Ex gratia payments are voluntary
Startup Contracts

Ex gratia payments are voluntary


Ex gratia payments are voluntary

1 August 2022

Ex gratia payments are a voluntary payment made by an employer and other organisations as a gesture of goodwill or to settle a dispute. Some people are suspicious of these payments in some situations. They can wrongfully think of them as payments to keep them quiet about a dispute. But this article focuses on ex gratia payments as part of an employment relationship.

What is an ex gratia to employees?

An ex gratia payment is a payment an employer makes when they are under no obligation to make one. This can be a payment made to superannuation as an act of goodwill, a bonus, paid on termination in addition to legal entitlements or when an employee retires to thank them for their service.

When is an ex gratia payment made?

Usually an employer makes an ex gratia payment when an employee is either terminated or they leave.

There is no set formula for what the amount of an ex gratia payment should be so you need to know how to identify this type of payment. Ex gratia is Latin for ‘favour’, so consider whether the payment has any conditions attached or an employer is legally bound to make the payment.

If either of these apply to a payment, it is not ex gratia. The whole point of ex gratia payments is that they are voluntary.

An example is that if an employer terminates your employment and lists your leave entitlements as an ex gratia payment. This is not ex gratia as they are legally obliged to pay out leave entitlements on termination. Another example is offering you an ex gratia payment to not start a business in competition. Again, this is not an ex gratia payment. It is conditional on you not starting a business that may compete with them.

What is an ex gratia payment on redundancy?

When an employer makes an employee redundant they may include an ex gratia payment as part of the employment termination payment as a gesture of goodwill for an employee’s service.

Offering an ex gratia payment to settle an employment dispute

There may be a time when an employer offers an ex gratia payment to settle an employment dispute. Whether you accept it or not depends on what you want as a settlement.

Consider whether the payment covers your costs and if there are any conditions attached to the payment. An employer may offer an ex gratia payment to stop an employee from making a legal complaint. If this is the case, it is not an ex gratia payment. There can be no conditions attached to a payment that is ex gratia.

How is an ex gratia payment calculated?

How an employer calculates an ex gratia payment depends on the employer and the situation. There is no set formula for calculating ex gratia payments.

Are ex gratia payments tax free?

When an employer makes an ex gratia payment as part of an employment termination payment, generally it is tax fee. But it will attract tax if it is paid to an employee while still employed. Calculating tax on ex gratia payments depends on why the payment an employer makes the payment.

Conclusion

An ex gratia payment is a gesture of good will, so it must not come with any strings attached.

It is wise to talk to your lawyer or accountant when you want to make an ex gratia payment or if your employer offers you one. They will be able to give you all the information you need.

Do you have any questions or experiences to share about ex gratia payments? Feel free to share them in the comments section or contact me directly for advice.





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Startup Contracts

Legal tips for a startup exit strategy and when you don’t have exit plan in your legals or any legals at all

Photo by Belinda Fewings on Unsplash

Legal tips for a startup exit strategy and when you don’t have exit plan in your legals or any legals at all

Updated: 28 March 2022

Founding a business with others is an exciting time. 

There is so much to think about and do that you may not think of a time in the future where you may need an exit strategy. 

But an exit strategy is wise because you never know what will happen in the future.

While you may not have an exit strategy now, this article offers legal tips about the steps to take before you see a lawyer if you do not have an exit plan. These can help you sort out your exit strategy so you can move on sooner.

Founders agreement & Shareholder Agreement

When you have an exit plan, it is usually in a founder’s agreement and/or shareholder agreement. 

The minimum exit terms usually cover:

  • Share treatment on exit such as the sale and/or ability to keep shares
  • Notice period
  • Confidentiality
  • Intellectual property.

If these terms are not in any of your agreements, prepare non-binding terms before seeing your lawyer.


Non-binding terms 

Non-binding terms are not legally binding.

These are terms informally agreed to by both parties when one wants to exit the business. These terms become binding when they are in contract form and all parties sign the contract to indicate their agreement. 

So if there is no exit plan in place, negotiate your exit terms informally to create non-binding terms before seeing a lawyer. This saves you a lot of money on legal costs.

Make sure you document, at a minimum, the following:

  1. The party who is to take action.
  2. Detail what they need to do to complete the action.
  3. The timeframe to complete that action.

The following is a template to use. It is for a co-founder leaving a company and includes some sample terms. 


Leave your questions and comments below and I will get back to you. Or contact me for more information.

Non binding exit terms sample

Company/Business Name and ABN 

Parties: [insert names]

Subject to both parties obtaining legal advice, below are the draft terms for your/my/our proposed exit. Both parties understand and agree that the terms will not be legally binding until they are formalised in a legal agreement that is prepared by a lawyer and executed by all parties.  

The following items are a guide  on how to start but they are not exhaustive:

  • [shareholder name] is to sell x shares back to [insert company name].
  • [director/employee anime] is to provide a handover of x, y, z by …. 
  • [director name] is to resign from a director’s role by [insert date] and the change is to be recorded with ASIC within 28 days of formalising this agreement.  
  • [company name/party name] will own intellectual property. 
  • [director name] is to receive $x for initial capital contribution. 
  • [director name] is to remain a director of the company. 
  • Confidentiality: Both parties agree not to disclose the exit terms other than the way described in the exit notice below. 
  • Mutual release: Both parties agree to mutually release each other from any liability in connection with [insert business/company/project name]. 
  • Exit notice: Both parties agree that notice of [insert co-founder’s name/s] exit will be by [insert name] OR both parties agree not to disclose the exit unless asked by customers and in this case the response will be [insert name] has moved on for another opportunity but it is business as usual here, and [insert name] will now be helping you. 
  • Social media: [Co-founder name] agrees to provide all social media login access details (if only one of the parties was managing accounts). 

Once you document your key exit terms, you lawyer will draft a legal document, a deed of release, with all the relevant details. 


Deed of release

A deed of release is the formal legal document used to document exit terms. 

Sometimes exit terms may be in an agreement with another name such as terms of settlement or a termination agreement. No matter what it is called, they all cover the same topic.

However, a deed is common and used over an agreement because it has a longer enforcement period if parties breach the terms.

The exit terms of both parties are set out in a deed of release. This provides comfort that no one will take legal action against the other. So it needs to be fair and the exit terms should be mutually agreed upon. Both parties release each other from liability and agree to keep each other’s information confidential among other mutual terms.

For more information about deeds and agreements, I have written several articles on the subject, including:


Limitation periods 

Under a contract, whether written, verbal or a hybrid of both, there is a limitation period for making a claim.

While it is 12 years or longer under a deed, it is best to act quickly so you can move forward. There may be a small chance of obtaining an extension in some circumstances, but it is not wise to risk it so act quickly. The following are the limitation periods for each state:

  • QLD, New South Wales and the Australian Capital Territory, the Northern Territory or Tasmania - 12 years 
  • South Australia or Victoria - 15 years; and 
  • Western Australia - 20 years. 

Note: If you do have a deed or agreement in place that covers the other aspects of the working relationship, the normal enforcement period that applies is six years for an agreement and longer for a deed (12 or more years depending on what state you are in). You can read about deeds in our other useful reads here: 


Bringing it all together 

When a co-founder wants to leave the business, check your legal agreements to see if there is an exit plan.

If there is no exit plan, prepare mutual non-binding terms. Once you have these sorted out, speak to a lawyer to have them accurately documented so they become binding.

Do you have questions or comments ? Be sure to leave them below.





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What is intellectual property, who owns it and how to protect it
Startup Contracts

What is intellectual property, who owns it and how to protect it

Photo by Patrick Tomasso on Unsplash

What is intellectual property, who owns it and how to protect it

Updated: 27 January 2021

It’s important to know what intellectual property (IP) is and who owns it so you can protect it.

Here’s a guide. 

IP meaning

Here’s what I mean by intellectual property - in simple terms, it’s an idea or proprietary knowledge.

This may include an invention, trademark, design, brand or the application of an idea. The idea has to be new or original. 

Some IP examples

Below are some examples of IP, while the list is long, it's not exhaustive:

  • algorithms; 
  • business names including domain and and domain names; 
  • circuits including circuit layout rights, integrated circuit, circuit layout or semiconductor chip layout or design, plan, drawing or design, or scientific, technical or engineering information or document;
  • charts and manuals including data and logic flow charts, user manuals, data structures;
  • computer program; 
  • content and designs for all websites and apps including written material, photographs, graphics, music, audio and video; 
  •  copyright or other rights in the nature of copyright subsisting in any works or other subject matter in this Schedule;
  • databases and database contents;
  • drawings and designs including but not limited to computer generated graphic symbols; 
  • e-commerce systems; 
  • invention or discovery;
  • logos; 
  • object code; 
  • patent or application for patent, right to apply for patent or similar rights for or in respect of any other Intellectual Property; 
  • product names; 
  • screen displays including but not limited to graphic user interfaces, web pages;
  • search engines;
  • software including text based HTML code;
  • source code;
  • trade secrets including but not limited to know-how, or right of secrecy or confidentiality in respect of any information or document or other Intellectual Property referred to in this Schedule.

Who owns the intellectual property

Employees vs contractors

Intellectual property created by an employee for an employer is owned by the employer, even if there’s no written or verbal contract in place.

As for contractors, the opposite is true. It’s the contractor that owns the intellectual property unless a written contract states the principal (entity that hired the contractor) is the owner.

What you need to protect your IP

For hires, a written contract is the best way to protect precious business intellectual property - and that applies for both employees and contractors. 

Even though a business automatically owns employee created IP, its important to let the employee know this to avoid any IP breaches. 

Transfer of IP deed or agreement

In many cases, contractors are also asked to sign a transfer of IP deed or agreement, this provides extra assurance to the employer and any investors (in addition to their employment or contractor agreement) that the IP has transferred and is owned by the business. 

Usually an IP assignment deed is the preferable format for an IP assignment because you have 12 years to enforce a deed compared to 6 years for an agreement. We wrote about the difference here

For your patents and designs, avoiding publicity is important

Patents + designs - avoid publicity

For patents and designs, beware of publishing your patents or designs if you are thinking of protecting your patent or design rights and have not applied for IP protection yet. 

Practically this means not posting about it on social media, presenting on it in public or disclosing it in trade journals. 

If you need to disclose your patent or design, a non disclosure agreement or deed is a good idea to protect your IP.

As always, get advice if you are in doubt.

Do you have questions or comments about intellectual property? Be sure to leave them below. 





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A guide to who prepares freelancer & MSA contracts & what's covered
Startup Contracts

A guide to who prepares freelancer contracts & what’s covered

Photo by Jose Escobar on Unsplash

A guide to who prepares freelancer contracts & what's covered

27 January 2021

As a freelancer, you’ll likely work with a mix of businesses - some small and some large.

So, who prepares the contract terms? You ? or the business your'e working with?

Here’s a guide. 

Master Service Agreement (MSA)

If you are working with a larger business, you’ll likely receive a contract from that business outlining the work you’ll complete, sometimes its called a master service agreement (MSA). 

This agreement covers the products and services you will be delivering. 

If you receive an MSA, it's a good idea to have it reviewed by a business lawyer. 

Below is what's usually covered: 

  • project start/end date 
  • product/service description 
  • fees
  • supplier code of conduct (if any) 
  • fees , expenses and payment
  • jurisdiction - the law that will apply e.g. NSW, Switzerland etc
  • record keeping & audit rights
  • transfer of IP rights
  • insurance
  • Indemnity 
  • liability limitation 
  • termination & consequences
  • confidentiality 

As a small business you'll want to pay special attention to payment terms as sometimes these can be quite long and onerous on small business cash flow. 

Ideally, you'll want payment terms that are 30 days or less wherever possible. 

Small and medium businesses

Small and even medium sized businesses may be happy to accept your freelancer contract terms (i.e. if you have already had them drafted beforehand).  

So what goes into your freelancer contract terms? Below is an idea of typical terms. 

Freelancer contract terms

Below are the typical key items in a freelancer contract:

  • product/service description 
  • term of contract
  • client responsibilities
  • fees & payment terms
  • expense reimbursement
  • late fees
  • intellectual property
  • warranties
  • indemnity for third party claims - for protection from client’s breach of a third parties IP rights
  • liability limitations
  • dispute resolution 
  • termination & termination consequences
  • confidential information 
  • marketing & promotions - ability to promote your work to add to your client portfolio 
  • relationship clause - clarify its not an employee/employer relationship 
  • subcontracting - ability to subcontract (if this will occur). 

Freelancer contract terms

Do you need to have your own contract terms prepared?

Ideally yes, because that way you can be prepared for situations where another party does not have contract terms ready and you can set your work terms clearly. 

I have worked with clients that have used their own terms in some instances and when working with larger clients, have used the larger businesses' terms. 

And, if you are going to use terms prepared by the other party, it's always a good idea to have them reviewed by a lawyer as well to make sure they are fair. 

How to display your freelancer contract terms 

How should you display your contract terms?

You may attach the terms to your invoice and make reference to them in the invoice for example, on top of the invoice you can write ‘by paying this invoice you agree to our terms over page.'  

Do you have questions or comments about freelancer contract terms? Be sure to leave them below. 





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A guide to using e-signatures in Australia
Startup Contracts

A guide to using electronic signatures in Australia

Photo by Kelly Sikkema on Unsplash

A simple guide to using e-signatures in Australia

Updated: 29 January 2021

The business case for using e-signatures in Australia is a simple one - they save costs, time and are easy to provide.

So are e-signatures valid ?

Rest assured, e-signatures are valid in Australia because of the Electronic Transactions Act 1999 (Cth).

In a hurry? You can jump ahead below. 

Electronic Transactions Act purpose 

The Electronic Transactions Act 1999 (Cth) is the reason why  electronic transactions are possible; this legislation promotes confidence in the use of electronic transactions. 

Below is a guide for how to use e-signatures in Australia. 

E-signature requirements

You'll need identification, reliability and consent to use an e-signature: : s. 10 Electronic Transactions Act 1999 (Cth). 

We'll go through these below.

Identification

A person’s signature will be valid if there’s a method that’s used to identify the person and to indicate their intention.

Reliability

The method used to identify a person must be reliable. 

To meet this requirement, signature software providers like HelloSign ask the person signing to enter their email address, this email address identifies the person that’s e-signing and satisfies the reliability criteria.

Consent

The person you are sending the e-signature to must consent to receiving it. This will not be difficult where you have received a request via an e-signature platform from the person who will be receiving your e-signed document.

Time of signature 

Generally, the time of the signature is taken to be the time when both of these events occur:

  • the recipient receives the signed document; and
  •  becomes aware that the e-signed document has been sent to them: s. 14A Electronic Transactions Act 1999 (Cth).

When to use e-signatures

You can use electronic signatures on a range of documents, below are some examples: 

  • customer order forms
  • client agreements
  • NDA’s
  • sales agreements; and
  • terms and conditions of sale 

When to avoid e-signatures

You should avoid using electronic signatures in these cases: 

  • where a document requires a witness to your signature 
  • any deed regardless of your state - you can read about signing deeds here.
  • powers of attorney 
  • wills, codicils and other testamentary instruments (they are excluded from the Electronic Transactions Act and must be notorised per the Succession Act 2006 (NSW).
  • filing of certain documents for legal proceedings in certain states and territories
  • certain documents for credit related services per the Consumer Credit Protection Act 2009 (Cth); and
  • official Commonwealth documents like passports. 

Why deeds should not be e-signed

While we’ve gone through signing deeds in detail here, below are the common objections from lawyers about certain formalities not being met:

  • witness - you need a witness for deed execution; and
  • paper - a deed must be printed on paper, parchment or vellum. While many argue that a soft copy deed may not meet this requirement, others argue if it's printed later, the common law requirement for paper is satisfied. 

My opinion - even if there is a common law argument, its best to avoid the legal headache and avoid e-signatures for deeds.

Addressing lawyers objections (based on the Corporations Act) 

Below is what section 127 of the Corporations Act 2001 (Cth) says about director signatures.

CORPORATIONS ACT 2001 - SECT 127

Execution of documents (including deeds) by the company itself

(1) A company may execute a document without using a common seal if the document is signed by:

(a) 2 directors of the company; or
(b) a director and a company secretary of the company; or
(c) for a proprietary company that has a sole director who is also the sole company secretary—that director.

(2) A company with a common seal may execute a document if the seal is fixed to the document and the fixing of the seal is witnessed by:

(a) 2 directors of the company; or
(b) a director and a company secretary of the company; or
(c) for a proprietary company that has a sole director who is also the sole company secretary—that director.

(3) A company may execute a document as a deed if the document is expressed to be executed as a deed and is executed in accordance with subsection (1) or (2). 

(4) This section does not limit the ways in which a company may execute a document (including a deed).

Some lawyers are apprehensive about e-signatures because of [2] above; they picture a paper document that has a seal affixed to it so assume that [1] above is also referring to paper. 

For the lawyers that are apprehensive, you may agree upfront with them:

  • a document may be e-signed under section 127; and
  • that you will print the document after its e-signed.

 Below we cover situations where an agent signs on a company's behalf.

Agents

Below is what the Corporations Act says about agents signing on behalf of directors, for example, when a director delegates to a worker signing on their behalf. 

CORPORATIONS ACT 2001 - SECT 126

Agent exercising a company's power to make contracts

(1) A company's power to make, vary, ratify or discharge a contract may be exercised by an individual acting with the company's express or implied authority and on behalf of the company. The power may be exercised without using a common seal. (2) This section does not affect the operation of a law that requires a particular procedure to be complied with in relation to the contract.

The principal should confirm with the other party that an agent will e-sign on their behalf and this should eliminate the concern about identity and consent criteria being met.

Where to sign

Below are some approaches that lawyers take for signing legal documents. Be sure to agree upfront the other party's preference. 

Option 2 is more practical for longer documents with multiple attachments. 

Option 1 

Sign every page and witness some pages. 

Option 2

Sign some pages as indicated, and for annexures, sign the first and last page of each annexure.

Key e-signature tips

Below are some key tips for using e-signatures: 

  • agree with the other party to use e-signatures
  • notify the other party if an agent will be e-signing (not the director(s);
  • agree the pages to be signed e.g. all pages or as indicated + first and last pages of each annexure.

As always, get advice if you are ever in doubt about how to use e-signatures.

Do you have questions or comments about using e-signatures? Be sure to leave them below. 





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Balance of probabilities meaning
Startup Contracts

Balance of probabilities

Balance of probabilities

10 December 2019

You've likely heard of the standard of proof 'beyond reasonable doubt' and possibly through TV shows. It's basically a standard of proof for criminal cases. 

Well, what about the 'balance of probabilities'?

The balance of probabilities simply means that disputed facts are compared to determine which set of facts are more likely to have occurred. 

A fact is proved to be true on the balance of probabilities if its existence is more probable than not.

Why does the balance of probabilities matter?

If you are ever involved in a civil matter (e.g. related to business or employment) that is likely to go to court, the balance of probabilities will be the standard of proof that the court will apply. 

This means, you will need to convince the magistrate that your version of events is more likely to be correct over the other parties version of events.

Some even put it this way: you'll need to convince the magistrate that your version of events is 51% likely to be the case over the other party with the losing 49% likelihood.

Got questions or comments about the standard of proof in a civil case? Be sure to leave them below.


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How to use a founders agreement at your startup
Startup Contracts

How to use a founders agreement at your startup

Importance of a founders agreement for startups

Updated: 30 June 2022

A founders agreement is essential for startups. It sets out the responsibilities and roles of all the founders, and protects everyone if things get messy down the track.

It is an exciting time starting a business and it is all too easy not to worry about setting up formal agreements right from the start. This can be a mistake. Although you may think all the founders of your startup are on the same page, it can derail down the track if you do not set out the crucial details clearly in a startup founders agreement.

When setting up your startup it can be hard to foresee anything going wrong. But planning for unforeseeable circumstances makes good business sense. Set out how you will make business decisions, responsibilities, capital contributions and the equity ownership of the business at a bare minimum. This sets clear expectations and minimise any disputes if they arise

Why use a founders agreement over an employment agreement ?

Firstly, unlike an employment agreement, all co-founders sign your startup founders agreement. This means everyone is bound by the same terms and has a clear understanding of the expectations.

Your startup may use a founders agreement instead of drafting individual employment agreements. Why? Because it cuts out the cost of multiple employment agreements.

The roles of your co-founders will change as you test and tweak your business offerings.

What information should you include about roles?

You will need a general idea of each founder’s functions. Further, you will need flexibility so that your founders agreement can allow for changes to their roles based on business needs.

How should your founder's agreement be structured?

Usually, the general duties and responsibilities of each founder are in the body of the agreement while the role descriptions are at the end.

Keep in mind that you will need to customise your founders agreement to meet the needs of your startup.

Tip. A lawyer experienced in working with startups can help you.

In addition, the following gives you an idea of helpful clauses to add to your founders agreement.

1. Duties and responsibilities

The duties and responsibilities of the founders may involve the following:

  • Carrying out duties with reasonable care and skill.
  • Complying with laws.
  • Complying with the direction of management.
  • Raising capital.
  • Building management teams.
  • Exploring market opportunities.

2. Decision making

What's a significant decision?

You can define what a significant decision is in your founders agreement. For example, seeking $1,000,000 in funding or making a decision about logo colours might be significant for you.

Decision-making clauses outline who will make the significant decisions and the consultation process.

3. Resource contributions

Personal savings, business loans or investor capital are all potential sources for resource contributions.

Funding is a major decision for your startup and, because of that, it’s wise to include this clause.

You may want to repay each co-founder their contribution with interest where one co-founder has made a more substantial contribution than the others.

You may also decide to repay any startup loans before making any other profit allocations.

4. Conflict of interest

A conflict of interest may exist where the aims of a co-founder and your startup are incompatible. This is where clearly defining roles and responsibilities is crucial to help prevent this.

So it is important to have a conflict of interest clause in your founders agreement so everyone understands this before they arise. Your conflict of interest clause can require each founder to disclose any potential or existing conflicts of interest.

5. Restraints

You can include a restraint clause to prevent each co-founder from working with or for a competitor either before or after their term with your startup.

Employment restraints are typically from three months to two years.

Any restraints should only protect the legitimate interests of your startup.

6. Confidentiality

Confidentiality clauses stop co-founders from disclosing confidential information about your startup during and after their term.

7. Intellectual property

An intellectual property clause normally states that all intellectual property is the property of your startup.

Logos, trademarks, designs, business plans and source code are all intellectual property.

An intellectual property clause protects your startup should a co-founder leave and wish to make a claim.

8. Mediation

Mediation clauses help you to minimise the escalation of disputes to legal proceedings.

Parties usually share mediation costs equally and the mediation clause outlines the procedure for choosing a mediator.

9. Variation

Variation clauses gives you the flexibility to change the terms of the agreement including the position descriptions.

10. Termination

Termination clauses practically set out what happens when the agreement ends. For example, each co-founder must hand back company property and not divulge confidential information.


Conclusion

It's important to have a clear idea of what matters most to you and your co-founders and include this in your founders agreement.

Tailored employment agreements can take the place of the founders agreement as your startup grows and you have more cash flow.

Got questions or comments? leave them below.

I wish you every success in your ventures





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Startup Contracts

The different types of terms and conditions for your business

The different types of terms and conditions for your business

Updated 30 March 2022

You are likely most familiar with website terms and conditions, but there are others types of terms as well.  

Here’s what  you need to know about the different types of terms and ways you can use them in your business. 

All-in-one terms

All-in-one terms sound appealing but they are not ideal. 

I am referring to terms that cover website use, affiliate and reseller terms, refund policies and everything else in between in one go.

Confusion and the time and complexity of searching for the answer are the two key reasons. 

Worse, these terms  may cause overwhelm for your customers and your customers may give up on reading them. 

While it may not be practical to have separate terms and conditions for each aspect of your business, you may wish to try grouping, I will explain this idea next. 

Terms

Before we get into the different types of terms and conditions, you’ll hear some terms that all mean the same thing. These are: terms of use, terms of service, terms and conditions and website terms. 

Titles aside, what matters most is the content of your terms. 

If you are unsure, check in with your lawyer before they start drafting them for you. At this point you should be talking to your lawyer about particular concerns you want to cover for. 

So what should you be aiming for?

Your goal

Aim for terms that cover key aspects of your business operations, are clear and limit your liability wherever legally possible.

You can always build on your terms as your business expands or pivots. This mindset helps clients not to get stuck reworking comprehensive terms that don't cover current operations. 

Grouping terms

Grouping your terms is a balanced approach. 

I suggest grouping your terms and conditions wherever possible for each set of your business activities. 

Below are some examples of how you can group your terms and conditions.  

Website

The website terms and conditions are perhaps the most commonly known by clients. They cover: 

  • Product delivery 
  • Payment terms including refunds 
  • Pricing errors 
  • Disclaimers of liability 
  • Indemnity 
  • Viruses 
  • Hacking incidents

Do you have many offerings sold on different terms? In this case, you may want terms for each offering.

Terms for each offering

As you develop more offerings that have different features, delivery, payment and refund rules, you may wish to have separate terms and conditions for each.

An example would be if you supply your products online and in a bricks-and-mortar store.

In this case, you may want to give your online shoppers more generous return time frames compared to your bricks-and-mortar customers, to give them peace of mind.

Promotions

You can have terms and conditions for each promotion that you run.

Below are sample items you may cover in your terms: 

  • Whether the offer is available with another 
  • How long the promotion will run 
  • Locations where the promotion is available 
  • Quantity limitation - e.g. one person per coupon, one person per day etc. 
  • Use limitation - e.g. coupon is only for person x, y or z

New or complex offerings

If you need to explain a new or a complex business process in many words, a new policy is going to be useful. 

Terms and conditions vs client agreement

Also, while you can have terms and conditions, in some situations you may also need a client agreement. 

For example, where  you are delivering bespoke services to a client that you are not delivering to all your clients, in this case, a client agreement is appropriate. Here are some examples: 

  • Loyalty discounts
  • Free product offer for a loyal customer 
  • Additional work to customise a product or service for a customer. 

I’ve written about the choice between terms and conditions and client agreements here.

Bringing it all together

Bringing it all together, here's what you need to know:

  • Terms are also known as terms and conditions, terms of service, terms of use and simply terms.
  • Break up your terms and conditions into categories for each aspect of your business
  • Example terms include website, promotions and product offerings.
  • Check if you also need a client agreement. 
  • Make sure your terms are clear and protect you from liability as far as legally possible. 

Always get advice if you are unsure. I wish you success in  all your ventures! 

Questions? Comments? Leave them below.





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Startup Contracts

The relationship clause in your contracts

The relationship clause in your contracts

Updated: 8 December 2019

The relationship clause is common in business contracts.

So what exactly is it?

It's a clause that clarifies the nature of the working relationship with the other parties to the agreement.

Sample relationship clauses

In its most basic form, the relationship clause will make a negative statement that the relationship is not one of employee and employer.

But in many cases, this is not enough.

Basic negative relationship clause

Here’s the basic negative relationship clause:

The service providers relationship with the client is not employer and employee.

Below is a more thorough relationship clause.

Relationship

  1. The Service Provider’s relationship with the Client is that of an independent contractor.
  2. Neither the Service Provider nor the Client will have (and must not represent that it has) the power, right or authority to bind the other, or to assume or create any obligation or responsibility, express or implied, on behalf of the other or in the other’s name;
  3. Nothing stated in this agreement should be construed as constituting the Service Provider and the Client as partners, in a joint venture, or as creating the relationship of employer and employee, master and servant or principal and agent between the parties;
  4. The relationship between the Service Provider and the Client is not exclusive. Either party may in any capacity work with, for or hire any third parties, works or services of any description.

Brief vs detailed

You are more likely to avoid disputes if you provide detail about what the parties relationship is and what it is not.

Why the relationship clause is important

The relationship clause is important for these reasons:

1. Contractor not employee

It clarifies an independent contractor situation so the other party is aware that they have not been hired as an employee and claims employee entitlements.

As a side note - it's not enough to say that someone is not an employee in a contract, then treat them as one off paper. This is called sham contracting and you can get into a lot of trouble for this.

2. Dealings with others

You can avoid a situation where a contractor holds themselves out as being authorised to act on your behalf.

3. No other relationship

In addition to clarifying that the other party is not an employee, you can avoid any other relationship misunderstandings, by clarifying there is no joint venture or agent relationship.

4. Exclusivity

Although last on the list, exclusivity is a big one.

You want to make it clear that the contractor has the freedom to work with other clients if this is the case without being locked into a contract that excludes this situation.

Note that one of the hallmarks of a contractor relationship is that the contractor is free to work with others. This is unlike an employee who is bound by the common law duties of loyalty and fidelity.

Be careful with contracts that claim a contractor relationship but impose restrictions on who the contractor can work with.

Questions? Comments? Leave them below.

I wish you success in all your ventures!


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Startup Contracts

Counterpart signing a deed or agreement

Counterpart signing a deed or agreement

Updated: 24 January 2022

There once was a time when a deed or agreement  needed all signing parties to be together to sign it. Or the one agreement had to circulate to each party for signing individually. 

Now an agreement or deed can contain a counterpart clause.

What is a counterpart clause? 

A counterpart clause in a deed or agreement allows all parties who need to sign it to sign separate copies [instead of everyone signing the same one]. This means that even though the signatures of all relevant parties are not on the same document, the sum of all the separate copies and signatures makes the deed or agreement binding.

Sample counterparts clause

This Deed may be executed in any number of counterparts. All counterparts, taken together, constitute one deed. A party may execute this Deed by signing any counterpart

Why use a counterpart clause? 

Use a counterpart clause when then there are many parties to the deed or agreement for the sake of efficiency and simplicity. But do not assume this is valid for all deeds and agreements. 

The document must have a counterpart clause in it before you can sign it in this way. Some deeds and agreements can specifically disallow counterpart signing. 

A requirement of a deed is that you cannot sign it electronically. So remember that when signing a deed that allows for counterparts you will need to sign a paper copy. This is especially important for documents which need the signature of a witness.

For more information about signing deeds, read How to sign your deed correctly. And for more information about signing agreements, read Useful tips to help you sign your legal agreements correctly.

Do you have any questions or comments about signing your documents? Ask below in the comments section or contact me personally. I wish you every success.






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