Can you suspend or terminate a contract because of the impact of COVID-19? In this article, we discuss the enforceability commercial contracts where the performance of those contracts is impacted by COVID-19.

The post Performance of commercial contracts during COVID-19 appeared first on Stone Group Lawyers.

Publications & News

What is a Franchise Agreement?

​Franchising is not itself a business, but rather, a way of doing business. A franchisor is someone who has achieved a proven system for success through their business model and branding, and has chosen to replicate that system by franchising. A franchisee who is someone who has seen that success and wishes to operate a business under the branding, systems and procedures stipulated by the franchisor. A Franchise Agreement is the contract between these parties which sets out the terms and conditions of their business relationship.The Australian franchising industry is regulated by the Franchising Code of Conduct (Code). The Code contains the legal definition of a “Franchise Agreement”. There are four elements which must be present for an agreement to be a “Franchise Agreement”:1. there is an agreement which is written, oral or implied; and2. one person grants to another person the right to carry on a business offering, supplying or distributing goods or services in Australia under a system or marketing plan substantially determined, controlled or suggested by the franchisor; and3. under which the operation of the business will be substantially or materially associated with a trade mark, advertising or a commercial symbol owned, used or licensed by the franchisor or specified by the franchisor; and4. under which, before starting or continuing the business, the franchisee must pay or agree to pay the franchisor a fee. As an example, this fee can include an initial capital investment, payment for goods or services, or a royalty fee, but excludes payments for goods or services supplied on a genuine wholesale basis or repayment of a loan.It does not matter what the parties call it and what name appears on the agreement; if it meets all four criteria, it will be a Franchise Agreement. As the saying goes, if it looks like a duck, walks like a duck and quacks like a duck, then it probably is a duck. The same reasoning of considering substance over form can be applied to whether a business arrangement constitutes a Franchise Agreement.

How the Franchising Code of Conduct affects franchisees

The conduct of franchisors and franchisees towards each other is regulated by the Code. The Code can be found on the website of the Australian Competition and Consumer Commission (ACCC). The ACCC actively monitor and enforce compliance with the Code.The Code regulates many obligations and procedures which must be followed and cannot be waived. Some of these include the following:1. The franchisor must maintain a Disclosure Document containing information about their franchise system. It must be in the prescribed format and updated annually (with some exceptions) and include details about current and former franchisees, all costs a franchisee can expect to incur during the course of the franchise and certain litigation that the franchisor and its officers have been involved in.2. A current Disclosure Document must be given to a prospective franchisee along with a copy of the proposed Franchise Agreement and the Code at least fourteen days before the franchisee enters into a Franchise Agreement. This period allows prospective franchisees time to do their own independent investigations into whether the franchise is the right choice for them.3. Franchisees are granted a seven day cooling-off period after entering into a Franchise Agreement or making a non-refundable payment to the franchisor, except on renewals, variations or transfers of existing businesses. Franchisees who have a last-minute change of mind can take advantage of the cooling-off period, but they will have to compensate the franchisor for some of the franchisor’s reasonable disclosed costs.4. Before entering into a Franchise Agreement, a franchisee must give the franchisor a statement about whether or not they received independent legal, accounting and business advice. It is not mandatory for a franchisee to obtain this advice, but they do need to tell the franchisor if they obtained it or not.5. There are rules governing how a franchisor can operate a marketing or advertising fund for the franchise system to which franchisees contribute. Franchisors must be transparent about what expenses they use this fund for and provide franchisees with annual statements if such a fund exists.6. Franchisors are subject to certain restrictions when requiring franchisees to incur items of significant capital expenditure during the course of the franchise (such as store and equipment upgrades). The expense generally needs to be disclosed in the Disclosure Document, and/or be an expense which will be incurred by a majority of franchisees within the franchise system.7. If the franchisor will place restrictions on the products and services which are used or sold in a franchisee’s business, including the suppliers a franchisee may use, then clear details of these must be included within the franchisor’s Disclosure Document. This disclosure also extends to any restrictions on the franchisee marketing the products and services of their franchised business online.8. There are processes to be followed for the resolution of disputes between a franchisee and franchisor, which include transparency between the parties about what the issues are, working together to resolve the dispute, and failing a resolution, attending mediation.9. Strict rules exist for terminating a Franchise Agreement. If a franchisee breaches a Franchise Agreement and the franchisor wants to rely on that breach to terminate the Franchise Agreement, franchisors must give written notice setting out what needs to be done to fix the breach, together with a reasonable time to do so (not longer than thirty days). It’s only if the breach is not remedied accordingly that a franchisor can then terminate the Franchise Agreement because of that breach. There are limited circumstances where this does not apply and the franchisor can terminate a Franchise Agreement immediately, for example, if the franchisee becomes bankrupt/insolvent, acts fraudulently in connection with the franchised business or endangers public health and safety.10. There is an overarching obligation for franchisors and franchisees to act in good faith in their dealings with each other. The Code doesn’t define “good faith”, so it’s determined on a case-by-case basis. It will include acting honestly in dealings with one another and not acting arbitrarily, and cooperating to achieve the purpose of the Franchise Agreement. However, this does not restrict either the franchisee or franchisor from acting in their own genuine commercial interests.

Why does the Code exist?

The purpose of the Code is to even-out the power imbalance which exists in a franchise relationship. Franchisors generally have the greater share of power in the relationship, so the Code places limits on this power, but at the same time ensures both franchisors and franchisees act fairly.The Code also endeavours to ensure that a franchisee is made aware that signing up to a franchise is a significant commitment, and that franchisees are provided with the some of the key information needed to assist in making an informed decision as to whether the franchise model is a suitable investment.

Takeaways

The responsibility of enforcing the Code rests with the ACCC. Any breach of the Code is also a breach of the Competition and Consumer Act 2010 (Cth).Breaches of some provisions will attract penalties. These are currently up to $63,000 in each instance. Multiple breaches of the Code can mean multiple penalties. Breaches can also lead to infringement notices issued by the ACCC. These are currently $10,500 per breach for companies and $2,100 for individuals involved in the conduct (such as a company director).Given that compliance with the Code is actively monitored and enforced by the ACCC, the Code must therefore be taken seriously by everyone in the franchise relationship.The team at Stone Group Lawyers are experienced in acting for both franchisors and franchisees in all aspects of franchising law. Give us a call if you need our assistance.

Disclaimer: This article is only meant to give you general information and should not be relied on as legal advice. Speak to one of our lawyers for more information.

LUKE MCKAVANAGH

Luke is an Associate with Stone Group Lawyers and is a regular contributor to online and print media for Inside Franchise Business. Luke is also a member of the Queensland Law Society Franchise Law Committee.

Free Consultation

At Stone Group Lawyers, we offer all clients for all areas of law a free initial consultation for up to 30 minutes. This consult can be over the phone, Skype or in person.

Request your free consultation

Complete the form below to request a free 30 minute consultation.

This iframe contains the logic required to handle Ajax powered Gravity Forms.

The post What is a Franchise Agreement? appeared first on Stone Group Lawyers.

Publications & News

Business Interruption Insurance Cover for Coronavirus COVID-19? Check your policy again!

As many businesses continue to suffer unprecedented disruption due to forced closures and severe reductions in trade due to the Coronavirus COVID-19 worldwide pandemic, there is currently a raging debate among the insurance and legal communities in Australia about whether business interruption insurance cover for COVID-19 may be properly excluded by policies which seek to exclude ‘diseases declared to be quarantinable diseases under the Australian Quarantine Act 1908 and subsequent amendments’.Business interruption insurance cover can extend to situations where there has been an outbreak of contagious disease at or near to the location of the insured business, or which has caused the business to be ordered by the Government or public authority to be closed or evacuated. Such cover often comes with an exclusion for quarantinable diseases. This exclusion was introduced following the SARS outbreak in 2002 and then widely adopted following the avian influenza outbreak in 2006 and swine flu in 2009. Diseases declared to be quarantinable diseases under the Quarantine Act include these diseases and also cholera, plague, rabies, yellow fever, smallpox and ebola.In 2015, the Quarantine Act was repealed. It was replaced by a revamped legislative regime called the Biosecurity Act 2015. The Biosecurity Act does not use the classification system previously used by the Quarantine Act of ‘quarantinable diseases’ and ‘notifiable diseases’. Instead it uses a different regime which includes identifying certain diseases as ‘listed human diseases’ which are diseases that are communicable and cause significant harm to human health. This list under the Biosecurity Act is very similar to the last list of quarantinable diseases under Quarantine Act before it was repealed, with the important exception that the list under the Biosecurity Act now includes COVID-19, added on 21 January 2020. In each case it was and is the Governor-General who had and has the responsibility of declaring whether a disease is to be included in these lists.After the Quarantine Act was repealed, many policies updated the exclusion to refer to listed human diseases under the Biosecurity Act. But for many policies the exclusion was not updated, raising the question under debate for such policies – can an exclusion that only refers to the Quarantine Act apply to COVID-19?Of course, given the recent birth of COVID-19 there are no Court decisions on this point. On one side are those for the insureds – arguing that the Biosecurity Act is not a subsequent amendment to the Quarantine Act. On the other side are those for the insurers – arguing that the obvious intent of the exclusion is to exclude all diseases with pandemic potential.It seems ultimately that this question will be determined by the judiciary. This determination may not be far away. It is a narrow question perfect for the Federal Court’s insurance list for short matters created to cater for the prompt and efficient resolution of insurance law policy interpretation issues.Which side will win remains to be seen. Presently, the expectation is that those for the insurers have the more difficult case. It is unlikely that it would be accepted that an insurance policy would contain an implied term that reference to a certain Act should include another Act where the two are separate legislative instruments. But whilst the Biosecurity Act ushered in a new regime for the protection of Australia from biosecurity risks and emergencies, the Quarantine Act which it replaced had the same objectives. The argument that the clear intent and commercial objective from a business perspective of an exclusion referring to quarantinable diseases is to exclude a disease like COVID-19 is attractive. But if the reason that the exclusion was not updated was mere oversight by the insurer, this would likely not be enough to invoke the Court’s equitable relief of rectification to correct the mistake. The insurer wrote the policy terms in the first place. There needs to compelling evidence that the terms of the policy do not express the parties’ common intentions before a Court would be prepared to rewrite the contract.Watch this space!

Ready to help

If you have a business interruption cover included in your policy, and your business has been impacted by COVID-19, you should make a claim under policy to recoup your losses. We can help you through the process.If you are ever in the unfortunate situation of your insurer refusing to cover all or part of a claim made under your insurance policy, it is vitally important that you promptly seek expert legal advice. If your claim for business interruption is not covered on the basis of an exclusion in the policy, we can provide you with expert advice as to whether the position taken by the insurer is justified, or whether the claim should be covered, and can assist you through the process of obtaining the cover provided by the policy that you paid for.Stone Group Lawyers are here to help. Call 1300 088 440 to arrange your free 30 minute consultation for new clients via phone, Facetime, Skype or Whatsapp.

Berren Hamilton

Berren Hamilton is a Special Counsel (Litigation) at Stone Group Lawyers. He is an Accredited Specialist in Commercial Litigation with the Queensland Law Society. He was admitted to practise in Queensland in 2001.

Free Consultation

At Stone Group Lawyers, we offer all clients for all areas of law a free initial consultation for up to 30 minutes. This consult can be over the phone, Skype or in person.

Request your free consultation

Complete the form below to request a free 30 minute consultation.

This iframe contains the logic required to handle Ajax powered Gravity Forms.

The post Business Interruption Insurance Cover for Coronavirus COVID-19? Check your policy again! appeared first on Stone Group Lawyers.

Publications & News

Why you need a Will

Many Australians don’t have a Will in place. We often hear comments such as:-“I don’t have any assets of value”“I’ve discussed my wishes with my spouse”“I know my family will do the right thing, so I’ll leave it in their hands”“I’m currently in good health so I’ll deal with it another time”Death is a touchy topic that most of us don’t like to think about, let alone our own death. However, it’s something none of us can avoid. It’s times like the current COVID-19 pandemic that we’re faced with the reality that illness can indeed result in the worst-case scenario.The reason for having a Will is certainty. Certainty about who oversees the winding up your affairs and paying your debts. Certainty about who will inherit your assets. Certainty about who will care for your children.The death of a loved one is a deeply emotional time for family and friends. Without a Will that details your wishes and directions, these people can be largely left in the dark. They’ll be facing large decisions, often based on what they think you would have wanted. Emotions can run high and disagreements can often arise.Dying without a Will is known as dying “intestate”. In order to wind up your affairs and distribute your assets, your next of kin must make an application to the Court for Letters of Administration.Under this application the Court is asked to grant that person, your “administrator”, formal authority to make these decisions. Your administrator will then need to follow the strict laws about distributing your assets – there’s not much room here for personal choice/discretion. The people who will inherit your assets might not necessarily be the ones you would have ideally had in mind.Without a Will, intestacy laws must be followed. It could mean the family home is sold against your wishes.Having a Will on the other hand means there’s a person whom you trust nominated to make these decisions. There’s also a clear direction on who will inherit your assets. Your wishes are clearly documented.Put simply, having a Will can save your family and friends a lot of unnecessary emotional and financial stress at one of the hardest times in their lives.

What are the steps to making a Will?

Okay, so you’ve made the decision to get your affairs in order and prepare a Will. Now what to do? Make an appointment with your lawyer. Yes, you can purchase a DIY Will-Kit at your local post office or download a Will from online, however, these options are fraught with dangers. They are often restrictive and don’t take into account all of the various considerations which a lawyer will put to mind when tailoring the provisions of your Will. A $30 Will-Kit may seem appealing, but in the long run it could cost your Estate tens of thousands of dollars in legal fees to fix a potentially invalid Will. In contrast, Stone Group Lawyers will work with you to determine your family tree, the people you trust to manage your affairs, and who you would like to inherit which assets. We will then ensure that your Will is validly signed to be legally binding.

Does the COVID-19 pandemic impact on preparing a Will?

When it comes time to sign your Will, you must sign it in the presence of two witnesses. They cannot be relatives or someone receiving an inheritance under your Will.If you have concerns about current social distancing regulations, then steps can be taken to put in place a temporary informal Will. This may involve recording the signing of your Will in the presence of witnesses over live-stream video. The Will won’t strictly be legally binding, but it will be a temporary solution until such time as you can sign it again validly. Should the worst happen in the meantime, take comfort that courts may uphold informal Wills if there’s enough evidence to show that you intended the document to be binding.The world is currently an uncertain place. If you can have a degree of control over something in your life right now, let it be your Estate planning.The team at Stone Group Lawyers are ready to provide you with advice and guidance to assist you with your Estate planning needs at this challenging time. We are offering consultations via phone, Skype, Facetime and Whatsapp – call 1300 088 440 to arrange a time to discuss your Will.

DISCLAIMER: This article is only meant to give you general information and should not be relied on as legal advice. Speak to one of our lawyers for more information.

LUKE MCKAVANAGH

Luke is an Associate with Stone Group Lawyers and is a regular contributor to online and print media for Inside Franchise Business. Luke is also a member of the Queensland Law Society Franchise Law Committee.

Free Consultation

At Stone Group Lawyers, we offer all clients for all areas of law a free initial consultation for up to 30 minutes. This consult can be over the phone, Skype or in person.

BOOK YOUR CONSULTATION

Request your free consultation

Complete the form below to request a free 30 minute consultation.

This iframe contains the logic required to handle Ajax powered Gravity Forms.

The post Why you need a Will appeared first on Stone Group Lawyers.

Publications & News

The Impact of Coronavirus Disease (COVID-19) Upon Commercial Contracts and Leases

The devastating impact the Coronavirus Disease (COVID-19) pandemic crisis has had and is continuing to have upon other parts of the world, as well as here at home in Australia, has been truly heartbreaking. The end is not yet in sight and there remains great uncertainty. The extreme radical measures all of us have had to adopt to combat and slow the spread of the virus while a vaccine can be developed are unprecedented, and have disrupted all aspects of life as we used to know it.

Directions made by Queensland’s Chief Health Officer, including to require many businesses to cease operating

On 27 March 2020, Queensland’s Chief Health Officer, Dr Jeannette Young, made a further direction pursuant to emergency powers under the Public Health Act 2005 (Qld) to assist in containing, and to respond to, the spread of Coronavirus within the community – the ‘Non-essential business, activity and undertaking Closure Direction (No. 3)’ – which presently is to remain in effect to at least 19 May 2020, with the real possibility that this timeframe may be extended.This direction requires many businesses to cease operating, with very limited exceptions. The businesses affected include pubs, licensed clubs and hotels (excluding accommodation), places of worship, gyms, indoor sporting venues, cinemas, beauty salons, play centres and other public places – all of these must be closed. There are restrictions on attendance at weddings, funerals and outdoor fitness classes. Restaurants and cares may only serve takeaway and home delivery. Supermarkets and pharmacies remain open. At the end of this article is a full list of the businesses affected, and details of the exceptions.It is the 11th direction made by Queensland’s Chief Health Officer in response to the Coronavirus outbreak crisis. It will not be the last. The previous directions which remain in effect include social distancing, home confinement requirements, restricting gatherings to maintain accessible space to no more than one person per 4 square metres, and also that anyone, including returning residents, who arrives from overseas or interstate must self-quarantine for 14 days.Anyone who fails, without reasonable excuse, to comply with the directions commits an offence, which carries a maximum penalty of $13,345.

Prime Minister’s announcement of temporary ban on evictions

On 29 March 2020, Australia’s Prime Minister, Scott Morrison, announced that the previous gathering limit of 10 people has been cut to two (unless they are your household members), and that the States and Territories would be moving to put a temporary ban on evictions of people and businesses unable to meet their commitments due to financial stress. The measures to be imposed in this respect have not yet been revealed. The Prime Minister said:‘Now there is a lot more work to be done here and my message to tenants, particularly commercial tenants, and commercial landlords, is a very straightforward one. We need you to sit down, talk to each other and work this out, about looking at the businesses which may have been closed, businesses that may have had a significant reduction in their revenues and we need landlords and tenants to sit down and come up with arrangements that enable them to get through this crisis.’

Impact upon Businesses and Contracts

The extreme impact and disruption of the Coronavirus upon businesses, especially supply chains, has brought new attention to the applicability of contractual clauses and remedies which previously have only rarely been brought into play, including frustration and force majeure clauses. The forced business closures would assist parties seeking to rely on frustration or a force majeure clause to excuse performance of contractual obligations.Stone Group Lawyers has been inundated with inquiries from businesses about such contractual rights, and also the availability of rent relief, employer obligations, how insolvency and bankruptcy may be avoided, the availability of business interruption insurance cover, the availability of Government economic relief packages, Australian Consumer Law guarantees and rights including with respect to cancellations and how to mitigate the worst economic effects of the virus. We expect these issues to continue to intensify. All businesses, landlords and tenants and parties to commercial contracts should be seeking advice and reviewing the terms of their contracts to ensure they understand their rights and obligations and options, and, as encouraged by our Prime Minister – to sit down and talk to each other to work out how to get through this terrible time together.

Frustration

The advent of unforeseeable circumstances beyond anyone’s control rendering a contractual obligation incapable of being performed, without any party being at fault, can cause a contract to be frustrated. It is necessary that it becomes impossible or illegal to perform the contractual obligation, not just more difficult or expensive or with delay. Frustration automatically terminates the contract, with both parties being relieved of their obligations under it. Under the common law in Queensland, upon the occurrence of the frustrating event, losses lie where the fall, all obligations including payment obligations cease. No party can claim damages for non-performance because no party is at fault. A party may have a claim for restitution for any services rendered after the frustrating event which results in the conferral of a benefit.

The terms of each contract and the factual circumstances of each case must be specifically considered. The key question is whether the impacts of Coronavirus and the measures as directed by the Government and any further measures that may be required having regard to the unique circumstances of each case make performance of the contractual obligation impossible, or only more difficult or onerous. If the contractual obligation can still be performed but will take longer or will involve an increased cost, then it is unlikely that frustration will apply.The consequences of wrongfully asserting frustration may be severe – this may amount to an anticipatory breach or repudiation of the contract, giving the other party the right to terminate the contract and claim damages. We recommend that you give careful consideration and seek legal advice before asserting frustration.If the contract contains a Force Majeure clause that can deal with the issue, then the contract will not be frustrated.

Force Majeure

A Force Majeure clause seeks to prevent the contract from becoming frustrated.A Force Majeure clause provides for situations where a party is prevented from performing their contractual obligations due to events or circumstances beyond their control, allowing the party to cease or suspend performance of their obligations, subject to conditions, to keep the contract on foot. Many commercial contracts may have force majeure clauses, but this is not always the case. You will only be able to rely on a Force Majeure clause if one is included in the contract and it applies to your circumstances.A Force Majeure clause is typically drafted to apply to specified events. As Coronavirus is new disease, it will not have been specifically contemplated, and so it would be necessary to identify how the impacts of the Coronavirus and/or the measures directed and/or required to combat the virus fall within the specified events and the scope of the relevant Force Majeure clause. Upon the Force Majeure clause applying and being invoked, it would typically then set out a procedure to be followed to effectively claim relief under the clause, and often seeking for the contract to remain on foot and not be terminated, but also often giving the other party additional rights, which may include a right to terminate.Examples of Force Majeure clauses that would likely apply to the forced business closures if included in the relevant contract would be clauses that specify events such as pandemics, epidemics, quarantine, forced closures, forced cessation of operations, government actions and work stoppages.No Force Majeure clause is the same, and so each such clause and the factual circumstances of each case must be specifically considered. Before invoking a Force Majeure clause careful consideration should be given to all of the other options available and whether invoking the clause would be the best decision.

Leases

Where a retail or commercial or residential lease does not have a Force Majeure clause, the Prime Minister’s announcement that there will soon be a temporary ban on evictions of people and businesses unable to meet their commitments due to financial stress, should avoid many instances where leases may otherwise be frustrated due to the Coronavirus or may otherwise be terminated. With the Prime Minister’s encouragement for parties to leases to sit down and talk, there is an opportunity for terms to be renegotiated in good faith.

Ready to help

It is important that businesses seek legal advice in navigating the legal and commercial issues arising and risks at stake, in making decisions in response to the Coronavirus and the measures to be taken. Stone Group Lawyers are here to help. Call 1300 088 440 to arrange your free 30 minute consultation for new clients via phone, Facetime, Skype or Whatsapp.

List of businesses directed to cease operating, and exceptions

Business, activity, undertaking, premises or place – directed to cease operating

Exceptions

Food and drink

Cafes, restaurants, fast-food outlets, food courts (together retail food services)

Takeaway service and home delivery can remain operational. All takeaway services must comply with the additional requirements set out below.

Retail food services at an airport that are reasonably necessary for the normal business of the airport, with social distancing observed.
Provision of food or drink by or on behalf of an employer to employees or contractors that is reasonably necessary for the employer’s normal operations, with social distancing observed.

Workplace canteens can provide takeaway, with social distancing observed.

Provision of food or drink by a school, university, educational institution or childcare facility that is reasonably necessary for the normal business of the facility, with social distancing observed.

Provision of food or drink at a hospital, prison, military facility, disability facility, resources sector facility including a canteen or mess hall or aged care facility that is reasonably necessary for the normal business of the facility, with social distancing observed.
Services providing food or drink to the homeless, with social distancing observed.
Hotel room service or similar services for hotel guests.

Additional requirements for the provision of takeaway are as follows:

Social distancing, including keeping 1.5 metres between people must be accommodated, implemented and monitored by employees or contractors of the retail food service provider;
Gathering for the purposes of ordering or collecting must not exceed one person per 4 square metres;
The retail food service provider may only operate to the extent they are not promoting or facilitating persons consuming takeaway food or drink on or adjacent to their premises.
Example: tables and chairs should be removed and all reasonable steps taken by the retail food service to direct persons away from gathering to consume takeaway food or drink on or adjacent to, the relevant premises.

Retail

Auction houses

 

Real estate auctions and open house inspections

Private appointments for inspection.

Outdoor and indoor markets

Food markets and farmers markets may continue to operate

Weapons

Licensed armourers and licensed dealers as defined under the Weapons Act 1990

 

Beauty and personal care services

Hairdressers and barber shops

Can remain operational with no more than one person per 4 square metres, with social distancing observed to the extent possible.

Beauty therapy, tanning, waxing and nail salons, and tattoo parlours

 

Spas and massage parlours

Health services provided by health practitioners registered under the Health Practitioner Regulation National Law, with social distancing observed to the extent possible.

Entertainment venues

Registered and licensed clubs, licensed premises in hotels

Bottle shops and off license premises attached to venues may continue to operate, with social distancing observed.
Golf clubs may continue to operate for outdoor sporting-based activities, with social distancing observed.

Cinemas, nightclubs

 

Casinos, gaming or gambling venues including wagering outlets that are open to, and accessible by, members of the public such as TAB agencies and retail outlets

 

Strip clubs, brothels and sex on premises venues

 

Concert venues, theatres, arenas, auditoriums, stadiums

Live streaming of a performance by a small group is permissible, with social distancing observed.

Theme parks, amusement parks and amusement arcades

 

Play centres (indoor and outdoor)

 

Leisure and recreation

Community and recreation centres

Facilities may remain open for the purpose of hosting essential voluntary or public services, such as food banks or homeless services, with social distancing observed.

Boot camps, personal training

Limited to groups of no more than 10 people for outdoor events, with social distancing observed. [We expect this will now be reduced to no more than 2 people per the Prime Minister’s announcement].

Indoor sporting centres, including gyms, health clubs, fitness centres, yoga, barre and spin facilities, saunas, bathhouses and wellness centres

 

Social sporting-based activities

Limited to groups of no more than 10 people for outdoor events, with social distancing observed. [We expect this will now be reduced to no more than 2 people per the Prime Minister’s announcement].

Swimming pools including public pools and pools in shared facilities such as hotels and apartments

A swimming pool located in a private residential dwelling for the use of the occupants of the dwelling such as a backyard pool.

Residential facilities

Hostels, bed and breakfasts, and boarding houses

May continue to operate for permanent residents and workers of the facility, with social distancing observed.
Limited to no more than 5 people in common areas such as lounge rooms and shared facilities, with no more than one person per 4 square metres.
Limited to no more than 10 people in an outdoor area, that is part of the facility, or near the facility, with social distancing observed. [We expect this will now be reduced to no more than 2 people per the Prime Minister’s announcement].

Outdoor recreation

Caravan and camping parks

Where people live permanently in caravan parks or are staying in caravan parks as interim abodes where their primary residence is not available, they may continue to do so, with social distancing observed.

Campgrounds

 

Zoos and wildlife centres

For the purpose of maintenance and care for the animals.

Non-residential institutions

Galleries, museums, national and state institutions and historic sites

 

Libraries, community centres, and youth centres

Community hubs in remote communities may continue to operate if they are essential for distributing health or medical information or education to the community, with social distancing observed.

Local government non-essential facilities and services (such as libraries and pools)

 

Community facilities (such as community halls, clubs, RSLs, PCYCs)

Community hubs in remote communities may continue to operate if they are essential for distributing health or medical information or education to the community, with social distancing observed.
Community facilities may continue to operate if they provide formal out of school hours care, with social distancing observed.

Places of worship, weddings and funerals

Weddings with a maximum attendance of no more than 5 people being the celebrant, couple and two witnesses with no more than one person per 4 square metres.
Funerals attended by a maximum of no more than 10 people with no more than one person per 4 square metres, except if an exemption is granted on compassionate grounds by the Chief Health Officer.

 

Berren Hamilton

Berren Hamilton is a Special Counsel (Litigation) at Stone Group Lawyers. He is an Accredited Specialist in Commercial Litigation with the Queensland Law Society. He was admitted to practise in Queensland in 2001.

Free Consultation

At Stone Group Lawyers, we offer all clients for all areas of law a free initial consultation for up to 30 minutes. This consult can be over the phone, Skype or in person.

Request your free consultation

Complete the form below to request a free 30 minute consultation.

This iframe contains the logic required to handle Ajax powered Gravity Forms.

The post The Impact of Coronavirus Disease (COVID-19) Upon Commercial Contracts and Leases appeared first on Stone Group Lawyers.

Publications & News

Performance of commercial contracts during COVID19

Over the past week, Stone Group Lawyers have received a number of enquiries from existing and new clients regarding the enforceability of their commercial contracts where the performance of those contracts is impacted by COVID-19.Typically, the questions are:1. Can I get out of a contract?2. Do I have to perform my obligations? or3. Can I walk away if the other party can’t perform their obligations?From a legal point of view, what we are being asked to consider is whether you can suspend or terminate a contract because of the impact of COVID-19The short answer is…. It depends on the terms of the Contract.There are a number of issues that are relevant to determining a party’s right to suspend or terminate a contract, including:1. Does the Contract contain a force majeure clause and if it does, does that clause provide exercisable rights?2. Has the contract been frustrated?If the contract has an exercisable force majeure clause, or the contract has been frustrated, then a party may be able to terminate or suspend the contract.

Force Majeure

Force majeure arises where unforeseeable circumstances prevent a party from fulfilling their obligations under a contract.Commonly, commercial contracts will contain a force majeure clause which outlines the rights and remedies that arise when an event occurs that is outside the party’s control. The common law does not recognise the doctrine of force majeure and therefore a clause of this nature is an important inclusion in commercial contracts. If the force majeure clause has not been expressly provided in the contract then the parties cannot rely on it for relief.As we are seeing at the moment, an event outside the party’s control, such as a pandemic or epidemic can be disruptive to a party’s contractual performance. However, not all force majeure clauses were created equally. When assessing force majeure clauses, there are two considerations:1. Does the clause cover the event; and2. Is that event materially relevant to the performance of the contractual obligations?If the answers to both of those questions are not ‘yes’, then a party risks wrongfully repudiating a contract if the purport to suspend or terminate the contract.The party exercising its rights under a force majeure clause bears the onus in proving that its contractual performance is significantly impeded.

Frustration

The doctrine of frustration can occur when a contract is ended due to an event that is beyond the control of the parties, thereby frustrating the performance of the contract.Unlike force majeure, as the doctrine of frustration is contained in the common law it can apply where there is no express provision written into the contract.However, like force majeure, the doctrine of frustration applies only in a limited range of circumstances, where the event renders the performance of the contract to be something fundamentally different from what was anticipated by the parties at the time of contract.Practically, where COVID-19 has caused the fundamental commercial purpose of the contract to be negated, the contract may be considered frustrated. However, it requires more than just a more onerous obligation upon one or both of the parties. A mere delay in performance will not be enough to enliven frustration and Courts are generally reluctant to apply the doctrine of frustration to a commercial contract.

Navigating the current crisis

As the trade and movement restrictions and regulations arising from current COVID-19 crisis are changing on a daily basis, businesses and consumers need to be acutely aware of how their contractual obligations are being effected, and whether they can gain some relief through frustration or force majeure. Each case will depend on the individual circumstances and the terms of the contract.However, parties must be careful when exercising their perceived rights under the contract. If a party wrongly suspends or terminates a contract, this can lead to a claim for damages against that party for wrongful repudiation.It is therefore of utmost importance that businesses and individuals obtain legal advice prior to exercising any rights to ensure they avoid the pitfalls of a wrongful termination and repudiation of the contract.

Options other than termination

Stone Group Lawyers have also fielded enquiries from businesses who are not looking to terminate their contractual relationships, but rather seeking other commercial avenues to navigate through the uncertainty that exists at the current time.As with termination rights, these commercial solutions are dependent on the individual circumstances of the parties, however these solutions could include:1. Suspension rights which enable the contract to continue, albeit with a delay to the performance of the obligations;2. A variation to the contract to reduce volumes or quantities of the goods and/services provided;3. Step in rights which may enable a party to seek alternate suppliers during a time where one party cannot perform its obligations; and4. Any other commercial resolutions that can be agreed to between the parties.

What should you do if you think this applies to you?

If COVID-19 has you questioning whether you or another party can perform its obligations under a contract, then you should immediately review your contracts to see whether a force majeure clause can be relied upon. You may find that performance has been so fundamentally altered that the contract has been frustrated.You should then seek legal advice to assist you in the exercise of those rights.Dan Birch, along with the Team at Stone Group Lawyers, are ready to provide you with advice and guidance to assist you with your commercial contracts during this challenging time. Stone Group Lawyers are offering consultations via phone, Skype, Facetime and Whatsapp – call 1300 088 440 to arrange a time to discuss your contract.

Dan Birch

Dan advises on a wide range of corporate, commercial and property matters, drawing on both his professional acumen and experience to provide the right advice and commercial outcomes to his clients.

Free Consultation

At Stone Group Lawyers, we offer all clients for all areas of law a free initial consultation for up to 30 minutes. This consult can be over the phone, Skype or in person.

Request your free consultation

Complete the form below to request a free 30 minute consultation.

This iframe contains the logic required to handle Ajax powered Gravity Forms.

The post Performance of commercial contracts during COVID19 appeared first on Stone Group Lawyers.

Publications & News

How is COVID-19 affecting your parenting orders?

Every evening we turn on our television and the Prime Minister urges the Australian public to practice ‘social distancing’ and ‘self-isolation’. We have been told to separate ourselves from others to ‘stop the spread’ and ‘flatten the curve’ of the novel coronavirus COVID-19.We have entered a stressful and unprecedented time and our family law team at Stone Group Lawyers are being besieged with questions about how to navigate co-parenting arrangements during these uncertain times: –Should the child be attending school?Should the child be spending time with the other parent and risking infection?What if the other parent isn’t practising self-isolation?Can the other parent withhold the child from me?How will the Court’s react?

Schooling

The Family Law Act provides a presumption that both parents have equal shared parental responsibility of children and there is an expectation that parents will consult with the other parent about major long-term decisions relevant to the children including, among other things, their education and health.It is essential that parents discuss decisions such as school attendance and health with the other parent. Please follow this link for the latest advice from the Australian Government about health, schooling and more https://www.australia.gov.au/.

Compliance with Court Orders

Put simply, if there are Court Orders in place, you are required to comply with them. Similarly, if there is a Parenting Plan in place, this should continue to be followed.There may be some instances where non-compliance with Court Orders is necessary, but those instances must be extraordinary. Parents are expected to work together, making the children’s best interests the paramount consideration.The Family Law Act states the primary consideration of the Court when determining a child’s best interests is the benefit to a child of having a meaningful relationship with both parents, and the need to protect the child from physical or psychological harm and from being subjected to, or exposed to, abuse, neglect or family violence.At the time of writing this article, the country is in Stage Two Lockdown. An example of a genuine reason to be non-compliant with Court Orders or a Parenting Plan at the time of writing this article would be if a parent is required by law to self-isolate (because they have returned to the state or have shown symptoms of COVID-19) or for jurisdictional reasons. Again, please follow this link for the latest advice from the Australian government about the pandemic https://www.australia.gov.au/.At the time of writing this article, Queensland has restricted entry and exit at all state borders. However, should parents be separated by a border, the Queensland Government have provided an exemption for parties to comply with Federal Circuit Court of Australia or Family Court of Australia Orders. If you have to cross the border to comply with Orders, please ensure you take those Orders with you to evidence same.Should you consider it absolutely necessary to withhold your child, we encourage parents to try to be flexible and accommodating and, if withholding is necessary, allow the child to spend extra time with the other parent once the situation is under control and facilitate additional telephone or Facetime communication during this time. Generally, parents can make alternate arrangements by consent, however, we strongly encourage you to do so in writing.Parents should not use the pandemic as an opportunity to spite the other parent or have the child spend more time with them.The Court’s will recommence in the normal manner in the not so distant future and we expect Judge’s will be displeased and critical of parents seen to be putting their own interests before those of the children by not complying with Court Orders or refusing to cooperate with the reasonable requests of the other parent. In circumstances where the Courts are likely to be inundated with cases on the other side of the pandemic, getting a Judge offside will only serve to detriment the prospects of a favourable outcome.If you have any questions about co-parenting arrangements during the pandemic, you are not alone. The Family Law team at Stone Group Lawyers practice solely in family and relationship law and are available to guide you through this uncertain period. Please do not hesitate to give one of our family lawyers a call on 1300 088 440.

Disclaimer: This article is only meant to give you general information and should not be relied on as legal advice. Speak to one of our lawyers for more information. 

Free Consultation

At Stone Group Lawyers, we offer all clients for all areas of law a free initial consultation for up to 30 minutes. This consult can be over the phone, Skype or in person.

Request your free consultation

Complete the form below to request a free 30 minute consultation.

This iframe contains the logic required to handle Ajax powered Gravity Forms.

The post How is COVID-19 affecting your parenting orders? appeared first on Stone Group Lawyers.

Publications & News

Insurance: Section 54 to the Rescue!

Introducing the Insurance Contracts Act

An insurance policy is a commercial contract subject to general contract law. What sets insurance policies apart from other commercial contracts is that insurance policies are also subject to the Insurance Contracts Act 1984 (Cth) , the provisions of which cannot be contracted out of to the prejudice of the customer or someone other than the insurer , and which apply to each insurance policy in priority of the terms of the policy and the general contract law.Australia is the world leader in pioneering insurance reform. The Insurance Contracts Act was the world’s first comprehensive consumer-oriented insurance legislation. It was enacted to ‘…reform and modernise the law relating to certain contracts of insurance so that a fair balance is struck between the interests of insurers, insureds and other members of the public and so that the provisions included in such contracts, and the practices of insurers in relation to such contracts operate fairly …’.

Introducing section 54

One of the most significant reforms introduced by the Insurance Contracts Act is section 54 which alters the remedies available to the insurer if, after the policy is entered into, the insured breaches a term of the policy. Whereas under general contract law a breach by one party to a commercial contract of an essential term or condition of the contract entitles the other party to terminate the contract and/or seek damages against the party in breach, section 54 operates to prohibit the insurer from refusing to pay a claim (or refusing to cover the insured for a liability contemplated by the policy) because of a post-contractual breach by the insured of a term of the policy in certain circumstances.Section 54 provides that where the effect of a policy of insurance would, but for this section, entitle the insurer to refuse to pay a claim, either whole or in part, by reason of some act/omission of the insured or another person after the policy was entered into, the insurer may not refuse to pay the claim by reason only of that act/omission. Instead, the insurer’s liability in respect of the claim is reduced by the amount that fairly represents the extent to which the insurer’s interests were prejudiced as a result of that act/omission.

How does section 54 work?

Where an insurer unreasonably refuses to pay a claim, the insured may invoke section 54 to compel the insurer to cover the claim. Conversely, an insurer may invoke section 54 to limit its liability to pay a claim.For section 54 to come into play, it is necessary that:The insured or another person committed a relevant act/omission;The act/omission occurred after the policy was entered into; andBut for section 54, due to the act/omission the insurer could refuse to pay some or all of the claim made by the insured upon the policy.The basis upon which the insurer could have otherwise, but for section 54, refused to pay some or all of the claim could be – falling outside a covered risk, or coming within an exclusion, or non-compliance with a condition – it does not necessarily need to be a ‘breach’ of a term of the policy. The focus is on the actual conduct of the insured – on some act which the insured did or omitted to do.If the insurer wishes to rely upon section 54 to reduce its liability for a claim, the insurer must also prove that:The act/omission caused prejudice to the insurer; andThe prejudice suffered by reason of the act/omission is financially measurable.To seek to demonstrate that the prejudice suffered is financially measurable, the insurer will seek to rely on evidence from its underwriting department that if the act/omission had not occurred the insurer would have cancelled the policy before the circumstances giving rise to the claim made by the insured upon the policy had eventuated. If the insurer demonstrates this then it would be accepted that the amount which would fairly represent the prejudice suffered would be the full cost of the claim effectively reducing the insurer’s liability for the claim to nil.However, if the act/omission would not have led to the insurer going off risk, but instead, for example, the insurer would have charged a higher premium for the insured to purchase the policy, then the extent of the prejudice suffered to the insurer may just be the difference in the extra premium that it would have earned if the act/omission had not occurred.Where an insurer asserts that it has been prejudiced, the insured should require the insurer to disclose the evidence upon which the insurer seeks to rely to establish this. It may be that the insurer has been prejudiced but is unable to quantify the prejudice as actual financial damage, and so not entitled to reduce its liability for the claim.

To the rescue!

Here are the most recent reported examples where section 54 has come to the insured’s rescue:In Maxwell v Highway Hauliers , the insured obtained a commercial vehicle policy to cover any damage to its fleet of prime movers and trailers used to transport freight between Perth and the eastern states. Two of the prime movers and trailers were damaged in separate accidents during the insurance period. The insurer refused to cover the cost to repair the damage on the grounds that the policy contained exclusions which provided that there was no cover if, as was the case in each accident, the driver of the prime mover had not achieved a minimum score on a driver test known as the ‘PAQS test’ . The relevant act/omission was the insured’s act of allowing drivers who had not passed the PAQS test to drive the prime movers. The High Court held that section 54 applied and operated to preclude the insurer from being able to refuse to pay for the cost of the repairs. The insurer was required to pay the repair costs.In Pantaenius Australia Pty Ltd v Watkins Syndicate, the insured’s luxury yacht on a return trip to Australia after competing in the Freemantle to Bali race struck a reef in Australian waters and was unsalvageable. The insurer refused to pay the claim relying on a term in the policy (which the Court found was in the nature of an exclusion) to the effect that cover would be suspended from when the yacht left Australian waters until it cleared Australian customs on its return, which it had not done before it ran aground. The insurer argued that as the insured had no opportunity to pass through Australian customs before the accident, there was no relevant act or omission to invoke section 54. The Court disagreed and held that because the insurer was unable to demonstrate any prejudice, it was required to pay the claim.In Allianz v Smeaton, the insured’s brother was driving the insured’s jet ski on the Ross River in Queensland when an accident occurred causing the passenger who was sitting on the back of the jet ski to suffer horrible injuries. The insurer of the jet ski refused to cover the claim by the injured person on the grounds of an exclusion in the policy that excluded any claim arising from an incident involving any boat under the control of an unlicensed person when a license is necessary. A licence was necessary to drive the jet ski which the insured’s brother did not have. The relevant act/omission was the failure to obtain the necessary licence. The Court held that the fact that the insured’s brother did not have the necessary licence would not have made any difference – and that if he did have the licence, the accident would have still occurred. Whilst the exclusion was breached, due to the operation of s54 the breach of the exclusion did not preclude the cover provided by the policy for the accident on the basis that the breach itself did not contribute to the cause of the accident.

Get legal advice!

There has been more litigation and reported legal cases surrounding section 54 than the rest of the provisions of the entire Insurance Contracts Act. Given the remedial nature of the section, this is perhaps to be expected. But the extent of the litigation produced by this section, which includes many decisions that went all the way to the High Court, shows that despite the simple and straightforward intention of the section, in practice its application can be complicated and misjudged. In our experience, the availability of relief under section 54 is often completely overlooked!Some commentators have complained that section 54 in practice can overwrite a clear intention to exclude cover. The cases do show that no amount of clever drafting can avoid the application of section 54.Whilst the reported cases give guidance, every case has different circumstances such that the outcomes always turn on their own facts, and so it is vitally important to promptly seek expert legal advice if you are ever in the unfortunate situation of your insurer refusing to cover all or part of your claim on the policy. It may be that section 54 can come to your rescue!

Berren Hamilton

Berren Hamilton is a Special Counsel (Litigation) at Stone Group Lawyers. He is an Accredited Specialist in Commercial Litigation with the Queensland Law Society. He was admitted to practise in Queensland in 2001.

Free Consultation

At Stone Group Lawyers, we offer all clients for all areas of law a free initial consultation for up to 30 minutes. This consult can be over the phone, Skype or in person.

Request your free consultation

Complete the form below to request a free 30 minute consultation.

This iframe contains the logic required to handle Ajax powered Gravity Forms.

The post Insurance: Section 54 To The Rescue! appeared first on Stone Group Lawyers.

Publications & News

INSURANCE: SECTION 54 TO THE RESCUE!

Introducing the Insurance Contracts ActAn insurance policy is a commercial contract subject to general contract law. What sets insurance policies apart from other commercial contracts is that insurance policies are also subject to the Insurance Contracts Act 1984 (Cth), the provisions of which cannot be contracted out of to the prejudice of the customer or someone other than the insurer, and which apply to each insurance policy in priority of the terms of the policy and the general contract law.Australia is the world leader in pioneering insurance reform. The Insurance Contracts Act was the world’s first comprehensive consumer-oriented insurance legislation. It was enacted to ‘…reform and modernise the law relating to certain contracts of insurance so that a fair balance is struck between the interests of insurers, insureds and other members of the public and so that the provisions included in such contracts, and the practices of insurers in relation to such contracts operate fairly …’Introducing section 54One of the most significant reforms introduced by the Insurance Contracts Act is section 54 which alters the remedies available to the insurer if, after the policy is entered into, the insured breaches a term of the policy. Whereas under general contract law a breach by one party to a commercial contract of an essential term or condition of the contract entitles the other party to terminate the contract and/or seek damages against the party in breach, section 54 operates to prohibit the insurer from refusing to pay a claim (or refusing to cover the insured for a liability contemplated by the policy) because of a post-contractual breach by the insured of a term of the policy in certain circumstances. Section 54 provides that where the effect of a policy of insurance would, but for this section, entitle the insurer to refuse to pay a claim, either whole or in part, by reason of some act/omission of the insured or another person after the policy was entered into, the insurer may not refuse to pay the claim by reason only of that act/omission. Instead, the insurer’s liability in respect of the claim is reduced by the amount that fairly represents the extent to which the insurer’s interests were prejudiced as a result of that act/omission.How does section 54 work?Where an insurer unreasonably refuses to pay a claim, the insured may invoke section 54 to compel the insurer to cover the claim. Conversely, an insurer may invoke section 54 to limit its liability to pay a claim.For section 54 to come into play, it is necessary that:The insured or another person committee a relevant act/omission; The act/omission occurred after the policy was entered into; and But for section 54, due to the act/omission the insurer could refuse to pay some or all of the claim made by the insured upon the policy.The basis upon which the insurer could have otherwise, but for section 54, refused to pay some or all of the claim could be – falling outside a covered risk, or coming within an exclusion, or non-compliance with a condition – it does not necessarily need to be a ‘breach’ of a term of the policy. The focus is on the actual conduct of the insured – on some act which the insured did or omitted to do.If the insurer wishes to rely upon section 54 to reduce its liability for a claim, the insurer must also prove that:The act/omission caused prejudice to the insurer; and The prejudice suffered by reason of the act/omission is financially measureable. To seek to demonstrate that the prejudice suffered is financially measurable, the insurer will seek to rely on evidence from its underwriting department that if the act/omission had not occurred the insurer would have cancelled the policy before the circumstances giving rise to the claim made by the insured upon the policy had eventuated. If the insurer demonstrates this then it would be accepted that the amount which would fairly represent the prejudice suffered would be the full cost of the claim effectively reducing the insurer’s liability for the claim to nil.However, if the act/omission would not have led to the insurer going off risk, but instead, for example, the insurer would have charged a higher premium for the insured to purchase the policy, then the extent of the prejudice suffered to the insurer may just be the difference in the extra premium that it would have earned if the act/omission had not occurred.Where an insurer asserts that it has been prejudiced, the insured should require the insurer to disclose the evidence upon which the insurer seeks to rely to establish this. It may be that the insurer has been prejudiced but is unable to quantify the prejudice as actual financial damage, and so not entitled to reduce its liability for the claim.To the rescue!Here are the most recent reported examples where section 54 has come to the insured’s rescue:In Maxwell v Highway Hauliers, the insured obtained a commercial vehicle policy to cover any damage to its fleet of prime movers and trailers used to transport freight between Perth and the eastern states. Two of the prime movers and trailers were damaged in separate accidents during the insurance period. The insurer refused to cover the cost to repair the damage on the grounds that the policy contained exclusions which provided that there was no cover if, as was the case in each accident, the driver of the prime mover had not achieved a minimum score on a driver test known as the ‘PAQS test’. The relevant act/omission was the insured’s act of allowing drivers who had not passed the PAQS test to drive the prime movers. The High Court held that section 54 applied and operated to preclude the insurer from being able to refuse to pay for the cost of the repairs. The insurer was required to pay the repair costs.          In Pantaenius Australia Pty Ltd v Watkins Syndicate, the insured’s luxury yacht on a return trip to Australia after competing in the Freemantle to Bali race struck a reef in Australian waters and was unsalvageable. The insurer refused to pay the claim relying on a term in the policy (which the Court found was in the nature of an exclusion) to the effect that cover would be suspended from when the yacht left Australian waters until it cleared Australian customs on its return, which it had not done before it ran aground. The insurer argued that as the insured had no opportunity to pass through Australian customs before the accident, there was no relevant act or omission to invoke section 54. The Court disagreed and held that because the insurer was unable to demonstrate any prejudice, it was required to pay the claim.In Allianz v Smeaton, the insured’s brother was driving the insured’s jet ski on the Ross River in Queensland when an accident occurred causing the passenger who was sitting on the back of the jet ski to suffer horrible injuries.The insurer of the jet ski refused to cover the claim by the injured person on the grounds of an exclusion in the policy that excluded any claim arising from an incident involving any boat under the control of an unlicensed person when a license is necessary. A licence was necessary to drive the jet ski which the insured’s brother did not have. The relevant act/omission was the failure to obtain the necessary licence. The Court held that the fact that the insured’s brother did not have the necessary licence would not have made any difference – and that if he did have the licence, the accident would have still occurred. Whilst the exclusion was breached, due to the operation of s54 the breach of the exclusion did not preclude the cover provided by the policy for the accident on the basis that the breach itself did not contribute to the cause of the accident.  Get Legal AdviceThere has been more litigation and reported legal cases surrounding section 54 than the rest of the provisions of the entire Insurance Contracts Act. Given the remedial nature of the section, this is perhaps to be expected. But the extent of the litigation produced by this section, which include many decisions that went all the way to the High Court, shows that despite the simple and straightforward intention of the section, in practice its application can be complicated and misjudged. In our experience, the availability of relief under section 54 is often completely overlooked!Some commentators have complained that section 54 in practice can overwrite a clear intention to exclude cover. The cases do show that no amount of clever drafting can avoid the application of section 54.Whilst the reported cases give guidance, every case has different circumstances such that the outcomes always turn on their own facts, and so it is vitally important to promptly seek expert legal advice if you are ever in the unfortunate situation of your insurer refusing to cover all or part of your claim on the policy. It may be that section 54 can come to your rescue!       

Disclaimer: This article is only meant to give you general information and should not be relied on as legal advice. Speak to one of our lawyers for more information.

Free Consultation

At Stone Group Lawyers, we offer all clients for all areas of law a free initial consultation for up to 30 minutes. This consult can be over the phone, Skype or in person.

BOOK YOUR CONSULTATION

Request your free consultation

Complete the form below to request a free 30 minute consultation.

This iframe contains the logic required to handle Ajax powered Gravity Forms.

The post INSURANCE: SECTION 54 TO THE RESCUE appeared first on Stone Group Lawyers.

Publications & News

How a franchisor can ease their resale legals

When a franchisee gives you notice that they wish to sell their franchised business, there are some simple steps to take to ensure that the process is as streamlined as possible. This will in turn ease everyone’s legal costs.
Do your background work
The first step should be doing your own preparation work. Don’t wait until a franchisee gives notice of their intention to sell. Have a process in place that’s ready to go:

Ensure your franchise agreement contains a clear and easy to follow process. If you’re confused about what your franchise agreement says, then chances are that a franchisee may be too.

Take the time to understand the timeframe requirements under the Franchising Code of Conduct (Code).

Put together a standard transfer pack that you can give to franchisees who are intending to sell and have this checked over by your lawyer. This should give a clear step-by-step outline of what’s involved, what you need from the franchisee, who needs to do what and when. This could even be a resource that your franchisees can access alongside your operations manual (for example, if this can be accessed through an online or internal intranet portal).

 Put together a process
It’s all well and good to have a structured process, but you should think about how that process will work in practice for your particular franchise system. Keep the following things in mind:

 Under the Code, once a franchisee tells you they wish to sell, and gives you all the information you require to decide whether to approve the sale, you then have 42 days to make a decision. If you miss this deadline then the request for transfer will be treated as approved. Therefore, your transfer pack should contain a list of everything you require from a franchisee in order to make such a decision. For example, this may include a copy of the franchisee’s proposed sale contract, contact details, references and financial statements for their buyer, and anything else you would normally ask of a new franchisee. 
Generally, a franchise agreement will give a franchisor the ‘right of first refusal’. This means that a franchisee first needs to give you the opportunity to buy the business on the same terms that the franchisee is currently proposing to sell. The franchise agreement will specify a certain time period that you will have to accept this offer. If the offer isn’t accepted in time, then the offer will generally lapse. This timeframe normally starts at the same time as the above 42 day approval period.
Once you’ve conducted your background checks and interviews with the proposed buyer, and you’re satisfied they meet your selection criteria, then you should give approval to the sale conditional on the remaining steps being completed to your satisfaction. Remember that you can withdraw this approval within 14 days of giving it, but you need to have good and justifiable reasons for doing so.  
 Issue disclosure documents to the buyer. You will then need to wait at least 14 days before the buyer can sign their franchise agreement, and during this time the buyer will need to return a signed receipt for the documents together with the other statements required by the Code.
The buyer won’t have a 7 day cooling-off period from when they sign their franchise agreement. The cooling-off period doesn’t apply to the transfer of an existing franchised business.
Factor in the paperwork that your outgoing franchisee will need to sign and return to you. This is generally a deed to formally terminate/surrender their existing franchise agreement.
Allow time for the buyer to complete your training program. Generally, this needs to be completed before the business purchase from the existing franchisee can officially ‘settle’ (transfer of legal ownership).
If you’re placing conditions on the sale, be clear about these from the outset. For example, if the franchisee’s premises or equipment needs to be brought up to your current standards, or if there’s a debt owed by the outgoing franchisee, don’t wait until the last minute to raise these things.
 Finally, know what you need to do from an accounting perspective before the changeover. On or before the day of settlement franchisors will generally collect a transfer/assignment fee, payment for their legal costs, and a clearance of any outstanding franchise fees. If you won’t know a final figure until the morning of settlement, then make this known so everyone can prepare accordingly.  

Takeaways
Preparation is key. By putting together clear processes and procedures, you will not only have a streamlined process, but also a lighter bill from your lawyer!
Luke McKavanagh is a regular contributor to online and print media for Inside Franchise Business. This article was previously prepared for Inside Franchise Business: https://www.franchisebusiness.com.au

Luke McKavanagh of the Stone Group Lawyers team recently discussed these findings and the implications for the franchising industry with Coast Business Radio. Listen to the podcast here.

LUKE MCKAVANAGH

Luke is an Associate with Stone Group Lawyers and is a regular contributor to online and print media for Inside Franchise Business. Luke is also a member of the Queensland Law Society Franchise Law Committee.

Free Consultation

At Stone Group Lawyers, we offer all clients for all areas of law a free initial consultation for up to 30 minutes. This consult can be over the phone, Skype or in person.

BOOK YOUR CONSULTATION

Request your free consultation

Complete the form below to request a free 30 minute consultation.

This iframe contains the logic required to handle Ajax powered Gravity Forms.

The post How to ease your resale legals appeared first on Stone Group Lawyers.

Publications & News

Disclosure Practices By Food Industry Franchisors

In late August 2019, the ACCC released a report on its findings into disclosure practices by franchisors operating in the food industry.

The report highlighted several key areas where greater transparency and compliance is needed across many franchised industries:Franchisors are making it difficult for a prospective franchisee to contact former franchisees by failing to include practical contact details such as a mobile phone number and email address.There is a failure to adequately disclose what essential goods and products are subject to supply restrictions, meaning franchisees are not realising the full extent of what they can buy and who they can buy from until after they start operating their business.In many circumstances, franchisors are receiving rebates from suppliers, but whether or not the rebates are being shared with the wider franchise network is not being made clear.Unavoidable ongoing costs that franchisees will incur, such as rent and wages, are not being sufficiently disclosed, meaning franchisees are not realising the full extent of the cost of operating their business until after the business is up and running.It was also found that over 40% of franchisees are not seeking independent professional advice from a lawyer, accountant or business advisor before entering a franchise agreement. This shows that franchisees are placing a high level of trust and reliance on the information disclosed by their franchisor, meaning a greater need for that information to be comprehensive and accurate.

Luke McKavanagh of the Stone Group Lawyers team recently discussed these findings and the implications for the franchising industry with Coast Business Radio. Listen to the podcast here.

LUKE MCKAVANAGH

Luke is an Associate with Stone Group Lawyers and is a regular contributor to online and print media for Inside Franchise Business. Luke is also a member of the Queensland Law Society Franchise Law Committee.

Free Consultation

At Stone Group Lawyers, we offer all clients for all areas of law a free initial consultation for up to 30 minutes. This consult can be over the phone, Skype or in person.

BOOK YOUR CONSULTATION

Request your free consultation

Complete the form below to request a free 30 minute consultation.

This iframe contains the logic required to handle Ajax powered Gravity Forms.

The post Disclosure practices by food-industry franchisors appeared first on Stone Group Lawyers.

Publications & News

Co-Parenting At Christmas

As the festive season approaches, the increase in parenting disputes inevitably arise, there are, however, ways to ensure that this Christmas ‘tis the season to be jolly’ is also child-focused. We make the following suggestions.

1. Check youR Court Orders or Parenting Plans for Christmas arrangements

Just as Santa will check off his list twice, you should do the same. Whether you have specific arrangements with the other parent in Court Orders or a Parenting Plan or you are to simply agree in writing. Now is the time to confirm with them your plans for the children’s Christmas time with you.

2. Changeovers

Ensure that you Jingle all the way to the pre-arranged changeover point as promptly as you can over the Christmas period. Christmas feasts or present unwrapping will wait for no man, women or child. Double-check that any external changeover points will be open on Christmas and take into account that it will be busier on the roads over the Christmas period. Where there are Orders in place, withholding the child even unintentionally could be considered as a contravention of those orders.If your changeover will occur on Christmas Day, be mindful that your children may have already filled up on some delicious festive foods at breakfast or lunch, so perhaps allow them a few hours of playing with toys or a quick game of beach cricket before re-commencing their feast.

3. Travel

In search of a White Christmas this year? You should be aware that once a parenting application has been filed with the Court (even if no Orders have yet been made) or while a parenting Order is in force, it is a criminal offence to take a child who is the subject of that application or Order outside of Australia, except with the written and properly witnessed consent of the other party to the proceedings or Order of the Court permitting the travel. The maximum penalty for taking a child outside of Australia without that consent or an Order is three (3) years’ imprisonment.Provide the other parent with an itinerary or flight details and confirm how the other parent will be able to communicate with the child whilst overseas. Don’t forget to confirm whether or not you will be travelling to a Hague convention signatory country as this may trigger a provision within the parenting orders (if any).

4. Presents

Tis the season of giving! If you can effectively communicate with the other parent, you should consider confirming what gifts you will each be giving to the child to avoid doubling up or perhaps even consider giving a joint present. After all, what is Christmas if it isn’t a time for forgiving and celebrating. Don’t forget to confirm with Santa what presents will be arriving to which household on Christmas morning too, the big guy in red has enough to worry about on Christmas Day as it is.

5. All is Calm, All is Bright

Children observe everything, so try to encourage and foster strong childhood memories of their Christmas. You may have disagreements or problems you have with the other parent, however Christmas time isn’t the time to bring them up, instead maybe consider giving a small gift to the other parent, like a Christmas photo of the children or ornament that your child made.

6. Home for Christmas

It won’t always be possible for the children to spend time with a parent over Christmas, in these circumstances, do your very best to facilitate communication between the parent and child on Christmas Day or take the opportunity to have your children send the other parent a small gift or letter in the mail.

7. If all else fails

Call us on 1300 088 440 to discuss your options. Keep in mind that if you can’t reach an agreement for Christmas, the cut-off date for filing Court Applications for Parenting Arrangements over Christmas is 15 November 2019 (i.e. the second Friday of November pursuant to Rule 5.01A of the Family Law Rules 2004).Except in cases of urgency, any applications filed after this date will likely be heard after Christmas. As such you should consider alternative dispute resolution options for finalising Christmas Parenting Arrangements which we can advise you of further.

From the Family Law team at Stone Group Lawyers, we wish you a happy and safe Christmas.

Free Consultation

At Stone Group Lawyers, we offer all clients for all areas of law a free initial consultation for up to 30 minutes. This consult can be over the phone, Skype or in person.

BOOK YOUR CONSULTATION

Request your free consultation

Complete the form below to request a free 30 minute consultation.

This iframe contains the logic required to handle Ajax powered Gravity Forms.

The post Co-Parenting at Christmas appeared first on Stone Group Lawyers.

Publications & News

5 Things Franchisors Can Negotiate With Franchisees

Showing an openness towards working with a franchisee to negotiate a franchise deal will be an excellent foundation to your future business relationship.

A willingness to negotiate isn’t a sign of weakness. Rather, it demonstrates you’re reasonable and open to good faith discussions. It can also reduce the risk of the franchise agreement contravening unfair contract laws.You don’t need to change the overall nature of your franchise agreement. There are 5 common negotiation points you can consider.

1. Term

Many franchisees want the comfort that the term and options under their franchise agreement will match those under their lease, along with the timeframes to exercise options. This is a reasonable request. You may also consider approaching the landlord to reach a middle ground. If a franchisee is pushing for additional renewal options, protect yourself through renewal criteria based on a franchisee’s continued compliance.

2. Fee Concessions

Agreeing to a period of reduced royalties or ongoing fees when the business opens for trade shows franchisees you’re aware it will take time to establish their business and customer base. Remember, you can place conditions on this, such as requiring the franchisee to follow a strict business and marketing plan during this period.

3. Exclusivity

Exclusivity can be contentious. Franchisees want it, franchisors are hesitant to give it.If you don’t offer exclusive territories, and you’re asked for one, a compromise may be committing to not establish a neighbouring franchise within a certain radius of the business. This should be subject to the franchisee remaining in full compliance with their franchise agreement. An alternative may be giving the franchisee the first right of refusal to purchase that neighbouring franchise should you ever decide to establish one.

4. Social Media

Social media is the face of modern business. Franchisors can be hesitant to allow franchisees to advertise online. If this is requested, a well drafted social media clause will give the franchisee the flexibility to promote themselves through an online presence, but also give you a degree of control. Ensure you have provisions about pre-approval of content, an ability to direct removal of inappropriate posts, administrator access and for the account to be transferred to you when the franchise agreement ends.

5. Performance Targets

Many franchise agreements say that the franchisor can force a sale of the business if a franchisee fails to achieve performance targets. This can be harsh. If a franchisee asks to remove this, a good compromise would be a staged process.First stage can be attending a meeting where a business and marketing plan for the franchisee must be agreed. Continued poor performance would then trigger a repeat of stage 1. Finally, if there’s no improvement, a forced sale would then be a reasonable consequence.

The Final Negotiation

After weighing up whether a negotiation point is reasonable and justifiable, always ensure what you’re negotiating won’t disrupt the uniformity of your franchise system, which is after all the foundation of a franchise’s success.

This article was previously published on the Inside Franchise Business website. You can view an online copy of the article here.

LUKE MCKAVANAGH

Luke is an Associate with Stone Group Lawyers and is a regular contributor to online and print media for Inside Franchise Business. Luke is also a member of the Queensland Law Society Franchise Law Committee.

Free Consultation

At Stone Group Lawyers, we offer all clients for all areas of law a free initial consultation for up to 30 minutes. This consult can be over the phone, Skype or in person.

BOOK YOUR CONSULTATION

Request your free consultation

Complete the form below to request a free 30 minute consultation.

This iframe contains the logic required to handle Ajax powered Gravity Forms.

The post 5 Things Franchisors Can Negotiate With Franchisees appeared first on Stone Group Lawyers.

In late August 2019, the ACCC released a report on its findings into disclosure practices by franchisors operating in the food industry.
 
The report highlighted several key areas where greater transparency and compliance is needed across many franchised industries:

Franchisors are making it difficult for a prospective franchisee to contact former franchisees by failing to include practical contact details such as a mobile phone number and email address.

There is a failure to adequately disclose what essential goods and products are subject to supply restrictions, meaning franchisees are not realising the full extent of what they can buy and who they can buy from until after they start operating their business.

In many circumstances, franchisors are receiving rebates from suppliers, but whether or not the rebates are being shared with the wider franchise network is not being made clear.

Unavoidable ongoing costs that franchisees will incur, such as rent and wages, are not being sufficiently disclosed, meaning franchisees are not realising the full extent of the cost of operating their business until after the business is up and running.

It was also found that over 40% of franchisees are not seeking independent professional advice from a lawyer, accountant or business advisor before entering a franchise agreement. This shows that franchisees are placing a high level of trust and reliance on the information disclosed by their franchisor, meaning a greater need for that information to be comprehensive and accurate.
Luke McKavanagh of the Stone Group Lawyers team recently discussed these findings and the implications for the franchising industry with Coast Business Radio. Listen to the podcast here: 
https://coastbusinessradio.podbean.com/e/episode-5-the-latest-in-business-from-the-gold-coast-to-byron-bay-recorded-at-the-sunset-cafe-bar-grill/
The post Disclosure practices by food-industry franchisors appeared first on Stone Group Lawyers.

As the festive season approaches, the increase in parenting disputes inevitably arise, there are, however, ways to ensure that this Christmas ‘tis the season to be jolly’ is also child-focused. We make the following suggestions:-
1. Check you Court Orders or Parenting Plans for Christmas arrangements
Just as Santa will check off his list twice, you should do the same. Whether you have specific arrangements with the other parent in Court Orders or a Parenting Plan or you are to simply agree in writing. Now is the time to confirm with them your plans for the children’s Christmas time with you. 
2. Changeovers
Ensure that you Jingle all the way to the pre-arranged changeover point as promptly as you can over the Christmas period. Christmas feasts or present unwrapping will wait for no man, women or child. Double-check that any external changeover points will be open on Christmas and take into account that it will be busier on the roads over the Christmas period. Where there are Orders in place, withholding the child even unintentionally could be considered as a contravention of those orders.
If your changeover will occur on Christmas Day, be mindful that your children may have already filled up on some delicious festive foods at breakfast or lunch, so perhaps allow them a few hours of playing with toys or a quick game of beach cricket before re-commencing their feast.
3. Travel
In search of a White Christmas this year? You should be aware that once a parenting application has been filed with the Court (even if no Orders have yet been made) or while a parenting Order is in force, it is a criminal offence to take a child who is the subject of that application or Order outside of Australia, except with the written and properly witnessed consent of the other party to the proceedings or Order of the Court permitting the travel. The maximum penalty for taking a child outside of Australia without that consent or an Order is three (3) years’ imprisonment.
 Provide the other parent with an itinerary or flight details and confirm how the other parent will be able to communicate with the child whilst overseas. Don’t forget to confirm whether or not you will be travelling to a Hague convention signatory country as this may trigger a provision within the parenting orders (if any).
4. Presents
Tis the season of giving! If you can effectively communicate with the other parent, you should consider confirming what gifts you will each be giving to the child to avoid doubling up or perhaps even consider giving a joint present. After all, what is Christmas if it isn’t a time for forgiving and celebrating. Don’t forget to confirm with Santa what presents will be arriving to which household on Christmas morning too, the big guy in red has enough to worry about on Christmas Day as it is.
5. All is Calm, All is Bright
Children observe everything, so try to encourage and foster strong childhood memories of their Christmas. You may have disagreements or problems you have with the other parent, however Christmas time isn’t the time to bring them up, instead maybe consider giving a small gift to the other parent, like a Christmas photo of the children or ornament that your child made.
6. Home for Christmas
It won’t always be possible for the children to spend time with a parent over Christmas, in these circumstances, do your very best to facilitate communication between the parent and child on Christmas Day or take the opportunity to have your children send the other parent a small gift or letter in the mail.
7. If all else fails
Call us on 1300 088 440 to discuss your options. Keep in mind that if you can’t reach an agreement for Christmas, the cut-off date for filing Court Applications for Parenting Arrangements over Christmas is 15 November 2019 (i.e. the second Friday of November pursuant to Rule 5.01A of the Family Law Rules 2004). Except in cases of urgency, any applications filed after this date will likely be heard after Christmas. As such you should consider alternative dispute resolution options for finalising Christmas Parenting Arrangements which we can advise you of further.
 From the Family Law team at Stone Group Lawyers, we wish you a happy and safe Christmas.
 
 
The post Co-Parenting at Christmas appeared first on Stone Group Lawyers.

Consistency is key in franchising. You have developed a proven business model for success through your brand and product recognition.
Franchisees have seen this success and chosen to partner with your brand. They have entered an agreement for the long run and handed over a large element of control to forgo operating independently. This exchange of give and take has arisen because they have:

invested most, if not all, of their available resources into this business venture;

observed the potential for value and their own success; and

importantly, placed their trust in your hands.

Being asked to change the original deal may not be received lightly.
Adaptability
A franchise system must be adaptable. Markets and consumer trends change overnight in our fast-paced world. Your system has succeeded because you identified an opportunity in the market and made the most of it. There was a need for your goods and services. Your ingenuity gave your business model such an edge that you chose to replicate it through franchising.
Just like that original market opening allowed your franchise system to grow and thrive, there will always be new openings. If you don’t fill them, a competitor will. You may lose customers if you don’t keep up with the latest trends. You understand that for your model to continue to be responsive to market changes, you must adapt. But do your franchisees understand this and share the same vision?
How you sell change to your franchisees is key, together with having the right mechanisms in place to facilitate this. You won’t get far if your franchise agreement does not permit you to introduce change.
Unfair contract terms
The franchising industry is currently facing significant changes itself. A government taskforce was recently convened to examine the sector following the release of the Parliamentary Committee report “Fairness in Franchising”. Conduct of franchisors is under the spotlight. You don’t want to be the next news headline.
This examination may soon result in unfair contract terms becoming illegal. The ACCC strongly backs this. At present, it may not be unlawful for your franchise agreement to contain an unfair term, but you may be prevented from enforcing that term if challenged in court.
The Australian Consumer Law contains strict criteria for what constitutes an unfair contract term and when it will be unenforceable. This won’t necessarily apply to all franchise agreements. Generally:

 one party to the agreement must be a small business;

the agreement was entered or renewed after 12 November 2016; and

the provision:
(a) causes significant imbalance between the parties’ rights and obligations;
(b) is not reasonably necessary to protect the legitimate commercial interests of the stronger party advantaged by the provision; and
(c) would cause detriment to the weaker party if enacted.

If all criteria are satisfied, a court can declare that provision to be unenforceable. The remainder of the agreement will continue untouched.
In the context of a franchise agreement, this means that even if your agreement contains a provision permitting you to introduce change into your franchise system, a franchisee could challenge you. If a court viewed the provision as unfair, then you can’t enforce it and can’t introduce your change. Trying to bypass this by instead amending your operations manual could also be captured.
A court will also take into account whether you gave your franchisee a genuine opportunity to negotiate the agreement before signing. If you told your franchisee “take it or leave it”, the franchisee might be in a stronger position.
If the laws are changed, it may then be illegal for a franchise agreement to simply contain an “unfair” provision.
Good faith
Unfair contract laws are not your only consideration.
The Franchising Code of Conduct (Code) imposes the obligation for both parties to a franchise agreement to act in good faith towards each other. This will not prevent you from acting in your own legitimate commercial interests, but you must act reasonably and have regard to how your actions and decisions may affect franchisees.
Failing to act in good faith can result in legal action or ACCC penalties.
Selling your idea
So, even though your franchise agreement may give you flexibility to introduce change in your franchise system, whether it be a re-brand, new logo or different products and services, how do you enforce this in light of stringent laws? Reasonableness and communication.
Inherent to the laws is acting reasonably. It must be in your own genuine and legitimate business interests to make the decision to enforce a change. This must be a carefully considered decision.
This means do your homework, build a convincing case, and then sell it to your franchisees. Do this in person. The sale may not be easy as people generally resist change. Think about how you would sell a new product or service to a customer, then apply the same sales pitch to your franchisees.
Use the carrot rather than the stick. Avoid simply quoting the section of your franchise agreement entitling you to enforce the change. Don’t market it as something that will improve your own bottom dollar.
Entice your franchisees by demonstrating how the change will benefit each of them personally. If they can’t see a direct benefit, where’s the incentive? Give them that incentive. Ensure they understand the necessity of this change.
Reinvigorate a franchisee by selling the potential to grow their business. Convince one, and they will spread the word to others.
Not everyone may be convinced, and that is when you may need to take a more forceful, but considered, approach.
Costs
Numbers matter to franchisees. They spent substantial funds acquiring their business. If they are being asked to invest more, they will naturally be hesitant.
Be mindful of the restrictions under the Code for directing a franchisee to incur an item of significant capital expenditure. You are permitted to make this direction if:

details are disclosed in your disclosure document (which is why your disclosure document should contemplate these scenarios); or
it will be incurred by a majority of franchisees and they have approved it; or

it is necessary to comply with legal obligations; or

the franchisee agrees to it; or

you give the franchisee a written statement with a rationale for making the investment, the amount, the anticipated outcomes and benefits, and the associated risks.

Takeaways
Whilst the law gives you a degree of flexibility to enforce change, having the cooperation of willing franchisees will always be preferable.
Have a clear franchise agreement, treat your franchisees as respected business partners and make reasonably informed decisions. That will put you on the right path for introducing change to your business model when there is a reasonable basis for doing so. Importantly, it will ensure your franchise system continues to hold its position in the marketplace.
By Luke McKavanagh
Luke is an Associate with Stone Group Lawyers and a member of the Queensland Law Society Franchise Law Committee. 

This article was originally published on page 44 of the October edition of The Franchise Review, the Official Journal of the Franchise Council of Australia. You can access a full copy of Issue 59 Edition 3 2019 here: 
https://s3.amazonaws.com/dbm.thewebconsole.com/S3DB1206/images/FCA19019_FR_ISSUE59_E3_2019_FINALWEB.pdf
 
The post Introducing change into your franchise system appeared first on Stone Group Lawyers.

Never rush to sign unless you’re satisfied you’ve negotiated the best deal. When it comes to franchising and leasing, the documents you sign will govern your business dealings for many years to come. There’s a very limited ability to renegotiate in the future.
Where to start
After you’ve identified a promising franchise opportunity, there’ll be many discussions with the franchisor’s representatives. If you’re new to franchising, don’t be afraid to ask questions to gauge what’s up for negotiation. Approach your accountant and lawyer during these early stages – a professional advisor experienced in franchising can offer a wealth of experience towards what’s negotiable and where to start.
How to tackle the franchise agreement
Once the big-ticket items are agreed with the franchisor, they’ll provide your draft franchise agreement. Don’t wait until this point to start negotiating. Some key things to focus on when beginning your discussions with the franchisor include:

There’ll be an initial franchise fee payable to the franchisor for the grant of the franchise, initial training, opening support and sometimes provision of equipment/stock. Start by asking exactly what you get from this fee. If you don’t think you’re getting the best value, then push for more to be included. For example, a franchisor-representative attending your business for a few days during your first days of operations to give assistance in starting up the business.

It’s standard to pay the franchisor’s legal costs of preparing the franchise agreement. You’ll save an additional expense if you can get the franchisor to waive these, or for the costs to be covered by your initial franchise fee.

Sometimes there’ll be no ongoing royalties or franchise fees for your first few months of operations, or a reduction during this time. This gives you the opportunity to establish your business and customer base before paying fees at full rates. If this concession is offered, try to increase its duration. If it’s not offered, push for one.

Generally, you’ll either have an exclusive or non-exclusive territory (or a mix) where you operate/market your business. Exclusivity means the franchisor won’t grant another franchisee the right to, or won’t themselves, operate within your territory. Always aim for the largest territory and as much exclusivity as possible. This reduces the risk of competition from within the franchise system itself. However, be mindful how a larger territory may interplay with minimum performance criteria under the franchise agreement (criteria may be based on territory size or population).

If you want the option to expand in the future, you can ask for a right of first refusal. If the franchisor wishes to franchise a neighbouring area, they’ll then need to offer it for sale to you first.

Franchisors often have minimum performance criteria to be met. Work with your accountant to ensure these are achievable – consider the time it will take to establish your business. If not reasonable, then negotiate. Ensure that the consequences for failing to achieve the criteria are reasonable and constructive. If the franchisor can force you to sell your business, change it to say you must develop and adhere to a special business plan.

Ensure the length of the franchise is suitable with a reasonable number of options to renew. A franchise that’s too short may not give you enough time to recoup your initial investment costs (before you’re faced with having to pay a renewal fee), but one that’s too long may leave you locked into a contractual relationship (not ideal if your business isn’t unsuccessful). When it comes to renewal options, ensure the criteria for renewal are reasonable and achievable.

These are just a few examples of common things a franchisee can negotiate. There can be many others depending on the franchise. Get a written commitment about anything you negotiate.
 
When you receive your franchise agreement, nothing prevents you from requesting further changes. However, be mindful that franchisors are generally reluctant to amend their standard agreement. Work with your lawyer to determine what’s worth requesting, and what’s worth accepting. There can be many instances where the franchise agreement will say something, but in fact, the Franchising Code of Conduct or another law override what the agreement says – if you already have that legal right you don’t need to request that change.
What happens with the lease
Larger franchisors sometimes handle the process of securing and negotiating your lease. You should ask from the outset what involvement your franchisor will have and if you’ll pay for this service. Franchisors who offer this and who have existing relationships with landlords can be an invaluable resource as they’ll know what you’ll need and what they can achieve. However, always obtain your own independent advice.
The franchisor’s involvement may be influenced by who’ll hold the lease. If the lease will be in your name, they may hold less interest, but if it’s in their name (and you’ll get a licence to occupy the premises) they’ll want greater control over the lease.
Be mindful that larger landlords (such as shopping centres), will be less willing to negotiate, but leases are always up for negotiation (more so than a franchise agreement). Remember again that the law implies certain provisions into leases, meaning that despite what the lease says about something, the law may override that. Extra caution is needed if the lease isn’t governed by retail leasing legislation. Your lawyer can advise you on what’s appropriate to negotiate.
Landlords often offer incentives such as rent-free periods or fitout contributions which can be negotiated for your circumstances. An essential thing to ensure is that the dates, term and options, as well as timeframes to renew under the lease, match those under your franchise agreement. You don’t want the time on your lease to expire but still have a franchise agreement on foot, or vice versa.
Takeaways
Always remember that if you don’t ask for something, you’ll never know if you’ll get it. We’re often surprised at the amazing deals franchisees can negotiate which really put them ahead of their competitors. A little forethought and planning in consultation with your professional advisors can help you secure a franchise agreement and lease for a successful business.
By Luke McKavanagh, Stone Group Lawyers

Luke is a regular contributor to online and print media for Inside Franchise Business. This article was previously published on pages 114 to 117 of the May/July 2019 print edition of the Inside Franchise Business magazine. View an online copy of the magazine here: https://issuu.com/franchisebusiness/docs/ifb0519-digital
The post Legal Advice: How to get the best franchise deal appeared first on Stone Group Lawyers.

Setting the dates for a new franchisee to start training and business operations can be somewhat like a tug of war. Everyone and their respective professional advisors will have different motivations during this busy time. Knowing the competing issues at play and having a well-structured process will ease the formation of your exciting new business relationship.
Legal Considerations
From a legal and risk management perspective, every franchisor should start by making a flowchart. This should account for the minimum time that each step will take. Some of these steps should include:

Assess the prospective franchisee’s application and do your background checks into their suitability. Don’t rush to the next step until both of you are happy to proceed with the franchise.
Issue disclosure documents to your prospective franchisee as early as possible. Streamline this by obtaining their consent to issue disclosure by email (for instance, incorporating an authority into your franchise application form). The franchisee must have these disclosure documents in their possession for at least 14 clear days. During this time they must return a signed receipt for the documents.
Once the receipt is returned, the franchisee can sign their franchise agreement from day 15 onwards. At the time of signing they must also provide a written statement:

confirming they had a reasonable opportunity to understand the disclosure document and Franchising Code of Conduct (Code); and
indicating whether or not they obtained independent legal, accounting and business advice.

When the franchisee signs the franchise agreement (unless they’ve previously made a non-refundable payment to you), their 7 day cooling off period will start.
Wait 7 days for the cooling off period to expire, then start your training program.
Depending on how your franchise agreement is structured, the franchisee’s commencement date for their business operations will generally be once training is completed successfully.

Risk Management
Whilst there’s no legal requirement to follow this process when setting a training date, it’s preferable from a risk management perspective.
Commencing training before cooling off expires runs the risk that your franchisee may ‘cool-off’ and walk away from the deal during (or even after) training. Yes, a well-drafted franchise agreement may give you a degree of protection by:

allowing you to recover the costs you’ve incurred in providing that training, but you will have lost your valuable time;
binding the franchisee to confidentiality obligations, but you can’t erase trade secrets learnt during training from someone’s memory.

If you’ve trained a franchisee before they’ve signed their franchise agreement, then if they have a change of mind, recovering the costs you’ve incurred can be complicated.
 
Finally, always remember that you cannot ‘enter’ into a franchise agreement with a franchisee or accept a non-refundable payment until you’ve satisfied Step (3) of the above process. That generally means that you shouldn’t allow a franchisee to start operating their franchised business until you’ve satisfied that Step.
Site-Based Franchises
Franchisees can hesitate to sign a franchise agreement (or even to sign the receipt for their disclosure document) until the lease is negotiated.
 
Franchisees holding the lease in their own name generally prefer to wait and sign the lease and the franchise agreement concurrently. They’ll be hesitant to commit to a franchise agreement without having a guaranteed lease, and vice-versa.
 
If the franchisor will hold the lease, again, franchisees will generally prefer to see the final lease before signing the franchise agreement. Under the Code, a franchisor is only required to give a franchisee a copy of the lease within 1 month of the lease being signed. This can be problematic for franchisors wishing to secure a franchisee for a site with a far-off operational commencement date, and no final lease in sight (such as a shopping centre under early stages of construction).
Finance
Take time to understand how the franchisee will be funding their initial fees and start-up costs. Securing finance approval is rarely a simple process. Sometimes a financier/bank will want to see a signed franchise agreement and lease before granting finance approval. For a franchisee, signing these documents before having guaranteed finance is a risk in itself – signing a franchise agreement kickstarts the cooling off period, and leases aren’t subject to a cooling off period.
 
Remember, the franchisee will generally have their:

financier wanting to see documents before approving finance; and
lawyer warning not to sign anything until finance is unconditionally approved; and
franchisor (and possibly landlord) wanting the franchise agreement/lease signed immediately.

Licences and Permits
Finally, always factor in the time the franchisee will need to secure the licences and permits necessary to operate their business. These can include a food licence, liquor licence or building licence, which will all take time.
Takeaways
If you want a smooth transition into your franchise relationship, establish a clear timeframe and be prepared for open communication and some simple planning ahead.
Luke McKavanagh is a regular contributor to online and print media for Inside Franchise Business. This article was previously published on the Inside Franchise Business website: https://www.franchisebusiness.com.au/news/time-franchisees-start-dates/
 
The post How to time a franchisee’s start date appeared first on Stone Group Lawyers.

Franchise buyers can often have many common misconceptions about franchising.
On Saturday 1 June 2019, Luke McKavanagh of the Stone Group Lawyers team busted some of the fake facts in franchising during a seminar at the Brisbane Franchising & Business Opportunities Expo.
Presenting alongside Sarah Stowe, Editor of Inside Franchise Business, Luke worked the audience through some of the key things a franchisee should know before they enter into a franchise agreement.
It’s important to first go back to basics and note that the Australian franchising industry is governed by stringent regulations in the form of the Franchising Code of Conduct (Code). The Code aims to set a balance in the power held between franchisors and franchisees. Someone who is new to franchising can often be confused by many of the terms used in this unfamiliar industry, leading to certain misinterpretations.
Myth 1: the 7 day cooling-off period means I’ll get all my money back
The right to “cool-off” can be a favourable option for nervous franchise buyers who view it as a “get out of jail free card”. The myth here is if you buy a franchise and change your mind within a week, then you can step out and recoup your money.
The 7 day cooling-off period does in fact have some strings attached. Yes, you can walk away from a franchise agreement within 7 days of signing it and you don’t need to provide a reason. Within 14 days, the franchisor must give you back any money you have paid.
However, the franchisor is entitled to retain their reasonable expenses, provided those expenses or the method for calculating them has been set out in the franchisor’s disclosure document. These expenses generally include:

The franchisor’s legal costs connected with preparing the franchise agreement. These can usually be a couple of thousand dollars, or sometimes more, depending on whether there’s also a lease involved.

An amount representing the reasonable costs the franchisor has incurred in recruitment, administration and management time towards you. This is usually a specified figure within the franchise agreement or the disclosure document.

The costs of providing any training to you. This is generally a pro-rata proportion of the franchisor’s standard training fee. For example, if their standard training fee is $5,000 for 5 day’s worth of training, and you only completed 1 day of training, then the franchisor will generally keep $1,000. If the franchisor incurred expenses in travel and accommodation to provide you training, then those expenses may be recovered from you in addition.

If the franchisor hasn’t provided you training but they’ve already booked flights and accommodation, then the costs incurred in cancelling these would also normally be included.

Other expenses that the franchisor might retain can also extend to losses the franchisor would incur if their “opening package” couldn’t be re-used for another franchisee. For example, if the franchisor has spent money towards registering your business name and arranging stationery, signage and marketing materials with your name on it. If you’re keeping the premises’ lease and the franchisor has fitted out your premises, then they’ll also be looking to recover those costs.

These amounts can quickly add up and can sometimes be rather high, depending on the particular franchise system.
Always remember, cooling-off only applies to a new franchise grant. It won’t apply to a renewal, the purchase of an established business or the variation to an existing franchise agreement.
Myth 2: “Good Faith” means that my franchisor can’t force me to do something
This can often be a difficult one and involves looking at the roles of each party, and how good faith relates to the franchisor-franchisee relationship. The starting point is to look at what “good faith” means in legal terms.
Asking what the limits of “good faith” are can be like asking “how long is a piece of string”. The Code doesn’t define “good faith”, so it’s determined on a case-by-case basis. It will include acting honestly in dealings with one another and not acting arbitrarily, and cooperating to achieve the purpose of the franchise agreement. Importantly, it doesn’t prevent a party from pursuing their own legitimate commercial interests.
What this essentially means is that the franchisor needs to act reasonably. If the franchise agreement clearly gives the franchisor the right to tell you to do something, then you generally need to do it. It’s then up to you to assess whether what you’re being told to do is in fact reasonable.
For an example, let’s use a restaurant franchise, and let’s assume that the franchise agreement permits the franchisor to give these certain directions:

If the franchisor tells you that you need to use their menu, decorate in a certain way, and offer table service, then that’s probably reasonable. Franchisors need to maintain uniformity within their franchise network. However, if the franchisor was asking only you to do this, and none of their other franchisees, that might not be acting in good faith.

If you only accepted cash payments from customers, then it would be reasonable for the franchisor to direct you to install an EFTPOS facility, given that’s the way people generally now expect to pay for services. It probably wouldn’t be good faith for a franchisor to direct you to accept Bitcoin payments, given that’s not a common form of currency for the restaurant industry.

If the restaurant was located in a shopping Centre next to a movie theatre, it would probably be reasonable for the franchisor to direct you to trade late-nights. It probably wouldn’t be good faith to direct you to stay open until midnight if you weren’t in a location with justifiable foot traffic, or late-nights weren’t common for your particular style of restaurant.

Asking you to obtain a liquor licence would probably be reasonable if you offered sit-down dining, but it probably wouldn’t be reasonable if you were a standalone ice-cream store.

Myth 3: Everything important about the franchise is in my franchisor’s disclosure document
When you’re looking into buying a franchise, there will be many things to consider, and information to absorb. The franchisor’s disclosure document is just one of these.
A disclosure document will contain some of the key details that you’ll need to make an informed business decision about whether to enter into a franchise. It’s up to you to use the disclosure document as a starting point for your own due diligence enquiries. There are many other important things to consider:

Yes, the disclosure document should ideally list the key expenses that you will foreseeably incur during the course of the franchise, but it shouldn’t be a substitute for you coming up with your own budget in consultation with an accountant and business advisor. Just look at the way that things like the costs of petrol and electricity can fluctuate – always plan that the costs of running your business may change.

One of the most valuable things in the disclosure document will be the contact details for the current and former franchisees. Don’t just look at a list of 50 names and think the franchise system must be growing well, and then stop there. It’s how you contact these people and what you ask them that is important. Contact as many of the current franchisees as possible and ask for their honest feedback about the franchise system. Are they happy in their business? Does the franchisor offer good support? Where would they like to see improvement? For those people who have left the system, why did they leave?

The disclosure document will contain a current snapshot in time of the franchise system. It won’t show you what things might be like in 2 or 5 years’ time. Do your research and your planning into the industry and have a thorough business plan. What might be a booming industry today could be a forgotten fad tomorrow. Ensure that your investment in the franchise will deliver a return.

Finally, don’t rule out other opportunities just because you’ve obtained a copy of the disclosure document for your ideal franchise. Continue to explore your other options. Push to get the disclosure documents for the franchise systems that are second and third in line on your list. You might identify something that’s a deal maker (or a deal breaker) that you had never even considered.
Myth 4: My franchisor has nominated a site/territory, so I don’t need to do my own investigation into its viability
Just because something looks great on paper doesn’t necessarily mean it will work well in practice. Yes, your franchisor is probably very experienced in site selection and will know what works (and what doesn’t) for their franchise model. However, this is no substitute for your own independent investigations into your proposed site or territory.
There’s a few things you can do as homework to assess the viability of the franchise offer:

If you’re being granted a territory, first establish whether it’s exclusive, non-exclusive or a mix. Exclusivity generally means the franchisor won’t grant another franchisee the right to, or won’t themselves, operate within your territory. From there, work out the size of your potential customer base. Get as many demographics as you can about the area. The number of prospective customers could differ greatly between an established city block with strict zoning (so, without population growth potential) compared to an up and coming urban area that’s quickly being developed and growing.

If there are performance targets that you will need to meet under the franchise agreement, ensure that your potential customer base will allow you to achieve those targets.

Do your research on the area’s local council. Order a town planning search and a main roads search to look for factors that might interrupt or decrease the desirability for your location.

If your franchise will be site-based, then loiter!

Visit that site as often as you can during different times of the day on different days of the week. Look at the foot traffic. Is the site in a standout location, or is it hidden away? Do the types of people fit the style of franchise?
Speak to other business owners in the area – what are their busy times and what are their quiet times? Do school holidays affect their trade in a good or a bad way?

Examine the lease with a fine-tooth comb. Are the annual rent increases sustainable? Are you granted exclusivity in the Centre (meaning the landlord can’t grant tenancies to competing businesses)? Are there plans for Centre redevelopments?

Myth 5: Legal and accounting advice isn’t compulsory before I sign my franchise agreement, meaning I don’t need it
Rather surprisingly, the recent parliamentary inquiry committee didn’t recommend legal and accounting advice to be mandatory in their report “Fairness In Franchising”. Regardless, many franchisors and professional advisors encourage franchisees to get advice.
Your franchisor will have spent a lot of money on getting their own legal and accounting advice over the years in order to put themselves in a certain position – and that’s a position to protect themselves.
You need to obtain your own independent advice so that you fully understand the differences between the franchisor’s position, and your own position.
Legal advice will ensure you understand the meaning of what your franchise agreement says, and where the benefits sit, as well as the risks.
Accounting advice will ensure that your business is set up in the correct way from the outset to reflect your circumstances, and assist you to assess whether the business will be financially viable to maximise your return.
Think of both these forms of professional advice as an investment. Without this advice, you’ll be at a disadvantage as you’re not going into the business with both eyes open.
Not getting the advice at the right time can really restrict your ability to exercise and take advantage of your rights in the future.
A lawyer or accountant with franchising experience will have read franchise documents from dozens of different franchise systems, and will have guided dozens of franchisees through various transactions. We know what to look out for and the advice you need to fit your circumstances.
Myth 6: My franchisor has already built the brand’s reputation, meaning I don’t need to work hard in my business
One of the biggest myths in franchising is thinking that you don’t need to work hard because a brand has a good reputation. When you buy into a franchise, you’re pigging-backing onto the franchisor’s reputation, giving you a degree of competitive advantage. However, you can’t afford to sit back and let the brand do all the work.
The success of a franchised business will be largely dependent upon a franchisee’s own business efforts. Yes, your franchisor has done some of the groundwork to get your first customers through the door, but it’s up to you to keep those people as repeat customers.
Don’t expect a business to run itself. Like any business, a franchised business will take hard work, time and dedication for the business to be successful. If you can’t see yourself working in the business daily and being happy doing that, then a franchise might not be the right choice for you.
Every franchisor is different. Some franchisors will be happy to give you guidance, support and hold your hand every step of the way. However, some won’t. Yes, if the franchisor provides you with a comprehensive operations manual and a great training program, that will be a great start. It’s up to you to take those systems and procedures onboard and apply them in practice.
Myth 7: My accountant told me to set up my business using a company/trust therefore I have no personal responsibility to the franchisor
Just because you may be operating your business through a company and/or trust, doesn’t necessarily mean you won’t have any personal responsibility. This is where legal and accounting advice at the right time is key.
Most franchise agreements include what’s called a personal guarantee. This means that the company’s directors and shareholders can be held personally liable to the franchisor. If your company owes the franchisor money, then they can demand you to personally pay something overdue. If the franchisor ever becomes entitled to sue your company, they can sue you personally.
Even if your franchise agreement doesn’t contain a personal or director’s guarantee (which is uncommon), there is usually a provision that says one of the company directors needs to be nominated as the day-to-day manager of the business. That person will then be personally responsible for overseeing the business and ensuring it’s operated in accordance with the franchise agreement. There will usually be a requirement for that manager to devote a specified amount of time working in the business each week. If the person named as manager doesn’t fulfil their duties, then this can place the franchisee in breach.
Therefore, ensure you carefully read the franchise agreement before you sign it. Many franchisees don’t understand the implications of giving a personal guarantee. If the business fails and the company is wound up, then the company directors can continue to remain liable to the franchisor.
Myth 8: I’m sure my franchisor will be flexible if I want to sell different products/services and use different suppliers
Entering into a franchise agreement involves a certain degree of give and take. The franchisor is handing you a proven business model for success – you’re not starting from scratch as if this were a new independent business. In exchange, a franchisee agrees to abide by the franchisor’s rules, regulations and restrictions for running the business. Entering a franchise therefore means you give up a certain degree of control.
Most franchise agreements place restrictions on a franchisee’s ability to introduce changes into their business. Generally, any change needs to be approved by the franchisor, who has the discretion to say yes or no. Think back to what we said earlier about good faith – if the franchise agreement gives the franchisor control over something, then they will generally be entitled to exercise that control.
It’s in the franchisor’s best interests to ensure that there’s uniformity across their franchise system, but it’s also in their best interests to grow the system through innovative new ideas. Therefore, every franchisee generally needs to be using and offering the same products and services, and this can extend to suppliers. If one franchisee is doing things differently, then this can disrupt the uniformity and the success of the entire franchise model.
Sometimes your suggested change will be a great idea, and the franchisor will allow the change, and even ask the other franchisees to adopt and follow your example. However, some franchisors aren’t this flexible. If you want to introduce a change, then when asking for permission, be prepared to make a case to justify your reasons. Remember, generally, one of the benefits of investing in a franchise is the opportunity to enjoy discounts and preferential deals with approved suppliers. One franchisee introducing a change can have a ripple effect across the entire franchise system.
Be mindful of whether other franchisees would have the capacity to adopt the same change in their business. For example, you may have found a supplier who can supply your ingredients for a cheaper price:

Your new supplier may not have the capacity to also supply products to the rest of the franchise network. They might not be reliable in delivery frequencies. They might not be able to deliver consistency in quality. These are all factors that would usually have gone into the franchisor’s original decision to nominate their preferred supplier.

On the other hand, if franchisees stop buying some products from the franchisor’s nominated supplier, this may disrupt rebate and discount schemes. Franchisors generally have arrangements in place with their nominated suppliers who will supply different things to franchisees. Sometimes whilst one product may be available elsewhere for cheaper, in exchange for charging that premium price on one product, the supplier may sell another product to the franchise network at discounted rates.

In other circumstances, a rebate might be paid back to the franchisor in exchange for all franchisees using the preferred supplier. Many franchisors will then reinvest this rebate back into the franchise system, for example, into marketing. The franchisor may not want to disrupt this rebate scheme.

Takaways
Doing some homework and getting professional advice at the right time is an essential step before you commit to a franchised business. It’s not meant to deter you from the franchise, but rather, it ensures you are fully prepared to know both the benefits and the risks of the deal.
Luke McKavanagh is a regular contributor to online and print media for Inside Franchise Business. Stone Group Lawyers thank Sarah Stowe for her contributions towards the original seminar on this topic.
DISCLAIMER:        This article is only meant to give you general information and should not be relied on as legal advice. Speak to one of our lawyers for more information.
The post 8 Common Myths in Franchising: Busted! appeared first on Stone Group Lawyers.

Luke is a skilled commercial lawyer who specialises in franchising, business and property law. He will strive to be an essential part of your business’ team.

Luke has spent a number of years acting for a diverse range of multinational franchisors. His experience includes advising franchisors on day-to-day operational issues and regulatory compliance, drafting/updating franchise agreements and disclosure documents, and acting on new grants/renewals/resales. From the setting up of new franchise systems, to working closely with established franchisors, Luke assists his clients maintain that careful balance of a healthy franchisor/franchisee relationship.

Acting for franchisors is only just part of his experience. He has helped franchisees of many different franchise systems achieve that exciting goal of becoming a business owner. After giving advice to determine the best business structure, Luke carries out a comprehensive review of franchise agreements, gives plain-English advice on the key terms and considerations to cut through the legal jargon, and then negotiates changes. He’s then just a phone call away to answer any questions once the business is up and running.

Luke has also assisted many franchisees and franchisors resolve their differences in times of dispute, helping his clients navigate the process of issuing and/or responding to breach notices.

Luke isn’t just about franchising though. His days involve providing advice on a wide variety of commercial issues that arise in operating small to medium businesses, where he assists clients who are growing their business or wanting to protect what they’ve established. This includes acting on business sale and purchase transactions, to reviewing and negotiating retail and commercial leases for tenants. He is also experienced in acting for landlords.

In his spare time, Luke is an active member of both the Queensland Law Society Franchising Law Committee and the Franchise Council of Australia Legal Committee. These committees allow him to keep on the forefront of the latest developments in laws affecting franchising, and to contribute towards government submissions on topical issues facing the franchising industry.

The post Introducing Luke McKavanagh to Stone Group appeared first on Stone Group Lawyers.