Business Associations - Template 2 (Australia)
Business Associations - Template 2 (Australia)
Business Associations - Template 2 (Australia)
structions, the principal is bound benefits and burdens from the time the agent acted. By Ratification, the relation of principal
Under the doctrine of privity of contract, only those persons who were immediate parties to a and agent is created retrospectively. This situation usually arises when the agent has
contract could acquire rights and liabilities under it. However, because of the complexity of 2. General Agency exceeded their authority.
commercial dealings, today it is often necessary for an individual to deal through others, such as Agent is authorised to:
bankers, brokers, auctioneers, factors, commission agents, managers, partners, company Make Ks of a certain class that are normal for such agents; OR Bolton Partners v Lambert
secretaries or solicitors to mention but a few. Where these persons negotiate on behalf of Do some act for a principal that forms part of the ordinary course of business for the - Lambert made an offer to agent of Bolton Partners. The agent had no authority to act for
individuals with third parties, they will be their agents. Agency is thus an exception to the agent Bolton Partners, but accepted the offer anyways. Lambert revoked the offer, but two days later
doctrine of privity of contract. Eg; manager of business has implied power to act as an agent of the business in all matters Bolton Partners ratified the acceptance of the agent.
necessary for the running of the business Issue-> can the unauthorized actions of the agent be ratified by the principle?
Agent Person employed to act on behalf of another Principle-> Held that the contract existed the moment when the contract between the agent and
Broker A mercantile agent who buys or sells goods for a principal, but who doesnt have 3. Universal agency Lambert was concluded. (I.E. When the agent enters into the original k.)
possession or documents of title. Power to do almost anything the P can do
Del credere agent A person who guarantees payment by third parties to the principal in return Usually appointed under a power of attorney TP offered to buy land from A (the acting manager of Pr), A did not have authority to sell land
for extra commission. Eg; a person going overseas for a long period of time could empower a close friend OR a parent but A accepted TPs offer. TP later revoked offer, but Pr was granted specific performance and
Factor A mercantile agent who, in the usual course of their business, has possession of the to act for them in their absence in any matters at all TP was not able to cancel.
goods or documents of title to the goods, of their principal and who can sell or pledge the goods
whereby the principal is bound by such sale or pledge. Step 3: Appointing of Agents Comment: Where a person acts without the principals authority, the principal may ratify
Independent Contractor A person employed under a contract for services who undertakes to the transaction, thus creating an agency relationship retrospectively. The principal then
produce a given result for an agreed price. 1. Express Appointments assumes the benefits and burdens from the agent acted.
Ratification The act of adopting a transaction by a person who was not bound by it originally Orally
Trust A fiduciary relationship where a person holds the title of the property for the benefit of Often an oral appointment is sufficient, however, a written appointment is the safest method Acceptance by the agent on behalf of the principal must be complete and unconditional.
another person. as it creates a degree of certainty between the parties. If acceptance is conditional, the acceptance would date from the date of ratification rather than
TrusteeA person who holds property on trust for another. In Writing the time of acceptance by the agent.
For reasons of security an appointment in writing is best. Statutes in each state require that
By definition, the agency situation involves three parties: many agency appointments be in writing, - for example- if the agency is to last for more than For ratification to be effective, the following conditions must all be satisfied or the agent
The Principal who passes the authority to act to the Agent, who in turn through this authority one year, or it is concerned with a contract for the sale of land or an interest in land, or for the will be personally liable:
affects the legal relations of the principal vis--vis the Third Party. sale or purchase of a business. 1. The agent must clearly be acting as an agent
By Deed 2. The agent must have a known principal. The principal must be named or
Agency can be distinguished from other types of relationships The appointment of an agent under seal is necessary in the following situations: identified.
Where the principal can only carry out a particular transaction by deed, the agents 3. The principal must exist at the time of making the contract
EmployerEmployee appointment for such a transaction must also be by deed. 4. The principle must have legal capacity to enter the contract.
An employee is expected to personally perform any directions that may be given to them by their Under a general power of attorney- for example, that given to a solicitor by a client can be 5. Ratification must occur within a reasonable time of contract being entered into.
employee. In the performance of these directions, the employee is subject to the control and under seal but where such power involves signing a transfer of land, the power of attorney is 6. Ratification is not effective if the original transaction is a void contract.
direction of the employer. As a general rule, an employee doesnt have the authority to affect an required to be registered. 7. Forgeries. Ratification will not make a forged signature good. But that person can
employers legal relations with third parties because there is no direct involvement with them. be estopped.
However, if the employer expressly or impliedly directs the employee to affect the employers legal 2. Implication or by conduct 8. Principle must have full knowledge of the rectification.
relations with third parties, then an agency situation will arise. Example: A shop manager may be In the same way as any other contract may be implied from the conduct of the parties, the 9. Ratification must apply to the whole contract
authorized to sell his or her employers products. existence of a contractual relationship may be implied from the conduct of the principal and the 10. Ratification can only be retrospective.
agent. The general rule is that an agreement may be implied where a reasonable person,
Director of Posts and Telegraphs v Abbot examining the conduct and action of the parties, would conclude that one party had Step 4: Authority of the Agent
Q: was the clerk an agent or employer with the ability to bind the employer? authorized the other to act as agent and that both parties had assented to the arrangement.
CT Held: no evidence of an intention by the employer to grant the employee power to make 1. Actual Authority
contracts 3. Operation of Law The actual or express authority of the agent will be found in powers expressly given by the
Comments An employee does not have power to affect the employers legal relations with third Cohabitation principal to the agent, implied in the agency agreement, and that arise from necessity or by the
parties unless the employer has expressly or impliedly directed the employee to act. Any such A spouse or de facto is presumed to have authority to pledge credit for necessaries suitable for operation of law.
agency situation should be within the scope of employees employment. their lifestyle. The onus of proof is on the supplier. If the supplier fails to show that the goods
supplied to the spouse were de facto were necessaries, then the supplier is going to have to sue The actual authority of an agent includes authority: to make representations (to say things) for
the spouse or de facto. which Pr will be responsible; to receive representations from TPs on behalf of Pr; to make K on
Employer-Independent Contractor
Necessity or Emergency behalf of Pr; to make payments for Pr; to receive moneys owing to Pr and to give receipt.
The employer employs an independent contractor to deal with the third party. When a contractor
An agent or necessity generally arises where a person who is entrusted with anothers property
deals wit third parties it is usually as principal. However, an agent can be an independent
finds it necessary to do something in order to preserve it. There are four conditions which must Hely-Hutchinson v Brayhead
contractor, as in the case of auctioneer.
be satisfied before such an agency can arise: TP was successful against Pr for losses after a failed takeover deal. The Agent the CEO had
**Employers will not normally be liable for the tortious acts of independent contractors. In the case
1. There must be a genuine emergency made various promises on behalf of Pr which Pr had refused to pay. The office of chairman did
of employees acting as agents, the employer is liable to pay either damages at common law or
2. It must be impossible or extremely difficult to get the principals instructions not give A actual authority to make the promises.
compensation under the relevant state Workers Compensation Act where the employee or agent
3. The person must be entrusted with anothers property;
is injured in the course of their employment. If the employee or agent injures a third party in the
4. The agent must act bona fide in the principals interests, and not merely for the 2. Implied Actual Authority
course of their employment, the employer may be vicariously liable for the employees tortious
agents own convenience. An agent has authority to do anything that is incidental to or necessary for the carrying out of
act.**
Agent of Necessity acts within their actual authority.
Step 1: Identify the Parties Great Northern Railway v Swaffield Actual authority may be impliedly created:
Horse arrived at rail station. Owner was not contactable. The Rail Company took the horse to a 1) To give business efficacy to a business agreement
a. Principal the person who grants authority stable and paid for its storage. Swafield refused to pay for the bill. 2) Based on existing custom or trade usage
b. Agent the person who acts within the authority to contractually bind the principal Held->that the rail company was an agency of necessity. No way to contact Swafield, Genuine 3) Based on a consistent course of past dealings
c. Third Party the person whom the principal is bound to through the actions of the agent emergency and taking the horse to the stable was in Swafields best interest 4) Where Pr has held A out as having ostensible authority
5) Where agency is presumed because fo the operation of law (ex husband and
Step 2: Determine type of Agency Comment An agent of necessity generally arises where a person who is entrusted with wife)
Determines the extent of the agents authority anothers property finds it necessary to do something in order to preserve or safe guard 6) Where A acts in accordance with the usual authority of agents of that class
the property. 7) Where a person acts as agent of necessity.
Clause 28 (No Breach by Franchisee) (4) A franchise agreement must not contain a clause that limits or excludes the obligation to Step 1: DEFINITION of Association
(1) This clause applies if: act in good faith, and if it does, the clause is of no effect.
a. a franchisor terminates a franchise agreement: Smith v Anderson
i. in accordance with the agreement; and (5) A franchise agreement may not limit or exclude the obligation to act in good faith by An association includes any group of persons who have agreed to join together in
ii. before it expires; and applying, adopting or incorporating, with or without modification, the words of another pursuit of one or more common objects or purposes.
iii. without the consent of the franchisee; and document, as in force at a particular time or as in force from time to time, in the agreement. This obviously includes those entities such as companies and partnerships, which have
b. the franchisee has not breached the agreement. Other actions may be taken consistently with the obligation been formed for profit making purposes.
(2) For subparagraph (1)(a)(iii), a condition of a franchise agreement that a franchisor can However, the word association may also be used to describe those non profit
terminate the franchise agreement without the consent of the franchisee is not taken to (6) To avoid doubt, the obligation to act in good faith does not prevent a party to a franchise associations which have been formed to promote religious, educational, literary,
be consent. agreement, or a person who proposes to become such a party, from acting in his, her or its scientific, artistic and other similar community-wide benefits.
(3) Before terminating the franchise agreement, the franchisor must give reasonable written legitimate commercial interests.
notice of the proposed termination, and reasons for it, to the franchisee. (7) If a franchise agreement does not: Amos v BruntonIt is a voluntary combination of persons with some object or purpose in
(4) Part 4 (resolving disputes) applies in relation to a dispute arising from termination under a. give the franchisee an option to renew the agreement; or common
this clause. b. allow the franchisee to extend the agreement;
Bohemians Clubs v Acting Federal Commissioner Taxation A club is a voluntary
Clause 29 (Termination due to Special Circumstances) this does not mean that the franchisor has not acted in good faith in negotiating or giving association of persons who agree to maintain for their common personal benefit, and not
(1) Despite clauses 27 and 28, a franchisor may terminate a franchise agreement without effect to the agreement. for profit, an establishment the expenses of which are to be defrayed by contributions made
complying with either clause if the agreement gives the franchisor the right to terminate by these persons.
the agreement should the franchisee: Case Law
a. no longer hold a licence that the franchisee must hold to carry on the franchised Step 2: Is it non for profit?
business; or Australian Competition & Consumer Commission v Simply No-Knead A body that is formed or carried on any lawful object or purpose but not for pecuniary
b. become bankrupt, insolvent under administration or an externally-administered Meaning of unconscionable conduct gain to its members. (Section 4 (1) and (5) Associations Incorporations Act 1981)
body corporate; or
c. in the case of a franchisee that is a companybecome deregistered by the FACTS:SNK, number of franchising areas around Melbourne franchisees had issues with o S4(1) Can carry on profitable activities so long as they have charitable ends
Australian Securities and Investments Commission; or franchisors Franchisor acting in unconscionable manner; took actions such as delisting It is not the purpose of entering into trading transactions which is intended to disqualify: the
d. voluntarily abandon the franchised business or the franchise relationship; or franchisees from Telstra directories; not providing correct material disqualification is in the purpose of gaining by trading or otherwise pecuniary profit for the
e. be convicted of a serious offence; or CT Held: SNK liable to the franchisees. members. (Adamsons case)
f. operate the franchised business in a way that endangers public health or safety;
4 Whether association is formed or carried on for the purpose of financial gain for its
or SEE IF ON THE FACTS IF FRANCHISOR HAS DONE ONE OF THE FOLLOWING WHICH members
g. act fraudulently in connection with the operation of the franchised business. WAS FROM SNK:
Refusing to deliver franchised products to franchisees (1) An association is not formed or carried on for the purpose of financial gain for its
members merely because 1 or more of the following circumstances apply to it
(a) the association makes a financial gain, but no part of the gain is divided among, or Bradley Egg Farm v Clifford A poultry farmer had his poultry tested by an employee of the
received by, any of the association's members; Step 5: What are the effects of Association Rules?GENERAL PRESUMPTIONThere is a Lancashire Utility Poultry Society, an unincorporated society which was formed to provide
(b) the association is established to protect or regulate a trade, business, industry or
calling (the pursuit) engaged in by its members, or in which they are interested, general assumption that members of unincorporated associations do not intended to be various technical services to its members. The test was carried out negligently, with the result
but the association does not itself engage or take part in the pursuit; contractually bound by the associations rules. that the poultry farmers fowls had to be destroyed. The farmer attempted to sue the employer,
(c) the association provides its members with facilities or services; The courts assume that there are no legal obligations between members unless that is the committee or the association, for breach of contract.
(d) the association trades with its members, but the trade is ancillary to its principal the rules actually make it clear that there are.
purpose;
(e) the association trades with the public, but the trade is ancillary to the association's This means that in most situations members cannot maintain a court action based DECISION The majority of the Court of Appeal held that committee was liable as the
principal purpose and is not substantial when compared with its other activities; upon an alleged breach of the rules. employer. Members of the particular society were not liable, as they had no rights or interests in
(f) the association makes a financial gain from Cameron v Hogan the funds or property of the society and because they had entrusted management to a
Any rules that the association may have to regulate its affairs do not necessarily constitute an committee.
(i) trading to which paragraph (d) or (e) applies; or
(ii) charging admission fees to displays, exhibitions, contests, enforceable contract between the members as they are presumed not to be legally binding. Carlton Cricket & Football Social Club v Joseph Gowans J distinguished from Bradley
sporting fixtures or other occasions conducted to promote its the High Court held that the respondent was not entitled to the relief sought as he Egg Farm on the basis the particular contract concerned a single act contemplated to take
objects; or had no proprietary right or interests in the property of the association as would place within a short period of time whereas in this case the contract was for a lease
(iii) charging subscriptions to further its objects; or enable him to a declaration in respect of these matters and further, that the rules expressed to last for 21 years.
(iv) receiving donations to further its objects;
of association did not operate to create enforceable contractual rights and
(g) the members of the association are entitled to divide the property of the duties between members, or between executive officers and members. The HELD:The Supreme Court of Victoria held that there was no contract. The
association between them on its dissolution; policy of the law is against interference in the affairs of voluntary associations company was purporting to enter into contractual relations with an association as
(h) a member of the association which do not confer upon members the civil rights susceptible of private it was constituted from time to time, not with the members of the association at the
i. receives a salary as an employee or officer of the association; or enjoyment. time the document was executed. This means that, as there was no legal entity in
ii. makes a financial gain from the association to which a non- existence, there could be no contract.
member, acting instead of the member, would equally be entitled; Presumption does not apply where:
or o Proprietary rights are involved or Re Falvey; Ex Parte Goddard The rules of an association may provide that members of the
iii. receives a trophy or prize (other than money) from the o There is a clear indication that the rules are contractually binding.
association because of a competition; or committee shall be indemnified against any personal liability, or such an indemnity may be given
iv. receives temporary assistance because of illness, injury or Courts have intervened in disputes involving members of unincoporated non-profit in respect of a particular transaction.
bereavement or other financial hardship suffered by the member. associations where those disputes involved: Bailey v Victorian Soccer Federation A football referee died during the course of a game.
His wife obtained an award of workers compensation against the VSF, an unincorporated
Step 3: Nature & Characteristics Rendall Short v Grier Disputed proprietary rights association of football clubs.
Unincorporated non-profit association is not a legal entity and is in reality nothing Redhead Grange Inc v Davidson Rules; where a clear indication exists that the rules The Federation appealed to the Full Court of the Victoria Supreme Court upon the
more than the aggregate of all its members at a particular time. of association are legally binding and that there is an argument that there has been a ground that the Federation, being a legal non-entity, could not be sued in its own
breach. name. The court rejected the appellants arguments on the basis that, for the
Conservative and Unionist Central Office v Burrell It was argued that there are six Harbottle Brown & Co Pty Ltd v Halstead Applications of public policy justifying purpose of the particular Workers Compensation Act, unincorporated bodies had
characteristics which are either essential or normal characteristics of a non profit judicial intervention in the circumstances. a juridicial personality and were capable of being employers within the meaning
association: Tutty v Buckley The enforceability of unreasonable restraint of trade of that Act.
Nagle v Fielden A denial by committee members of the association of a right to work in
1. There must be members of the association a chosen field. Step 7: Tortious Liability
2. There must be a contract binding the members among themselves The liability of members of an unincorporated non profit association in respect of tortious claims
3. There will normally be some constitutional arrangement for meetings of members is determined by general principles of law (Baker v Jones).
and for the appointment of committees and officers Murdison v Scottish Football Union Courts do not, as a general rule, interfere in the
4. A member will normally be free to join or leave the association at will internal affairs of voluntary associations, societies or clubs. Agreements to associate for
purposes of recreation, or an agreement to associate for scientific or philanthropic or social or Membership of the association of the committee does not of itself create any special duty of
5. The association will normally continue in existence independently of any chance care, however, cases seem to suggest that it will be the committee members who will be liable
that may occur in the composition of the association; and religious purposes, are not agreement which courts of law can enforce. Therefore, in order to
establish a civil wrong from the refusal to carry out such an agreement, if it can be inferred that in respect of tortious claims.
6. There must as a matter of history have been a moment in time when a Smith v Yarnold->
number of persons combined or banded together to form the association. any such agreement was made, it is necessary to see that the pursuer has suffered some
practical injury, either in his reputation or in his property. spectator at a greyhound race who fell due to a defective grandstand. The race was run by an
In such circumstances there can be no recovery from either the committee or the association so Smith sued Yarnold who was secretary of the association. Action was dismissed
Although points 3, 4 and 5 were not put forward as essential characteristics, the judge, agreed
that points 1, 2 and 6 were essential characteristics of unincorporated associations. members for a breach of contract. However, the court stated that if the affected member as the association did not owe any special duty of care.
asserts rights arising out of membership and these assertions are ignored, then those Hrybynyuk v Mazur-
City of Gosnells v Roberts The club had no constitution and no rules. It did not ignoring the member may be liable in tort. member fell threw a roof. Brought an action against the president of the association saying that
therefore have the essential characteristic of an unincorporated association, a composite he owed a duty of care in relation to the demolition of the work requested .
body of persons in a legal relationship giving rise to joint rights or obligations or mutual rights Step: 6 Contractual Liability
Appeal was dismissed-> a member of an unincorporated association does not
and duties. An unincorporated non profit association has no capacity to enter into a binding
contract. owe a duty of cares to others members of the association if that is the only
relationship between them. Following: Owen v Northampton BC
Objectives of an Association, ProfitsThe aims of the members of the associations
should not involve making a direct pecuniary profit for themselves. However, it would be Member Liability
incorrect to say that such associations cannot be involved in profit making activities such as Generally, a member of an unincorporated association does not owe a duty of care to other
raising money by holding fetes, selling magazines, badges, pens and so on. As long as the RULE:Members of an association are not liable for contracts made on their behalf by members if that is the only relationship between them (Owen v Northampton BC)
associations objects are not focused upon profit for members, but are orientated to these committee members or by agents of the committee. The rationale for this position was Duty of care will only arise on ordinary principles of negligence in particular circumstances
charitable ends, then the association will be regarded as a non-profit and will not be regulated. developed in Freeman v McManus.
As the particular political organization had a large and fluctuating membership and
Step 8: Rights & Liabilities of Members
Step 4: Formation of Unincorporated Not for Profit its members had no proprietary interests in its assets, the executive of the
organization could not bring its members into a contractual relation with third
It has been said that the members of an unincorporated association are bound together for a
Very little formality required remember it is not a separate legal entity parties.
Most important consideration is mutual understanding of members common purpose or purposes by mutual undertakings inter se to carry out such purpose or
For practical reasons, members usually adopt a name for the association and a purposes, and to comply with the mutual rights and obligations which are stated in the rules of
Members Liability The fact that the members of a society have entrusted its affairs and
constitution and/or set of rules or by-laws association (Conservative and Unionist Central Office v Burrell). This falls short of creating a
Do not need a name to function management to a committee does not give the committee authority to make contracts binding on
contractual relationship between members in most cases.
Must not choose a name to deceive or inflict pecuniary loss Earl Cowley the members, especially in a case where the member have no interest in the societys funds.
v Countess Cowley.
Ordinary Members As far as ordinary members are concerned, liability is usually limited to
Committee Member Liability
Re Thackrah Before one can find an association, there must be some rules either the amount of their subscription or entrance fee.
The position with respect to committee members is different. Where such committee members
written or oral, by which those who are supposed to be members of it are tied together. I acting within their authority have entered into a contract purportedly on behalf of the association,
think that they would probably be written rules. There must be some constitution. An Wise v Perpetual Trustee Co An unincorporated club was formed and a meeting of
they will generally be personally liable to the party with whom they made the contract.
unincorporated society has been referred to as a group of people defined and bound together by members purported to appoint four trustees and authorize them to take up a lease of premises.
rules and called by a distinctive name (Re Price). There no quorum a the meeting but the minutes of the particular meeting were confirmed at a
later meeting. The trustees signed a 10 year agreement for lease. The club was later dissolved professional football, the court said that the rules had contractual force and therefore they could o is formed or carried on for the purpose of providing financial gain for its
and the premises were sublet for the balance of the lease. Subsequently, the sub-lessee was intervene. However, both the Court of Appeal and the High Court noted that in the members . . .
wound up without assets. After one trustee died, and since the trust had no assets, his estate circumstances the issue of whether the rules had contractual force was irrelevant where there You will still be a non for profit even if you make money as long as those things used for
sought declarations that all of the people who were members after July 1988 should be required was an unreasonable restraint of trade. Tuttys case was distinguished from from are for the salary of some of the members who are doing something for the association
to indemnify the estate. It was held by the court that the trustees were personally liable to Camerons case. Their honors found that the restraint was unreasonable. This view was (for the purposes of the running of the association) such as charging admission fees,
the lessor and that they were entitled to an indemnity from the ordinary members in the affirmed in the High Court. An unreasonable restraint of trade amounts to a breach of trading with the public, association might provide services or facilities for the members
circumstances. public policy. s 5(1)(c) qualified by s 4:
o List of negatively framed factors
The following are examples of situations where the courts have intervened in MANAGEMENT OF ASSOCIATIONS o Incorporated Associations
Procedure to Incorporate:
the affairs of unincorporated associations. There is no set management structure that must be adhered to, unincorporated non profit Choose name (must use Inc. s. 29 unless exempt under s. 33)
associations are usually administered by a committee comprising certain members of the Design constitution and rules (Part 5 )
1. Where the rules are contractually binding association.
If it can be inferred that the rules of an association are legal binding, and thus overcome the Lodge application
effect of the application of the presumption arising from Cameron v Hogan, then any alleged Appoint secretary
Ward v Etherington An association desired to build a clubhouse and entered into a
breach of those rules may warrant judicial intervention. agreement with a firm of engineers for the latter to produce the necessary drawings and plans. Provide registered address
Plenty v Seventh Day Adventist Church of Port Pirie The firm of engineers was not paid, and subsequently sued for its fees.
Mr and Mrs Plenty were charged with breach of church discipline and, after an One question was who, if anyone, was liable for the debt? On-going Requirements
internal hearing at which they did not appear, they were expelled from membership of A second and related question flowing on form the first question and assuming that
the church. Lodge details of any changes
liability was found to exist, was whether all committee members were liable
HELD: Followed Cameron v Hogan, in that the rules of the church did not clearly Keep adequate accounts
notwithstanding that some of the committee members were absent form the relevant
appear to contemplate the creation of legal rights enforceable in a court of law. meeting where it was resolved to appoint the firm of engineers. Hold annual general meeting
Redhand Grange v Incorporated v Davidson HELD: The court concluded that all the committee members were liable, because Lodge annual financial return
It was held by Brownie AJ that the particular constitution was drafted so as to create they were committee members, and that it did not matter who was present or Committee members must comply with duties
legal relations between the proprietor members, and between them and the plaintiff. absent at the meeting.
A similar conclusion was reached in Islamic Council of South Australia v Rules form the terms of contract between association and members
Australian Federation of Islamic Councils Inc. Separate legal entity to its members (body corporate)
Helwig v Jones The meetings of unincorporated non profit associations must be convened
and held in the manner provided by the rules. Where there are no rules, the common law can be o Associations Incorporations Act 1981 (Qld) s 21
2. Where there is a dispute concerning property rights used to regulate the calling of, and the conduct at meetings. In this regard the common law Must be not-for-profit
It has been held that members may challenge a committees decision dealing with disposition of makes provisions for reasonable notice of meeting, the contents of the notice, quorum, Popular with sporting and recreation clubs
property. It was in that context that the Camerons case was distinguished in Rednall Short v the election of a chairperson and voting.
Grier.
In Rendall Short it was held that members had a proprietary right in insisting that a committee International ExpansionAgency, Distributorship and Licensing
DISSOLUTION OF ASSOCIATION Once a company establishes an exporting presence beyond the occasional sale abroad, or it
of management apply income and property of the association in the promotion of its objects.
Re Sick and Funeral Society of St Johns Sunday School It was decided to wind up a sees growth potential, it may seek to deepen its presence abroad through the establishment of a
3. Public policy justifying juridicial intervention society. Some members attempted to pay up subscriptions which they had not paid for 3 years representative office in the targeted foreign market. As opportunities further develop, the
In Harbottle Brown & Co Pty Ltd v Halstead a particular clause in the rules of the Wine and so as to share in the distribution. Membership of a club or association is primarily a matter of company may wish to expand its presence even further through the use of an agent or
Spirits Merchants Association purported to oust the jurisdiction of the court to determine contract. The members make their payments, and in return they become entitled to the benefits distributor to further develop the business.
disputes. The court held the committee could not take away the Ps right to bring the of membership in accordance with the rules. The sums they pay cease to be their individual Advantages Disadvantages
action to court. property, and so cease to be subject to any concept of resulting trust. Instead, they become to Establishing a visible presence in a foreign Complicated Process
4. Interference with a right to work property, through the trustees of the club or association, of all the members for the time being, market
In cases where unincorporated non profit associations have the power to regulate employment including themselves. A member who, by death or otherwise, ceases to be a member thereby Potential for greater and faster growth Risky and not guaranteed
in particular areas by granting licenses, courts will often intervene where a committee of the ceases to be the part owner of any of the clubs property. Those who remain continue owners. If Increased marketing opportunities Uncertainty
association prevents a person from earning their livelihood. then, dissolution ensues, there must be a division of the property of the club or association Brand exposure
among those alone who are the owners of that property, to the exclusion of the former
Nagle v Fielden The P had trained racehorses for a number of years. The stewards of the members. Licensing Another strategy to profit form a product or invention without the associated risks
jockey club controlled horse racing. A license was needed in order to train horses. The P could involved with agency or distributorships is through licensing. That is, a company granting
not get a license and she claimed it was because she was a woman. INCORPORATED ASSOCIATIONS another company a license to produce and or distribute its good. Companies often make use of
Upon incorporation, the association becomes a body corporate enjoying legal entity status. licensing to substantially raise revenue with very minimal effort. Of course, licensing carries its
No reasons were given for the refusal. However, her head lad had a license and the P claimed Must be Not-for-Profit: s 5(1)(c) Associations Incorporations Act 1981 (Qld) own risks and pitfalls.
that this pointed to the fact that she could not get a license because she was a woman and
showed that it had nothing to do with her capacity and fitness as a trainer. It was argued that Registration as an incorporated association gives an association legal entity status and gives it Representative Office, Agency & Distributorship
there need to be a contractual relationship between the plaintiff and the stewards and as there members and in some cases, it committee members, limited liability. If registered as an
was no such relationship, she could not succeed. incorporated association, the word incorporated or the abbreviation INC will form part of the Representative Office A company establishes a representative office in a foreign market to
associations name. promote its products or service and to provide information, for example, regarding government
When an association, who have the governance of a trade, take it on themselves to license Advantages: and industry requirements, technical advice, and support to local importers and distributors. The
persons to take part in it, then it is at least arguable that they are not at liberty to withdraw a office does not take orders, sell the products or service or accept payments. In essence, a
Association has separate legal entity (ss. 21 and 25):
mans license and thus put him out of business without hearing him. Nor can they refuse a man a representative office is the first step towards establishing a presence or a deeper presence in a
license and thus prevent him from carrying on his business in their uncontrolled discretion. If Can own property in own name
foreign country.
they reject him arbitrarily or capriciously, there is ground for thinking that the courts can Can sue and be sued in own name It is important to remember, regardless of the legal form intended by the parties, that
intervene. Perpetuity local law may deem the relationship to be something different than was intended or
Members have limited liability (s27) understood by the foreign investor. This could have severe consequences and potentially
5. Where the dispute involves an unreasonable restraint of trade Disadvantages: produce unexpected liability for the client.
In employment cases involving unincorporated non profit associations, the Australian judiciary
has adopted a related approach to the position in the UK. This approach involves the No major disadvantages (only disadvantage is that it is not-for-profit)
Contractual Issues Once a suitable agent or distributor has been selected, the appropriate
examination of whether the rules of the association amount to a restraint of trade. o Formalities depend on size
contractual arrangement must be drafted. The suppliers local counsel, together with counsel
o Keeping of separate accounts, financial returns (cost) qualified in the host country, should jointly be involved in the negotiating and drafting process.
Tutty v Buckley Tutty, a minor, signed a contract to play rugby league with an What is Non for profit? The following issues, at a minimum should be considered.
unincorporated association. Certain rules of the association were objected to on the basis that Associations Incorporations Act 1981 (Qld) s 5:
they were unreasonable restraints of trade in preventing Tutty form moving to another club. The 1. Local Law The importance of local laws cannot be overlooked or underestimated in
An association is not eligible for incorporation under this Act if the association
NSW court of appeal had to consider the applicability of the decision in Cameron v Hogan and any agency or distributorship agreement. Local law may be procedurally cumbersome
had to decide, therefore, whether the court should not interfere. In the circumstances of
or even provide substantive difficulties to achieving the aims and objectives or the Agency The primary role of an agent usually is to identify potential customers for the b. The supplier should also ascertain whether the local law allows for the
arrangement. supplier, handle or assist with marketing on the suppliers behalf, and obtain orders for the agents representations to customers constitute warranties by the
supplies goods or services on term established by the supplier. The supplier then fills the orders. principal.
a. Language BarriersThe contracts must be translated into the official language
of the host country prior to registration. Where applicable the parties should clearly Title does not shiftThus, the agent does not take title to the goods. Instead, the sales 5. Harmonization
state in the contracts which version of the contact controls in case of any agreement remains between the seller and the buyer. The agent, normally located in the 1. Indemnification A licensee should also seek to have the licensor indemnify it and
conflicting language between the two versions. buyers country, serves primarily as an intermediary by which the agreement is hold it harmless against and in respect of any and all infringement claims arising form
concluded. use of the licensed technology. The indemnification should continue beyond the
b. Government AgencyLocal law may also permit or require the involvement of a termination of the license and the timing of the indemnification payments.
government agency in the negotiation process, even when both parties already Risk The agent, therefore, does not bear the risk that the buyer will not pay. The risk 2. Litigation ProvisionsIf an exclusive license has been granted, the licensing
are in agreement as to terms of the arrangement. remains entirely with the seller. Likewise, the buyers recourse for faulty, defective or agreement must select one of the parties to be the principal in enforcing the IPRs in the
otherwise inappropriate goods remains solely with the seller. licensed technology via litigation. The license should also provide that the other party
c. Import IssuesThe issue of import restrictions it should be noted here that both has the authority to maintain such actions should the designated party fail to defend or
the supplier and agent or distributor should ensure that they are aware of and in The agent usually: initiate an infringement action.
compliance with all applicable importation and distribution laws and regulations. 1. Does not possess or control a warehouse,
As the local agent will likely be more familiar with such issues than the foreign 2. Does not coordinate transport arrangements and 3. Record keeping and audit clauses As the payment of royalties to the licensor are
supplier, it may be prudent to allocation the responsibility to the agent or 3. has no control over the price or terms of the sales contract. usually based upon the production or sales of the licensed technology, the licensing
distributor in the contractual agreement. agreement should require the licensee to maintain adequate records in order to
Simply put, the seller agrees to the terms of sale and the agent cannot choose to deviate substantiate the basis of the royalty payments to the licensor. The records must be
2. Independent Contractor Status Must countries allow agents and distributors to be from those terms. However, in some agency agreements, the agent also acts as collection subject to verification through an independent audit, and should be kept safe and
deemed independent contractors, rather than employees of the supplier. Government agent for the supplier and may even provide after sales warranty advice to customers. verifiable for at least a determinate period of time. The parties may also want to
interference could lead to an agent or distributor being deemed to be an employee negotiate who should bear the costs of the audits and storage.
instead of merely an independent contractor. This is likely to occur when the agent or Compensation An agent is compensated on a commission basis and usually is subject to
distributor is under the direct authority of the supplier, or if the agent or distributor significant control by the supplier.
receives a salary in addition to sales commissions. If the agent is deemed an employee,
the situation becomes more complicated as the employee and the supplier will be Common Law v Civil Law ImplicationsAgency laws differ between countries, and the
subject to local labor laws. There are also tax implications to being considered and typical freedom to contract regime common to Australia and other common law countries is
employee. unlike the more regulatory model used in civil law countries and much of the developing world.
In the latter cases, agency is more extensively regulated and the distinction between an
3. Export Compliance The supplier must comply with all relevant export laws, agent and a distributor is sometimes blurred in a manner not anticipated or contemplated
including possible licensing requirements. The exportation of certain goods may be by the seller.
regulated or prohibited, and eports of goods may also be prohibited from being sent to
certain individuals, groups or nations. Failure to comply with such laws, which are Several issues typically arise that are unique to a suppliers relationship with a foreign
normally based on national security and foreign policy concerns, could be costly. agent:
4. Intellectual Property Licensing Licensing of Intellectual Property Rights to a foreign 1. Regulation of Agents Most jurisdictions have laws regulating agents. For instance,
agent or distributor may raise the issues in the host jurisdiction. If local licensing laws in some jurisdictions:
are deemed applicable, the agreement may be subject to certain burdens and a. agents are required to be citizens of the country in which they act as
restrictions. In some countries licensing agreements must be approved by the relevant representatives.
government agencies prior to their taking effect. It is important for any supplier licensing b. Some jurisdictions have registration requirements, whereby all agents must
IPRs in another market to ensure that is has been properly registered in the targeted register with a government office.
market. The contractual agreement between the supplier and agent should prohibit the c. Have complicated regulations dividing agents by type, with different requirements
part from registering any of the suppliers IPRs in its own name. The supplier should and restrictions applicable to each type of agent.
also consider including a grant back provision in the agreement that allow the suppliers 2. Termination of Agents Almost all jurisdictions regulate the ability of the principal to
to benefit from any translations, modifications and improvements created by the agent terminate the arrangement and the compensation that must be paid to the agent on
or distributor. termination.
a. Most jurisdictions impose mandatory notice periods prior to termination, with
5. Force Majeure The contract between the supplier and the agent or distributor should serious consequences resulting form failure to abide by the notice provisions.
contain a force majeure clause describing the situation in which the parties will not be b. Most impose obligations on the principal to compensate an agent whose
responsible for a failure to perform in accordance with the contractual provisions contract is terminated, and base their compensation provision on:
because of unforeseen events arising beyond their control. This should specifically i. the length of the term for which the agent represented the principal,
include the possibility of changes in government relations and policies between the ii. the amount of money the agent invested in developing the business, and
relevant governments. iii. the goodwill created by the agent.
c. In most jurisdictions, notice and compensation provisions are mandatory
6. Governing Law As with contract, the parties should select the law governing the law and cannot be avoided by contract.
contract and the appropriate forum, should a dispute rise. However, in many
jurisdictions, particularly in the case of agency relationships, the choice of law will be 3. Non Competition following termination Most jurisdictions limit the scope and
unenforceable and the law of the host nation must be applied. Moreover, even if the length of non-compete covenants that survive termination of the agency relationship as
host country permits the law of the suppliers home country to apply, it will likely still to geographical scope, duration and the universe of products covered by the covenant.
have mandatory laws that continue to apply and cannot be avoided by contract. Limits to non-compete covenants are mandatory law and cannot be avoided by
contract.
7. Competition Law Several provisions in an agency or distributorship relationship
have the potential to raise competition law concerns for the host nations. These issues 4. Scope of Authority Even if it is clear to all parties involved that the agent should not
include the use of exclusive licenses, the establishment of exclusive sales territory, non- have the authority to bind the supplier by executing sales contracts or order forms, the
compete clauses and restrictions on a distributors resale pricing. Local law may prohibit contract should explicitly address the issue.
certain provisions or require clearance from the relevant governmental agencies in
8. Advance. a. The contract should also address whether the agents representations
to customers constitute warranties by the supplier. Despite such
language, however, some jurisdictions allow the agent to bind its principal to
. agreements with third parties, notwithstanding clear contractual limitations.
AGENCY
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