Archives for August 2018

Restraint of trade clauses in commercial contracts

A restraint of trade occurs where one party (Covenantor) agrees with another party (Covenantee) to restrict their liberty in the future to carry on trade with other persons who are not parties to the contract see: Petrofina (Gt Britain) Ltd v Martin [1966] Ch 146 at 180.

Restraints of trade clauses are prima facie void, however, the presumption can be rebutted if the restraint is justified because it is reasonable in the circumstances.    Note that there is a significant divide between restraints in commercial contracts and those in employment contract with the latter being widely accepted as only being enforceable for a far shorter period of time. [Read more…]

The legal relationship of agency

The importance of establishing whether a legal relationship of agency exists, and if so, to what extent, can be critical when ascertaining whether a person had authority to enter into an agreement on behalf of another person or entity.  The precise legal nature of the relationship may be important to the parties if either are attempting to enforce their rights under an agreement between them. [Read more…]

Unfair preference payments and third-party payments?

Often creditors, when dealing with a debtor company struggling with outstanding debts, will agree to enter into a payment arrangement.    If the debtor company subsequently goes into liquidation during the course of the payment arrangement, the incoming liquidator will usually seek to recover the payments received by the creditor during the relation-back period on the basis the payments were preferential[Read more…]

The consequences of inaction in litigation in Queensland Courts

Litigation in the Queensland Court system, as governed by the Uniform Civil Procedure Rules 1999 (Qld) (UCPR), is largely driven by, and conducted at the pace of, the parties themselves.  However, there remain consequences where the parties fail to take any steps in the matter for extended periods of time. [Read more…]

Diversion of corporate opportunity doctrine

Directors have a fiduciary duty to act in the best interests of the company they direct and its shareholders.  This duty owed by the directors (Directors) arise by virtue of the fiduciary relationship in equity between a director and the company and the Corporations Act 2001 (Cth)(Act).

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Safe Harbour granted to proactive Directors of an insolvent company who are not merely ‘living in hope’

Amendments to the Corporations Act 2001 (Cth) (Corps Act) introducing the safe harbour insolvency provisions come into effect on 1 July 2018.   Under section 588G of the Corps Act a director of a company may be personally liable for debts incurred by the company if at the time the debt is incurred there are reasonable grounds to suspect the company is insolvent.  The section 588GA safe harbour provisions aim to encourage directors to remain in control of a business in financial difficulty and to take reasonable steps, outside of a formal insolvency process, to restructure and / or allow it to trade out of its difficulties in anticipation that such action will achieve a better outcome for the company than immediately appointing an administrator or liquidator.  The provisions encourage directors to closely monitor the financial position of the business, engage early with financial distress and then actively take steps to either restructure the business or, if that is not possible, to move quickly to formal insolvency.   [Read more…]

Implications of non-compliance with the Building and Construction Commission Act (QLD) 1991

At common law there is no requirement for an enforceable contract to be in writing or for it to be accepted in the same way.  It is not uncommon for a contract to be wholly oral, or even partly written and partly oral.  Similarly, acceptance or entry into a contract (be it written, oral, or partly written and partly oral) does not have to be in writing but can be by conduct which evidences acceptance of the contractual offer made.

A simple example is a request for a quote to supply “widgets”, the supplier says they can supply the widgets but requires a 10% deposit and the buyer pays the deposit.  The buyer may not have spoken words to the effect that the quoted price has been accepted, but the conduct in paying the deposit evidences acceptance.  [Read more…]

Quantification of losses for breach of contract

A breach of contract can broadly be described as the failure to comply with any term of an agreement; some examples include a refusal to perform, incomplete performance, delay or unlawful termination.  Once it has been determined that a breach of contract has in fact occurred, the next question is how to determine the resulting loss and whether it can be recovered from the responsible party.  Whilst there is no hard and fast rule when attempting to quantify losses, there are certain principles which form part of the process of  assessing damages caused by a breach of contract.

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