In our recent updates, we talked about liability for a breach of contract. You may recall that, in the absence of a contractual limitation of liability, such liability is basically unlimited (subject to some restraints under common law – causation, remoteness and mitigation). Further, a contractual indemnity usually removes these common law restraints and therefore results in completely unlimited liability. People commonly believe that insurance offers an answer to liability under common law and indemnities. But does it?
In our last few updates, we have discussed liability for a breach of contract. You may recall that under common law, subject to a few restraints (causation, remoteness and mitigation), liability for damages for a breach of contract is unlimited. The situation is even worse under a contractual indemnity, which, amongst other things, removes the common law restraints and thus truly imposes a completely unlimited exposure on the indemnifying party.
In our last two articles, we have talked about liability for a breach of contract and under an indemnity. You will recall that in contract law when we talk about liability, we mean liability to pay general damages (ie compensation). However, instead of liability for general damages, the parties may agree in the contract to apply so-called liquidated damages for a breach of a particular obligation.
Liquidated damages are pre-agreed (i.e. agreed in the contract) amounts payable for a breach of a specific contractual obligation.
Indemnity clauses are ubiquitous in contracts. However, people who draft or negotiate indemnities frequently fail to appreciate their numerous pitfalls.
So, what is an indemnity?
An indemnity is simply a contractual promise to pay for a loss if it occurs as a result of a specified event. In that way, an indemnity is not dissimilar to insurance, except the indemnifying party does not have the benefit of the many conditions protective of the insurer one finds in an insurance policy, nor does the indemnifying party get paid a premium for giving an indemnity.
In contract law, when we talk about liability, we mean liability to pay damages (ie compensation). Here are some key principles:
- Courts will award compensation designed to place the innocent party in the position they would have been in if the contract had been performed.
- In the absence of a contractual limitation of liability the defaulting party’s liability for a breach of contract is unlimited. This is perhaps a slight exaggeration as the courts have developed a few “restraints” on the extent of liability as follows:
Contracts are a fundamental part of commercial life. Many people have an intuitive awareness of how contracts form, but there are some traps to be aware of. For example, people are frequently surprised when told that contracts can be verbal or that a written contract may not be a “contract” (in a legal sense) if the essential terms are too uncertain.
So, here are the key ingredients of contract formation:
Australia’s franchise industry is in good shape! There are currently more than 1,100 business format franchise systems bringing in $144 billion of revenue and contributing $65 billion to the Australian economy, with new entrants into the franchise sector coming predominantly from the retail sector.
IP audit is an important tool for understanding and valuing your IP assets
Last year we discussed the fact that intellectual property (IP) weaves through many aspects of your business and is an asset that is valuable and worth protecting.
It is not uncommon for businesses to overlook that their IP assets need to be audited, like regular stock taking.
A valuable investment to safeguard the longevity and success of any business with more than one owner.
We’ve seen it all too often before – some friends have a cracking business idea so they quit their day jobs to devote lots of time and effort into establishing a new, jointly owned business. They think up a catchy business name, create a fabulous website and have boxes of glossy marketing material at the ready. Their enthusiasm is at an all-time high and they’re all set to market the business and bring in the customers. But they have forgotten something.
There are several sources of the obligation to give notice on termination, so how do you work out how much notice has to be given?
The first place to look is the National Employment Standards in the Fair Work Act 2007 (Cth). The NES set out minimum notice periods that apply to all employees. The following notice periods apply: