Contracts – some basics, liability & indemnities
Who are you contracting with?
Legal Entity
- 1 or more individuals
- 1 or more individual t/as … registered business name
- incorporated association
- company
- company t/ as …registered business name
Business Name – is not a legal entity but registered to an owner – individual, individuals (might be a partnership) or corporate body
If business name not registered – there will be issues enforcing agreement
Company – ACN and/or ABN
- Free ASIC business & company name search – use company number, company name or the business name
ABN confirmation often important for GST and financial process purposes
- Free ABN search
ABN Lookup – http://abn.business.gov.au/
Always confirm name, individual, corporate entity & ACN/ABN – before you contract
Essential terms and certainty
Offer (e.g. To provide services/advice/product for valuable consideration)
Acceptance
Consideration – price or other ‘valuable’ consideration e.g. Money/publicity/international acknowledgement
Certainty – agreement to set out the terms clearly or can be void
Other terms and certainty
Background useful for context – particularly if a 3rd party later needs to interpret intentions
Commencement date
Length of contract (the term), termination date useful
Termination details/process
Include relevant legislative obligations and liabilities
Payment terms – negotiate realistic time
Confidentiality
Worker screening – Blue card; Yellow card; police checks
Intellectual property – ownership, sharing, licensing
Insurance requirements
Indemnities
Dispute resolution process – agree while friendly
Jurisdiction e.g. Queensland
Liability & Indemnity clauses
Clearly state the liabilities/responsibilities of each party:
specific legislative requirements e.g. if workers are to hold blue cards &/or yellow (disability positive notice) cards
matters where you rely on their expertise
matters over which you have no control e.g. 3rd party fundraiser responsible for event registrations
quality of services / goods
confidentiality & consequences where relevant
include indemnity & insurance requirements re matters for which other party is responsible
particularly if your organisation remains liable through contract, legal liability (including duty of care responsibilities) or legislative requirements
Legal liability is as set out by legislation and common law (that is court decided case law principles)
Liability insurance policies are contracts with the insurer that subject to its terms and conditions, cover you for your legal liability.
Existence of insurance policy does not mean automatic cover – may be exclusions / carve outs from legal liability. Know your policies
Liability insurance policies
public/property
professional indemnity
Will not cover you for things you do not control and/or for which you are not legally liable e.g. A fundraising event run by member of the public – even though your NFP is beneficiary; employment service clients on work placement
Unless you have arranged relevant endorsements with your insurer – for specific circumstances. May cost more (increased premium) & insurer may still limit extra cover
Contractual Indemnity” clauses – unfair (inequitable), seek to extend contractual liability past a party’s legal liability
Do not agree if a clause:
extends liability further than your legal liability, or
extends your liability to matters over which you have no control
Unless you have made a conscious commercial decision to do so – having applied your board approved risk assessment process or obtained express board approval where required
Each party should remain responsible for their own negligent acts & omissions and that of their employees, contractors (and agents)
Always require your contractors / subcontractors to:
indemnify you for their negligent acts & omissions
provide current certificates of currency signed by their insurer
Insurance
Insurance policies cover only legal liability unless you have made special arrangements
Do you have specific insurance requirements of the other party – list them e.g. Public & products liability, professional indemnity, workers compensation
Your insurer probably requires you to do so – check with your broker
Avoid clauses that require other party’s approval of your insurer – you probably already have one – change so the clause acknowledges that your insurer is acceptable
Obtain the other’s certificates of currency before commencement of the contract – check they are current and signed by insurer!
Noted as an ‘interested party’ not effective
Rather,
Arrange for a policy endorsement specifying the contract and where your NFP is the principal in the contract – required that your organisation is noted on the other party’s policy as a principal for that contract
Where the other party is the principal for the contract arrange for them to be specified for that contract on your insurance policy
Talk to your insurance brokers before entering agreements – keep them in the loop, use them – they are there to help you
Insurance & government contracts
Government grants or service agreements may have insurance requirements outside legal liability & outside standard insurance contract cover
The Terms & Conditions of the grant or agreement is usually available before you submit your proposal so you are for warned
Find the insurance requirements – send them to your broker – ask if your policy complies / covers
Before tendering/applying – know if you need to: seek further insurance cover
Is it available?
What will it cost? Or do you need to negotiate, make the tender/application on terms that do not breach your insurance policy (insurance contract)?
Do you need to allow for extra costs in your price?
Failure to comply with insurance requirements breach of the contract? May result in termination of it and other Dept contracts
Therefore breaches that affect other govt contracts mean a lot of income may be affected
Grants / agreements may require declarations of compliance
Providing false declarations – fraud, potential criminal consequences