best to arrange signing of documents under the Regulation, please contact us on (02) 9521 2455 or email help@mckilloplegal.com.au.

This information is general only and is not a substitute for proper legal advice.

Please contact McKillop Legal to discuss your legal concerns or objectives.

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Contract to Make Mutual Wills

A Contract to make Mutual Wills is an agreement between 2 parties (usually a husband and wife, but can be a same sex couple or a de facto couple) to make Wills in an agreed form.

Usually, they provide that the parties may not act such that those Wills don’t get given effect to, such as:

  • revoking or destroying the Will;
  • making a new Will; or
  • disposing of assets so that they do not pass to the agreed beneficiaries

without the consent of the other party (or the executors/administrators of their estate  if they have died).

Often they are put in place when the parties have had a prior marriage or marriages and there are children of the prior relationship/s and the current relationship.

The benefit of such contracts (or deeds as they often are) is that the parties can take some comfort in providing for the other during their lifetimes (for example by gifting their entire estates to each other in their Wills), but with the overall distribution of their combined estates (on the death of the last of them) passing as agreed in the Wills made pursuant to the document.

Where a party breaches the agreement (such as by changing their Will), that party (or their estate) may be sued by the other party (or their executors/administrators if they have died) for breach of contract.

Whilst mutual Wills can be an effective estate planning tool, they are not for everyone and they can cause unintended complications due to their inflexibility, particularly around subsequent marriages, children and unexpected events following the death of a party.

As with most things, there are also other options or alternatives to consider to get a similar result, including creating life interests in real estate or establishing trusts.

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to estate planning, business succession or any other commercial law matter, contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au.

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your estate planning needs.

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Employment Contracts

Are the Employment Contracts used by your business up to date?

Employees are arguably the most important asset of your business. They are also potentially one of the most risky.

Employees have contact with customers, form relationships with them, suppliers and referrers, have access to all of your other business assets such as databases, intellectual property and trade secrets.

When an employee leaves your organisation, there is potential for them to take more then their personal belongings with them when they go.

Employees are arguably the most important asset of your business. They are also potentially one of the most risky

For these reasons having a robust, yet commercial and flexible, employment agreement is essential.

What should your employment contract include?

At the very least, a contract of employment should include:

  • Position, duties and responsibilities (including whether full time, part time or casual)
  • Hours
  • Probation (for new employees or roles)
  • Remuneration and other benefits (including superannuation)
  • Leave entitlements (as well as obligations such as notice, reporting etc)
  • Confidentiality
  • Intellectual property ownership
  • Consenting to reasonable surveillance in the workplace
  • Obligation to comply with Workplace Policies including those relating to anti-discrimination and bullying, email and internet use and the like
  • Termination (including notice provisions that comply with the National Employment Standards)
  • Obligations on termination (such as returning property) and those that continue after termination (including appropriate and enforceable Restraints of Trade)
  • A copy of the Fair Work Information Statement

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to any employment related issue or any business/commercial law matter, contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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What is a Granny Flat Right?

WHAT IS A GRANNY FLAT RIGHT?

You can have a granny flat interest in any kind of dwelling, not just those typically referred to as a “granny flat” (a separate, self-contained building or living area attached to a home or property). It must be a private residence and your principal home.

You cannot however, have a granny flat interest in a property in which you have legal ownership (or your partner or a company or trust that you control).

A “granny flat right” or a “granny flat interest” is where you pay for the right to live in a specific home for life.

Granny flat interests are usually family arrangements providing company and support for older people, but they don’t have to be for social security purposes. They are created when you exchange assets, money or both for a right to live in someone else’s property for life. For example, you could:

  • transfer ownership of your home but keep a lifelong right to live there or in another private property; or
  • transfer assets, including money, in return for a lifelong right to live in a home.

The granny flat right only lasts for your lifetime. It’s not part of your estate when you die, so you can’t give it in your will as part of your estate plan.

DOCUMENTATION

A granny flat right does not have to be in writing however, given that amounts that can be paid for a granny flat right can be significant and they are usually funded by significant events like the sale of a family home, it can be a very good idea to get a lawyer to draw up a legal document so you have proof of what you and the owner have agreed to in relation to the granny flat arrangement.

A Granny Flat Right Agreement can include many things in addition to the amount paid, such as what happens if the property is sold, whether the right can be transferred to another property or what you may get back if you give up your granny flat right, as well as what regular contributions for rent, maintenance or outgoings (insurance, rates, phone etc) may have been agreed.

GIFTING RULES & THE REASONABLENESS TEST

In Centrelink/Department of Human Services terms, a “deprived asset”, also known as “gifting”, is where you give away an asset without getting something of at least equal value in return.

The value of a granny flat right is the amount paid, or the value of the assets transferred, in return for a life interest or life estate in a property.

Centrelink may apply the “reasonableness test” in determining the amount that should be paid for a granny flat right. This test is based on a formula based on a conversation factor relating to your age next birthday and the couple age pension rate.

If the amount paid is equal to or below the value determined by the reasonableness test, then there is no deprivation. However, if the amount you paid for the granny flat right is more than the cost or value of the granny flat right, the excess amount paid is considered to be a “deprived asset”.

This could affect the amount of pension you are paid.

Depending on the value of the granny flat right, you may be considered as a home owner for Centrelink (assets test) assessment purposes, even though you don’t own the home you have the granny flat right in.

WANT MORE INFORMATION?

Speak to us about how we can assist you to draft a Granny Flat Right Agreement to document your arrangements regarding the use and occupation of part of your home. We will liaise with your financial planner to cover off the financial and social security aspects as there may be other things you can do like contribute proceeds of sale to super.

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to documenting co-habitation and property use agreements and estate planning matters generally, contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au.

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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What is an indemnity clause?

WHAT IS AN INDEMNITY CLAUSE?

An indemnity clause is a common clause in contracts, whether for the supply of goods, terms and conditions of the provision of services, leasing of assets or the sale of property.

The indemnity is intended to assign responsibility for risks in performing the contract to a particular party – it either confirms or alters the position at common law which would otherwise apply to determine responsibility for such events.

COMMON EXAMPLES

When drafting an indemnity, the nature and types of losses that may arise need to be considered.

Common areas that you may want an indemnity clause or limitation of liability cause to cover may include: negligence; injury to or the death of any person; loss of or damage to property; infringement of third party rights, such as intellectual property rights; duties and taxes; and legal costs and disbursements.

REMOTENESS & REASONABLE FORSEEABILITY

The common law (extending back to the 1854 case of Hadley v Baxendale) basically provides that if a head of damage wasn’t contemplated by the parties at the time of contracting (wasn’t reasonably foreseeable) or didn’t arise naturally arises from the breach according the usual course of thing (is too remote) – it may not be a recoverable loss.

Accordingly, if the damages that you may want the other party to wish the other party to bear on the occurrence of a certain event are considered remote, then they would probably not be recoverable at common law and therefore, you may wish to specifically provide for them in the clause.

The other party may not agree, so the negotiation would then begin and the parties will ultimately have to agree on what is a reasonable compromise in the circumstances.

DRAFTING THE INDEMNITY

Commonly, indemnity clauses are drafted such that where a right to indemnity arises, the liability reduced to the extent that the party benefited by the clause caused or contributed to the loss, that is reduced proportionally.

The extreme in indemnity clauses is where the liable party is liable absolutely (ie, there is no carve out to reduce the liability proportionally). This type of clause, given its strict nature, is usually only agreed to where the event is wholly within the control of the indemnifying party.

INSURANCE COVERAGE

Just as the strength of a personal guarantee is in the financial standing of the guarantor, you also need to be satisfied that the party providing the indemnity has the means to meet any claim if called upon. Often, a party is required to have insurance to support any indemnity but they fail to investigate the extent of their cover and are often not insured at all.

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to any contract negotiation, agreement drafting issue commercial dispute, contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au.

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your legal concerns or objectives.

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What is a restraint of trade?

Post engagement restrictions

Often, employment contracts and contractor agreements contain restrictive covenants or ‘restraints of trade’ to protect businesses when an employee or service provider / contractor leaves.

So, what is a restraint of trade? A restraint of trade is effectively a restriction on the employee or contractor as to where they may work and who they may work for during, and for an agreed period after the termination of, their engagement. Restraints often restrict an employee’s ability to work for competing businesses and within a certain geographical area for a specified period of time.

How far can they go?

A valid restraint should only restrict activities reasonably necessary to protect the legitimate interests of the business that has the benefit of it. Those legitimate interests may include clients, referral relationships, trade secrets, confidential information and the like.

A restraint clause that is too wide, and therefore too restrictive, is generally unenforceable. A restraint should be tailored to accurately reflect the nature of the business activities being protected and only go so far as to protect them, when looked at reasonably. Where restraints seek to protect more than is reasonably necessary to protect the business, they can be struck down. There are public policy considerations in not preventing competition. Restraints are read strictly against the business that seeks to impose it.

Where there are no restraints in the employment or services agreement, there is no restraint and the business will only be able to rely upon their common law rights, which are often inadequate.

How are they enforced?

To enforce a restraint, the court requires that the party seeking to enforce it show that the restraint is reasonable – this will depend on the nature of the business, the restraint period, the restraint area and the nature of the work undertaken by the person or entity affected by it.

Often, enforcement takes the form of an injunction, seeking damages or an accounting for profits.

Further information

If you would like any more information in relation to employment law, disputes or business issues generally, please contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your business and employment law needs.