Is my email a binding Contract?

It is a surprise to many of our clients that the exchange of emails can constitute a binding Contract. The courts are frequently holding people to these Contracts and it is a topic that requires some careful consideration in times where email is the dominant method of communication. Stodgy old paper Agreements with a lengthy witnessing clause might get left on the desk when parties are talking. However, if there is sufficient dialogue and certainty of terms by email, that may be enough to create a legally binding agreement. When parties are negotiating it is a real danger time and there are some rules that should be followed during those exchanges. Although the Courts are often perceived as being backwards in regards to technology, they have in fact responded to this shift in communication by accepting email as a means of creating binding agreements. Not all business managers have caught up with this trend and are regularly placing their company at risk.  It is a mistake to believe that what is said or agreed over email is not binding, and that a legally binding contract is only made when a formal written document is signed. Take a look at some recent cases with us and let us know if you have a similar issue in your business. EMAIL NEGOTIATIONS – BINDING OR NOT? If you have started to negotiate by email but don’t want your emails to be a binding contract, then you must clearly state in your emails that “no binding agreement is formed unless and until a formal contract has been executed”. If you don’t expressly state...

Electronic Signatures – Binding or Not- Part 2

Last week we talked about different methods of electronic signatures and why the process is important for binding agreements. This time we round off the discussion about how best to achieve the signing by law What are the obvious legal risks? There is a risk that the identity of the person using the private key is not accurate, or at least may be subject to a legal challenge. This would be similar to a situation where a handwritten signature is required and a person fraudulently signs the contract. There is no practical way to verify the person’s identity with one hundred percent certainty using digital signature tools. Arguably the biggest failing with digital signatures and public-key cryptography generally, is that they are dependent on the private key being kept secret. If the private key is exposed, it is open for someone to dispute that they were indeed the person who “digitally signed” a document. If a targeted cyber-attack or data breach exposed a private key, then it would have a cascading effect on the enforceability of digitally signed documents which depend upon that key. Accordingly, some may argue that this is also true for more traditional methods of signing, although there is certainly still a commonly held belief that wet ink signing trumps digital signatures in security – this is largely due to the fact that a wet ink signing can be witnessed and verified by another person also signing by a wet ink signing. To help reduce this risk, there have been a number of additional verification and authentication techniques made available to users. Most digital signature software...

Electronic Signatures – Binding or not? Part 1

It is a strange thing to find yourself increasingly challenged by the pace of change, and none greater than the impact of technology. People live in a very different way, than say 20 years ago, when I started this business, and the way we communicate with each other is fundamentally altered. We are under real pressure to respond faster, process more efficiently and create a platform of client interaction that meets the “what’s in it for me” requirement. We live in a smaller global community, events and the means to communicate have become easily accessible and barriers of distance and time zones have been removed. The way we conduct business transactions is also affected and the bridging of the international barrier has meant much of the mindset has fallen away. People see no issue with downloading agreements from different jurisdictions and using templates for negotiations in many different circumstances. This is regardless of the legal technicalities concerning enforcement if the deal goes bad and great caution should be exercised. Consider the types of transactions affected, the purchase of foreign goods or services on-line, a merger or takeover by a foreign company, property investments by non-Australian residents, contracts for Information Technology and multi-jurisdiction commodity agreements.  These are all regularly negotiated and confirmed using electronic documents and communications. It is all very well to have documents downloaded, but how do parties effectively sign them? Are electronic signatures in fact legally binding, and can they be used as evidence in court? The law of contracts formed through electronic means is a tricky area, so consider the following legal issues about electronic signatures....

Employee Share Schemes (ESS)

  It has been a little while since I have had an opportunity to blog about interesting things I encounter when helping clients. The year goes quickly and despite the arctic vortex freezing us there is some heat in business activity right now. It seems that there is a bit of political football going on with major policy decisions but there is one small glimmer of hope for those business owners wanting to give further incentive to key employees. Take a look at the recent amendments to the Income Tax Assessment Act 1997 which will mean that many small companies can offer tax effective incentives to employees under an employee share scheme (ESS). What are the new rules? The new rules operate from 1 July 2015, for companies that are: Not listed; Comprising turnover below $50 million per annum; and Incorporated for less than 10 years. This will appeal to many of our small to medium business clients. If  shares in the company are issued to a key employee, it is not counted in the employee’s assessable income on one big condition.The discount on the price of shares cannot be any more than 15% of the market value of the shares in the company. This would require an accountant to do a valuation of the shares as at the date of issue. Options to acquire shares at a later time, require different rules. If the exercise price of the option is equal to or more than the market value of the shares at the time that the options are granted, it is not assessable to the employee. This is great news...

Timing is everything securing rights under PPSA

The significance of timely registration of security interests under the Personal Property and Securities Act (PPSA) has been delivered in the recent case of Relux Commercial Pty Ltd (in liq) v Doka Formwork Pty Ltd. The case required consideration of Section 588FL of the Corporations Act. Section 588FL provides that certain security interests under the PPSA not registered on the Personal Property and Securities Register (PPSR) within a certain period vest in the company that is being wound up. This case involved the following facts. Relux rented formwork equipment from Doka Formwork Pty Ltd (Doka) and operated a formwork construction business. Relux Commercial Pty Ltd (In Liquidation) (Relux) appointed administrators on 7 April 2014, and had possession of the formwork equipment. The administrators were appointed liquidators on 16 May 2014 at a creditors meeting. From March 2013 Doka leased the formwork equipment to Relux for indefinite periods. But, only on 20 February 2014 did Doka register a PPSR security interest. Formwork equipment was provided to Relux in 2013, while some had been leased in February and March 2014. The liquidators applied to the court for a decision on who had superior rights and interest in the formwork equipment. His Honour determined that Doka’s leases were ‘PPS leases’ under Section 13 of the PPSA because they were for indefinite periods, and Doka’s business leased such goods to the public. His Honour then considered the Corporations Act, Section 588FL, regarding the timing of Doka’s registration. Section 588FL provides a PPSA security interest vests in a company where, at the time of administration or liquidation: (a) The security interest is enforceable against third...

Crowdfunding Capital Some Key Points

A new report outlines the recommendations to enable a different capital raising method. The key points of proposed crowdfunding  laws are: Equity crowdfunding will have legislative sanction under the Corporations Act. Existing company structures will be adjusted to raise crowd equity, rather than create a new type of entity. Intermediaries, such as website operators, will be regulated and most likely must be licensed. Whilst crowdfunding has a natural home in the start-up space, the Federal Government is also considering making it available for mature enterprises. Basically, crowdfunding is a company seeking capital funds, particularly early stage capital, offering its equity to a potentially large number of investors (the crowd) in return for cash. Those investors are inevitably sought through a website, the operator of which acts as an intermediary between the crowd investors and the company seeking the capital. The detail of the government’s legislative framework for crowdfunding has not yet been released but the CAMAC report put forward the following: Placing a cap on an issuer’s fundraising – no more than $2 million in any 12 month period. Introducing caps on investment levels – $2,500 per issuer, and $10,000 overall, in any 12 month period. Capital raising to occur via licensed intermediaries that are prohibited from providing investment advice, soliciting investors or having an interest in any issuing company. For further information please don’t hesitate to contact us....