Sale agreements will usually contain a range of warranties by the vendor in favour of the purchaser in relation to the company or business being sold. These warranties are usually subject to a range of limitations (e.g. minimum and maximum claim thresholds and time limitations) and qualifications. One of the common qualifications is to the effect that the purchaser cannot claim a breach of warranty if the vendor disclosed the true state of affairs to
When parties can’t agree on a fixed price for the sale of a business, they often use an earn out arrangement whereby some of the price is dependent on how the business performs or whether certain milestones are achieved after the business is sold. Earn out arrangements are usually beneficial to both the vendor and the purchaser. For instance, if the business performs well, that is a good result for the purchaser plus it also
Shareholder agreements, joint ventures and similar arrangements often contain transfer procedures that are administered by the board of the relevant company as agent for the party transferring its shares or interests. A recent case highlights some of the risks that boards are exposed to when they undertake these roles, particularly in relation to the extent of information that must be disclosed to interested bidders so they can make an informed assessment about whether and how
Commercial agreements often include provisions that give one of the parties exclusive rights to supply the other party’s requirements for particular goods or services. But what if the agreement does not expressly deal with this? Can exclusivity be inferred or implied? A recent case shows that it can. This is an important development because exclusivity is such a key commercial term that it would ordinarily be expressly dealt with in the contract if the parties intended
Commercial agreements often require the parties to act ‘reasonably’ or ‘in good faith’ to resolve their differences or reach agreement on unresolved matters. These sound like simple obligations, but determining what they actually require in particular contexts is notoriously difficult to discern, especially the requirement to act in good faith. A recent case sheds some light on these issues and demonstrates that they can sometimes require more than you might expect. Since this article was
Under Australia’s securities laws, it is important to register your security interests on the Personal Property Securities Register (PPSR). Unfortunately, the registration process is not straightforward. A recent case demonstrates how using an ABN instead of an ACN can be a fatal defect in a registration with the result that the secured party can be left with no security at all. Who needs to know? Anyone who needs to register security interests on the PPSR.
New rules were recently passed to protect small businesses from “unfair” terms in standard form contracts. The new rules mean that an unfair term is void and cannot be enforced against a small business. Other consequences also apply. The new rules commence on 12 November 2016. This is probably the most fundamental change to the regulation of business contracts in Australia in the last 40 years. Who needs to know? Anyone who owns or runs
Many contracts contain clauses which allow a party to terminate or take other action if the other party commits a “material” breach of the contract, but what is meant by “material” in this context? A recent decision of the Supreme Court of Western Australia sheds some light on the issue. Who needs to know? Anyone who is involved in drafting contracts or who is seeking to rely on a material breach to terminate a contract.
If the vendor under a sale agreement breaches its undertakings, warranties or other contractual commitments, the purchaser is commonly entitled to recover its damages (subject of course to the range of limitations and exclusions that are usually included in sale agreements). Normally, the purchaser’s damages are assessed at the time of the breach. An alternative approach is for the parties to agree upfront how the recoverable damages will be quantified (either with actual dollar amounts
Pre-emptive rights give incumbent shareholders the opportunity to buy other participants’ shares before they are offered or sold to a third party. A recent case demonstrates the need for very clear language if you are trying to apply a pre-emptive rights regime to situations where there has been a change in the control of one of the shareholders. Who needs to know? Anyone who is involved in negotiating or drafting shareholders’ agreements, joint venture agreements