Heads of agreement are widely used as interim documents to record the key terms of an agreed deal as a precursor to entering into a formal legal agreement. The question of whether a heads of agreement is legally binding depends on the intention of the parties. Usually, the intention of the parties is primarily ascertained from the wording of the heads of agreement itself, but courts can and do also have regard to the surrounding
The contract negotiation process tends by its nature to be adversarial. You negotiate to get the best outcome you can. The other side should look after itself, do its homework and make its own inquiries. If it doesn’t, then that’s entirely its problem, isn’t it? Well, not always. Several Australian cases show that if you have material information which the other side ‘reasonably expects’ would be disclosed, and you fail to do so, then you
There are few things more frustrating than going through a procurement process and selecting the preferred tenderer only to find that the preferred tenderer seeks to renegotiate or back out of the deal. The preferred tenderer may have (deliberately or by miscalculation) put in a very attractive tender to nudge out its competitors with a view to hopefully being able to clawback some value in negotiations before the formal contract is signed. A recent decision
Businesses can be structured in many ways, including as partnerships, trusts, joint ventures and corporate models with shareholders’ agreements. Each structure is inherently different in terms of the rights and obligations of the parties involved, they way in which the structures are documented and of course, the tax implications. A recent decision of the Supreme Court of Western Australia highlights the uncertainty that can arise when the participants adopt a particular structure but then conduct
Introduction The phrases “market value”, “fair market value” and “fair value” mean roughly the same thing, right? Wrong. A recent case confirms the legal meaning of “market value” and in doing so demonstrates how critical the choice of value expression can be. Who needs to know? Businesses, debt and equity investors and corporate finance advisers who deal with structures that involve independent determinations of value. It’s also particularly relevant to independent experts who are appointed
Introduction The phrase “reasonable endeavours” is widely used in commercial contracts. A recent decision by the High Court of Australia demonstrates how the “reasonableness” of a reasonable endeavours obligation can be “conditioned” by the standard of reasonableness evidenced elsewhere in the contract, particularly in relation to the extent to which a party can have regard to its own commercial interests. Who needs to know? Read this article if you prepare or negotiate commercial contracts. Background
Introduction One of the most fundamental features of a convertible note is the rate at which it converts into shares or other securities. Often this is a simple 1 for 1 conversion, but it can sometimes be determined by a formula involving a range of variables. A recent case highlights how disputes about the conversion formula can arise, and be avoided. Who needs to know? Businesses, debt and equity investors and corporate finance advisers who
Introduction A key principle of contract interpretation is that words are given their natural and ordinary meaning, but there is much more to interpreting commercial contracts than this. Courts will consider the contract as a whole (not just words in isolation). They will apply an objective approach to discern what a reasonable business person in the position of the parties would have understood the words to mean. This is where it becomes more complicated. In
Introduction Exclusivity arrangements are relatively common in commercial contracts, particularly financing and advisory mandates. Similar arrangements such as rights of first refusal or price matching can also be used. Usually, these clauses clearly specify the type of goods or services which are covered and the period of time during which the exclusivity applies. A recent decision of the Supreme Court of Victoria demonstrates the importance of clarity and consistency when drafting these clauses. If they