Welcome to the first edition of our Family Business newsletter. This regular newsletter is designed to provide information on topical legal issues facing members of family-owned businesses.
Cornwall Stodart is well-known and widely-respected for our work with family-owned businesses. We place emphasis on understanding the specific needs and idiosyncrasies of these businesses.
We have significant expertise advising family-owned businesses on business structuring; corporate and commercial matters; estate planning; retirement planning; succession planning for individuals and family businesses; wills and probate; workplace relations and employment matters; and resolving family disputes.
We have provided a range of legal advice and services to family-owned businesses in the retail sector, transport and extractive industries, to name a few.
Cornwall Stodart has proudly sponsored Family Business Australia for almost ten years. Elizabeth Guerra-Stolfa is a long-standing member of the Executive Committee of the Victorian Chapter.
If you would like further information on any of the topics in this newsletter or information on a different topic, please do not hesitate to contact us. We appreciate your feedback and hope to hear from you.
Elizabeth Guerra-Stolfa – Partner and Head of the Family Business team.
WorkChoices – Maintaining Employee Records
It’s now over 12 months since the Federal Government’s industrial relations legislation known as "WorkChoices" came into effect. WorkChoices has resulted in major changes in the areas of termination of employment, minimum conditions and agreement making. One area of change that has had an immediate and direct impact on all employers is - the new record-keeping requirements. All employers must ensure they are keeping the required records from 27 March 2007.
Below is an overview of the records that must be kept.
Employers must keep employee records in a condition that is legible and allows a Workplace Inspector to ascertain whether an employee is receiving their correct entitlements.
Records comprising the following details must be kept for all employees:
the name of the employer and employee;
the date the employee commenced their employment;
whether the employee is full-time or part-time and whether they are a permanent, temporary or casual employee;
rate of remuneration, including the gross and net amounts paid and details of any deductions;
any allowances, penalties, loadings, bonuses or incentive-based payments;
leave taken and accrued and any details of leave which the employee has elected to forgo;
if superannuation contributions are made for the employee (excluding those made to defined benefits superannuation funds), the amount of the contributions, name of superannuation fund, and details of choice of fund;
if applicable, penalty rates and loadings for overtime hours actually worked;
if the employee has agreed to an averaging of hours, a copy of the agreement must be accessible; and
the termination of an employee, including:
- the name of the person who conducted the termination;
- reasons for the termination
- how the termination took place (ie by consent, by notice, summarily or in some other manner); and
- the date of the termination.
If an overtime loading is payable the employee’s daily start and finishing times must be recorded.
If an employee's base salary is less than $55,000 (indexed each year) the total number of hours worked each day must be recorded.
Base salary does not include superannuation, loadings, penalties, bonuses or another similar entitlement.
All employers must keep written records in legible English for seven years and those records must be made available for inspection by Workplace Inspectors if required.
Congratulations
Congratulations to Louise Houlihan who has just been promoted to Partner at Cornwall Stodart. Louise heads our Workplace Relations and Employment team and has significant experience advising clients on the impact of WorkChoices on their business. She prepares employment related documentation such as employment contracts, workplace policies and procedure manuals. In addition, she provides legal and strategic advice to clients on a range of employment and industrial relations issues including industrial disputes, enterprise bargaining, wrongful and unfair dismissals, EEO and occupational health and safety.
When Does a Contract Become Binding?
People often believe that to be binding, a contract has to be in writing or that a formal document must be prepared and signed. This is not correct. Business contracts, while usually in writing, can be made by word of mouth. It is important to take great care in negotiating the terms of a contract.
To create a legally binding contract there must be:
an offer;
acceptance;
consideration; and
intention to create legal relations.
While it is common for contracts to be wholly written, they can also be wholly verbal, partly written and partly verbal, or even implied from the parties’ actions. Some contracts by reason of law must be in writing, such as those involving a sale or other disposition of land.
Negotiating parties may find themselves bound by a contract without one of the parties necessarily intending to be bound. You should always be careful when negotiating the terms of a contract that you make it clear to the other party if you do not intend to be bound by the contract until a specified point in time, e.g. a written contract signed by the parties.
Pre-contractual negotiations between parties can fall foul of the rules of offer and acceptance unless a party is careful to show there is no intention to enter a contractual relationship on the terms set out.
In Masters v Cameron the High Court outlined three situations that commonly arise when one party alleges a binding contract has come into existence prior to any formal documentation being signed:
The parties have finalised the terms of their bargain and intend to be bound immediately to perform those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect;
The parties have completely agreed on all the terms of their bargain and intend no departure from those terms but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document; or
The intention of the parties is not to make a concluding bargain at all, unless and until they execute a formal contract.
In the first two cases there is a binding contract. The contract binds the parties immediately to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document.
In the second case, there is a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution.
There is no binding contract in the third case. The terms of the agreement are not intended to have, and therefore do not have, any binding effect of their own.
While Masters v Cameron outlines only three situations, there can be a situation "in which the parties were content to be bound immediately and exclusively by the terms in which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms." In this case, all the terms of the proposed transaction may not be finally agreed between the parties and accordingly changes might be made in the terms proposed and new terms could be introduced. In such a case, there is a contract between the parties.
Whether or not a contract is binding will depend on the circumstances of each case. Factors which may indicate there was no intention by the parties to be legally bound before any formal documentation is exchanged include:
correspondence that shows the parties contemplated an exchange of contracts;
the magnitude and complexity of the transaction;
the subject matter;
vagueness in any documentation, such as guarantees;
tentative terminology in draft contracts; and
particularly in property matters, if the parties intended a deposit be paid and whether stamp duty had been paid.
These factors may appear to be of varying significance. The basic test is always whether a reasonable person would regard themselves bound by what they said and did, in light of the admissible surrounding circumstances to show a bound contract.
While the principles of law in this area are well settled, the difficulty lies is applying the principles to the facts. It is recommended parties, if it is their intention, make clear in their correspondence that they do not intend to be legally bound until formalities (such as the exchange of signed contracts) have been completed. One down side to expressing such an intention is it allows the other party to pull out at any time even after an oral agreement is reached until the written contract is signed. It is recommended that as soon as the terms are agreed the parties proceed to execute formal documentation quickly to prevent any uncertainty about the contractual position.
Sinclair, Scott & Co Ltd v Naughton (1929) 43 CLR 310
