Most business people will at some point sell their business. The most common way to do this for small business owners is to engage the services of a licensed real estate agent or licensed business broker.

There are a number of things that you should know when dealing with a business broker / agent:

Term of Appointment

All contracts with business brokers and agents will have a minimum period of appointment, with an additional period called a continuing period after this time. You should consider appointing an agent for a set period with no additional or continuing period, this will make your agent work harder and will help you avoid being locked into a relationship which isn’t working.

Commissions

Business brokers and agents almost always charge their commission on a variable basis, for example 5% of the sale price, but often charge additional fees / charges. You should be clear to find out, before signing an agreement, whether this is the total of the agent or business broker’s fee, or whether there are additional advertising and retainer fees payable. If you don’t ask this question, it can be a costly mistake.

Contracts

Finally when you find a buyer and the deal is ready to be done, you need to sign a contract of sale of business (and in some cases a share sale agreement). Many business brokers and agents use a standard form document, while these documents are generally suitable for a very small number of businesses, they can’t always address the complexities of each individual sale. You should never rely on a business broker or agent to prepare a contract for you, lawyers commonly see a number of mistakes that business brokers and agents make, for example:

1. they change the standard form contracts, which can lead to unintended consequences;

2. in most cases special conditions need to be drafted, business brokers and agents are not lawyers, they do not understand the legal complexities of contracts and are not qualified to draft special conditions – lawyers have seen many examples of poorly drafted clauses which have the reverse legal effect to what the client had actually wanted;

3. clients suffer severe tax consequences as a consequence of contracts that do not properly consider tax and corporate planning issues.

Before you sell your business you should always speak to your lawyers and accountants to obtain the right advice.

A lot has been written on the huge financial impact sickness, work place accidents and the like have on the business community. However, very little attention has been given to the effects a breakdown of marriage has on a person’s office productivity. Up to 40% of marriages now end in divorce, with the trend increasing. Accordingly, a very large percentage of the workforce is directly affected and involved. Indirectly, virtually everyone is involved in some way in the process, whether as a family member, confidante, or sympathetic work colleague.

There are the obvious and immediate effects to the business, such as absenteeism. Then there is the distraction of the staff member seeking support from within the office during those difficult times. Less obvious are the mistakes that are made due to being distracted, lack of motivation, sometimes for long periods of time, and lack of positive initiative. When a senior and valued executive is effected in this way, the effects on the organisation can be devastating. There are even instances where a separation of top level executives or proprietors has created doubts in the minds of all employees as to the long term viability of the business concerned, with the resultant debilitating consequences. The legal process of divorce proceedings can also be quite stressful. Several attendances at Court may be required as well as counselling in certain circumstances, particularly when children are involved.

Given the above, a concerned employer would observe that it is important to see that the process is carried through quickly and efficiently. Appropriate and sensitive support from the
organisation would be beneficial. At the very minimum, the staff member should obtain competent counselling and legal advice. Whilst legal action may not be contemplated and
indeed may not even be necessary, at least in this way many popular misconceptions regarding the ramifications of the separation can be disabused. If action is required for the
benefit of the employee, then it can be taken sooner rather than later. It is appreciated that different people react differently to the stress of a divorce. By pointing the person in the right direction, the prospects of a speedy recovery can be greatly enhanced. This is particularly so if the work environment provides sympathetic and positive support during these difficult times.

In our view, if your organisation has not yet given consideration to pro-actively providing assistance, it would be advantageous to do so. The message to the recipient is one of care
and concern for their welfare. For the organisation, the end result would be a speedier return to a balanced and settled work environment, with improved productivity. The Family Law
Department at Moores Legal is well aware of the need to ensure speedy and efficient service, conscious of the concept that “time is money” both for the organisation and for the
staff member concerned.

Personnel managers in your organisation may wish to give consideration to the possibility of contacting us to provide first consultation advice as part of their services to the staff. If there are any inquires in that regard, or regarding counselling and other support services, please do not hesitate to contact us.

Article By Peter Szabo, Principal, Moores Legal

Peter Szabo, is a Principal and member of Moores Legal’s Family Law Group. An acknowledged leader among Family lawyers throughout Australia and an Accredited Family Law specialist, Peter is particularly expert in handling financial issues and taxation/estate planning within property settlements. He was the key lawyer in the famous High Court case of Ascot Investments and Harper which remains the definitive case on third party rights in the Family Court. Peter is also experienced in international aspects of Family Law and is a member of the International Academy of Matrimonial Lawyers. Peter is engaged by clients, financial advisors and national financial planning institutions to assist with financial,
tax and estate planning strategies and how those strategies are affected by marital breakdown.
9 Prospect St, Box Hill Vic 3128 Telephone: (03) 9898 0000 Facsimile: (03) 9898 0333
Lvl 10, 350 Queen St. Melbourne Vic 3000
info@mooreslegal.com.au www.mooreslegal.com.au

DISCLAIMER This article is intended to provide general and useful information. However, it is not proposed to be comprehensive legal
advice. Readers are advised that before acting on any matters arising in this article they should seek specific legal advice about their
situation.

We are currently working on some new business law articles and hope to bring them to you shorty.

If you have a special request for a business law article please let us know.

The Businesslaw.com.au Team

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By Peter Moon, Partner, Logie Smith Lanyon Lawyers

People are often confused about the effect of clauses that say ‘You acknowledge that we have made no other promises or representations to you.’ Often you see such clauses quoted in support of an argument that a claim for misrepresentation cannot succeed where a contract contains this clause.

But that ain’t necessarily so.  In fact, it ain’t normally so.

‘Entire agreement’ clauses

Typically they read something like this:

This document is the entire agreement between you and us and you acknowledge that we have made, and you rely on, no promise, representation or warranty to you that is not set out expressly in this document.

What they are supposed to achieve

In theory, an ‘entire agreement’ clause prevents you from claiming that you relied on something a salesperson told you, or otherwise sits outside the document.

But the law sidesteps them with ease

The law sees it this way:  If a person was told something misleading that caused them to decide to enter a contract, then their entry into the contract was obtained ‘on false pretences’.  That taints the contract from the moment of its inception.  It is, and always was, a contract obtained by misrepresentation.

So, when the law comes to the ‘entire agreement’ part of that tainted, flawed contract it reasons that it cannot operate as its black & white words suggest it does.  It simply won’t be enforced so as to wipe out the misrepresentation.

So are ‘entire agreement’ clauses irrelevant ?

No, they can have effect.

In deciding whether a person was induced into entering a contract by some external misrepresentation, the court must decide:

• what was actually said or otherwise represented
• whether it was true or false
• if it was false, whether the person would not have entered the contract has they known the truth.

This third element, often called the ‘reliance question’, is frequently overlooked by lay people.  They think that they can avoid a contract if they can show there was a misrepresentation leading up to it.  But they need to show more: they must show that they relied on the misrepresentation as a material factor in entering the contract.

A court can take an ‘entire agreement’ clause quite seriously as evidence that a person did not rely on some external representation.  It can say ‘We accept that a misrepresentation may have occurred, but in judging whether you relied on it we give weight to the fact that you signed a piece of paper saying that you didn’t.’

A high water mark example

Let’s say you sign a short contract after getting legal advice, and it contains a clear ‘entire agreement’ clause.  A court might well say:

• it’s a short contract
• the clause is clear
• you obtained legal advice
• you actually signed the document
• you must have very clearly considered the clause and chosen to assent to it -

so we are satisfied that you did not rely on the external representation you now complain about.  We accept that it was made, and that it was untrue.  But in all the circumstances including the ‘entire agreement’ clause, we don’t accept that you relied on it.

An example at the low water mark

At the other end of the scale, let’s say you sign up for a mobile phone service in store.  The provider uses a Standard Form of Agreement, which you don’t actually see before signing up.

Even if you did see it, it would be dozens of pages long and the ‘entire agreement’ clause is buried on page 24.

The only ‘advice’ you get about the deal is from the commission salesperson.

In those circumstances, if you can later point to a material misrepresentation, the court will sidestep the ‘entire agreement’ clause in a blink.  You did not carefully and consciously assent to the proposition that there was nothing more to the deal than what’s in black & white.

Section 52 of the Trade Practices Act

This must be the most quoted piece of consumer law on CSP Central.

A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

In virtually every section 52 claim that involves a contract, there is an ‘entire agreement’ clause.  If such clauses could lock out misrepresentation claims, there’d be very few contract cases based around section 52.

But just take a stroll through these cases and you’ll see how many there have in fact been.

Myth busted

‘Entire agreement’ clauses can be important and effective.  But especially in consumer situations where the deal moves fast, the contract is not focused on and there’s no independent advice, they are no sure defence to a misrepresentation or section 52 claim.