You are on page 1of 2

Doing Business in Australia: Contract law | Clayton Utz

http://www.claytonutz.com/publications/edition/12_june_201...

Careers

Expertise

People

Community

Training

Publications and News

About us

International

English

!"#$ %& %')(

Search Clayton Utz...

Home Publications and News Insights (Newsletters) Clayton Utz Insights


Clayton Utz Insights
Redemption of units from a

Clayton Utz Insights

non-liquid MIS
The long arm of carbon
pricing: your long-term supply
contract might allow costs to

12 June 2014

Doing Business in Australia: Contract law

be passed on

By Matthew Johnson and Julia Millar.

Crowd control: regulating

Key Points:

crowd sourced equity funding


in Australia, part 2
Significant changes proposed

The basic principle of Australian contract law is freedom of contract, but there are

What others are reading

to Queensland's electricity
market

Australian contract law is based on the English common law, rather than on any codified or

Expanded powers and tougher

statute law. The basic principle of Australian contract law is freedom of contract, under which

penalties for environmental

parties are at liberty to strike whatever bargain they choose.

offences in NSW
Furthering the reach of class
actions: Gray v Cash
Converters

It is good practice to record the terms of a contract in writing no special forms or procedures
are required and Australian courts will give considerable weight to the expression of the
parties intentions evidenced in documentary form.

Doing Business in Australia:

These broad statements of principle are affected by some important legislation, notably, the

Contract law

Competition and Consumer Act 2010 (Cth), which cannot be contracted out of and may result

Previous articles of Corporate


/ M&A

Matthew Johnson

some restrictions on that freedom.

in legislative rights which override contractual rights in certain circumstances.

Aren't they just contracts?


The difference between
deeds and agreements
Direct vs consequential loss:
is there a difference
anymore?
An inconvenient truth with
termination for
convenience?
Doing Business in Australia:
Business structures

Parties

Previous articles of Litigation


and Dispute Resolution

Under Australian contract law, with certain limited exceptions, those who are not parties to a

Corporate / M&A

contract cannot be bound by it. This is known as the privity rule.

Litigation and Dispute

If a corporation which is registered under the Corporations Act is a party, its registered number

Resolution

an Australian Company Number (ACN), Australian Registered Business Number (ARBN) or


Australian Business Number (ABN) must also be cited for that party in all public documents.
Security over, or title to, assets
If a security interest is created over any assets which are personal property then the
Personal Property Securities Act 2009 (Cth) (PPSA) will apply. To preserve the interest of the
security holder, the interest should be registered on the Personal Property Securities Register
within the applicable time period. Personal property includes all property that is not land, or
certain rights granted by Commonwealth or State Governments (for example, a mining
licence).
The PPSA covers a broad range of security interests, including traditional forms of security as
well as interests created under retention of title provisions, hire purchase agreements and
certain leasing arrangements.
The registration of security interests is governed by the PPSA, relevant provisions of the
Corporations Act 2001 (Cth) and associated subsidiary legislation.
Restrictions on penalties in contracts
Under the general law of contract, it is permissible for parties to agree upon a sum of
liquidated damages, or the method of calculation of such a sum, payable by one party to the
other in the event of defined breaches of contract. This may be useful where monetary
damages may be difficult to calculate, and the parties wish to avoid the cost of dispute
resolution or litigation. Such an agreement on liquidated damages must represent a genuine
attempt to estimate the likely damages which may be suffered.
If it is imposed by one party merely as a threat to enforce compliance, is excessive, or is
specified to arise in circumstances which are vague, or may be triggered arbitrarily, then the
provision may be regarded as a mere penalty and not enforced by a court.
Restrictions on restraints of trade
Any restriction upon the dealing by a party to a contract (or deed) with third parties, including
employment by a third party, directly or indirectly, whether during or after the term of a
contract:

1 of 2

5/08/15 10:33 PM

Doing Business in Australia: Contract law | Clayton Utz

http://www.claytonutz.com/publications/edition/12_june_201...

may constitute exclusive dealing, conduct regulated by the anti-trust provisions of the
Competition and Consumer Act 2010 (Cth); or
may be a restraint of trade at common law, which if unnecessarily broad in the conduct
restrained, the time period of the restraint or the area over which the restraint operates, will
be void, and unenforceable by a court.
In the State of New South Wales (only), the Restraints of Trade Act 1976 (NSW) permits the
Supreme Court of New South Wales to limit the operation of a restraint to the extent that the
court considers reasonable.
Limitations and exclusions of liability
Subject to the operation of the Competition and Consumer Act 2010 (Cth) and the equivalent
sale of goods and fair trading legislation of the States and Territories, parties to a contract are
free to limit or exclude liability for breaches of contract, or in other circumstances. The party
seeking to rely on an exclusion or limitation of liability clause will, however, need to convince
the court that the clause in question, properly construed, is as that party contends.
Resolution of disputes
Australia is a party to the New York Convention on the recognition and enforcement of Foreign
Arbitral Awards. Accordingly, the award of an arbitrator (which can usually give any legal,
equitable and statutory remedies) will be recognised and enforced in the Federal Court or any
of Australias
State or Territory Courts as if it were a judgment of that Court.
International Contracts For The Sale Of Goods
Australia is a signatory to the Vienna Convention on Contracts for the International Sale of
Goods. This provides for uniform rules which govern the formation and performance of
contracts for the international sale of goods and sets up a framework of rules specifying the
obligations of parties to them.
The parties to a contract for the international sale of goods may agree that the Convention is
not to apply, and may select the laws of one of the parties home jurisdictions as the governing
law of their contract. If they do not do so, however, then the Convention will apply, and
incorporate into the contract the rules set out in the Convention.
This article is taken from Clayton Utz's Doing Business in Australia, the essential guide for
investors and business exploring commercial opportunities in Australia.

For more information, contact...


Email: Matthew Johnson, Partner
Tel: +61 8 9426 8540

Disclaimer
Clayton Utz communications are intended to provide commentary and general information. They
should not be relied upon as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted
in all states and territories.

QUICK LINKS

FOLLOW US

People

Careers

Sydney

61 2 9353 4000

Melbourne

61 3 9286 6000

Expertise

Community

Brisbane

61 7 3292 7000

Perth

61 8 9426 8000

Publications and News

Training

Canberra

61 2 6279 4000

Darwin

61 8 8943 2555

International Network

About Us

Copyright 2015 Clayton Utz

2 of 2

CONTACT US

Privacy Policy

Disclaimer

Copyright

Sitemap

RSS

Contact Us

5/08/15 10:33 PM