NFP Resources

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
• https://connectonline.asic.gov.au
• 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  žyour 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

Additional Resources

• What risk are you placing on your NFP by agreeing to an indemnity?

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Disclaimer – Reliance on Content
The material distributed is general information only. The information supplied is not and is not intended to be, legal or other professional advice, nor should it be relied upon as such. You should seek legal or professional advice in relation to your specific situation.

It is critical to understand that although indemnity clauses are commonplace in commercial agreements such as event or hiring agreements, a NFP’s insurance (including any professional indemnity, public liability or products liability) is not likely to cover the liability under the indemnity. The reason being is that most insurance policies specifically exclude cover for any liability assumed by way of an agreement only (which is the case with most indemnities).

Accordingly, if the NFP’s insurance does not cover the indemnity the NFP would be required to pay that liability “from its own pocket”.

As a simplistic example only – if someone were severely injured during an event and the courts determined that the NFP was responsible to the extent of 50% of the injury and the event management organisation (the “Event Manager”) was responsible for the balance:

• the NFP’s insurance company is expected to cover the 50% for which the NFP was held responsible; however
• regarding Event Manager’s proportion, the Event Manager (or its insurer if it had claimed the matter on its insurance policy) would then seek to recover that liability from the NFP under its indemnity;
• the NFP’s’ insurance company would not cover that liability under the indemnity, the NFP would need to cover that liability personally.

If the NFP must pay the liability “from its own pocket” this will directly affect the organisations or persons it was established to assist and, worse case scenario, the NFP may need to be wound up.

So, by agreeing to an indemnity you have significantly increased the risk to your NFP and its stakeholders.

How can you best manage an indemnity to reduce the risk to your NFP?

When negotiating indemnities, you may consider one or more of the following strategies:

• omit the indemnity clause – eliminate the risk;
• omit the indemnity clause but offer principal’s liability insurance for the particular event/ agreement –you will need to consider the costs of obtaining principal liability insurance;
• limit the indemnity:
• require the indemnity to be subject to a liability cap – as a general guide negotiate up to an overall liability cap of 100% of the contract price plus the proceeds of insurance policies.
• require the indemnity to only extend to the loss or damage within the control of the NFP, and only apply to loss or damage caused by the NFP
• ensure the indemnity provides for a proportional reduction in liability
• place an obligation on the principal to mitigate any loss or damage

Above all, check your NFP’s insurance policy.  You must ensure that any indemnity provisions which are agreed to in contracts are covered by the insurances in place and do not invalidate policies of insurance.  For this reason, it is advisable that any negotiations and agreement of indemnity provisions involve your NFP’s insurance broker and are made subject to acceptable insurance cover being obtained.

If you need assistance in reviewing or negotiating the indemnity provisions under a contract you are considering, NFP Lawyers are happy to assist.

What is Copyright?

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Copyright is the exclusive legal right to protect the form of the expression of ideas.

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Copyright is free and applies automatically when the work is created – there is no registration system for copyright in Australia.

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Copyright does not protect ideas themselves, information, styles or techniques, names, titles, slogans, or works that have not been reduced to material form.

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There are no general exemptions from copyright law for not-for-profit organisations.

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Copyright - What does it protect?

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Copyright protects original works such as:

• literary works (e.g. computer programs, letters, poems),
• artistic works (e.g. paintings, drawings, photographs),
• dramatic works (e.g. choreographed shows, script for a film), and
• musical works (e.g. musical compositions).

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Copyright also protects ‘subject matter other than works’, such as:

• cinematographic films and sound recordings,
• broadcasts, and
• published editions.

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Copyright - Who owns it? 

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The owner of copyright in particular works will depend on the type of works and any agreements that operate to alter the 'first owner' rules contained in the Copyright Act 1968 (Cth) ("Copyright Act").

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Literary, dramatic, musical or artistic works

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The first owner of the copyright in literary, dramatic, musical or artistic works ("Works") will be the author of the Works unless an exception applies.

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One such exception is where an employee creates the Works in the course of their employment. In that case, the employer will be the owner oft he associated copyright. Notably, there is an alteration to this exception where the employee is employed as a journalist.

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Another exception arises when one of the following Works in commissioned in exchange for payment of a fee:

·        a photograph taken for domestic or private use,

·        a painted or drawn portrait, and

·        an engraving.

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In these cases, the copyright subsisting in the Works will be owned by the person who commissioned it.

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Films and sound recordings

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The person who is the maker of a film (i.e. the person who arranges for its production) will be the default owner of the copyright subsisting in that film unless the film is commissioned (the maker has entered into an agreement to make the film for another person in exchange for a fee). When a film is commissioned, the commissioning part will be the owner of the copyright.

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The same principles apply in respect of sound recordings. The ‘maker’ of the sound recording could be, for example, a recording company.

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In some circumstances, a performer who contributes to the sounds captured in a sound recording may also share in the copyright ownership.

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Broadcasts

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The owner of the copyright that subsists in a television or sound broadcast is the maker of the broadcast. For copyright to subsist in an Australian broadcast, it must be made under a relevant broadcasting licence or by the Australian Broadcasting Corporation ("ABC") or the Special Broadcasting Service ("SBS").

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Published editions

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The owner of the copyright in a ‘published edition’ will be the publisher.

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The Crown

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Despite the above, the copyright in any Works, sound or film recordings made by, or under the direction of, the Crown will be owned by the Crown.

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Moral Rights

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Individual creators have moral rights, whether or not they own copyright. These are the rights to:

• be attributed as the creator of the work,
• take action if their work is falsely attributed as being someone else's work, and
• take action if the work is distorted or treated in a way that is prejudicial to their honour or reputation.

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Importantly, moral rights are non-economic personal rights and are not transferrable.

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Key takeaways

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NFPs should ensure that they have the appropriate agreements in place to properly assign the copyright in any Works or recordings produced by third parties and gain the consent of any moral rights holders in relation to Works or other materials.

Tip #1 – Conduct an IP audit

What is it?

An Intellectual Property ("IP") audit is a systematic review of the IP assets owned, used, or acquired by the not-for-profit ("NFP").

Purpose

The purpose of conducting an IP audit is to:

• Uncover underutilised IP assets,
• Identify any gaps in the NFP’s IP protections, and
• Enable the board or management committee to devise informed strategies that will maintain and improve the NFP’s position and reputation.

Steps:

1. Identify

Identify your NFP’s IP assets. Examples of assets include:

• Registered trade marks,
• Copyright owned by the NFP,
• Licenses (in, out, and cross-licences),
• In-house manuals, publications, training, databases, and recipes/formulations,
• Trade secrets, know-how, and other confidential information,
• Goodwill and client loyalty,
• Product certification and regulatory approvals,
• Distribution contracts and client lists, and
• Marketing and advertising strategies.

2. Assess

Assess what the NFP’s legal rights are in relation to each item of IP identified. Consider the following questions:

• Does the NFP own the IP?
• If the NFP does not own the IP, is there an agreement in place granting the NFP a right to use the IP?
• Are there any restrictions affecting the NFP’s ability to freely use the IP?
• Should the IP be registered to increase protection?

3. Value

Understand the value of the NFP’s IP rights. Some good questions to reflect on include:

• What is the commercial benefit of protecting your NFP’s rights?
• What would the economic damage to your NFP if its IP rights were infringed by a third-party?
• How closely is your NFP’s IP tied to its funding and reputation?

Tip #2 – Keep records of your IP

Keeping an IP register can help NFPs keep track of their IP rights. Details that may be entered onto the register include:

• Type and specifications of the relevant IP.
• Owner of the relevant IP.
• Licences (and limitation) for use of the relevant IP.
• Official registration numbers for the relevant IP.
• Allowable uses of the relevant IP.

Tip #3 – Develop an IP management strategy

Internal management

Consistency is key to the management and protection of an NFP’s IP. For greater protection, an NFP should consider implementing the following

• Document management system,
• Training programs to educate employees about the risks and ramifications associated with unauthorised or improper use of IP,
• Use of IP policy, and
• Information technology ("IT") security policy.

External strategy

As the stakeholder reach expands, an NFP’s IP can become more valuable. It is important that NFPs take steps to prevent the infringement of their IP by third parties and ensure that they themselves are not infringing the IP rights of someone else. The following measures can be implemented to discourage misuse:

• Include terms and conditions on the NFP's website relating to use of the NFP's IP.
• Acknowledge IP that the NFP uses but does not own.
• Include attributions where required.
• Use tools such as 'watermark' on images and documents.
• Identify an image, identify copyright owners, its country of original and permitted uses.
• Use disclaimers as commencement of each section, or link to disclaimers.

Infringement strategy

In the event that a third party does infringe your NFP’s IP rights, an IP infringement strategy can provide pre-liminary guidance on the steps to take to resolve the issue. When developing an IP infringement strategy, NFPs should consider:

• Proactive detection – eg. conducting scheduled internet searches to ensure other business are not infringing your NFP’s IP rights.
• Reporting obligations of staff and volunteers on becoming aware of IP infringement.
• Budget for dealing with IP infringement.
• Consulting a legal profession for bespoke advice and strategies.

Tip #4 – Have the appropriate agreements in place

Many NFPs work collaboratively with other organisations and contractors to achieve their purpose. These kinds of collaborations can include the development, exchange and use of IP – so it is important that the proper agreements are in place to protect your NFP’s IP rights. When engaging in collaborative or contractual arrangements, NFPs should consider the following questions:

• Are the proper confidentiality/ non-disclosure agreements in place?
• Do contractor agreements provide for the assignment of IP developed for the NFP?
• Does the NFP have the appropriate licence to use its collaborator’s IP?
• Do employment agreements clearly define the scope of employment to ensure any IP developed by an employee is assigned tothe NFP?

Tip #5 – Register your IP

Some types of IP, such as trade marks, designs and patents, can be protected by registration.

Consider if any of your NFP’s IP should be registered.

Often the most important asset of a Not-for-profit is its brand. This is not limited to other’s perception of the Not For Profit but includes things like trade names, domain names, logos and trade marks.

These are all part of what is known as intellectual property (IP) and it is often this IP that has the most value, both to the Not For Profit’s vision, mission, activities and business and to the future sustainability of the Not For Profit.

There are a number of ways that a well-informed Not For Profit can protect its brand:

• Develop a Brand Use Policy. A well drafted policy should establish the approach to managing the Not For Profit Brand, the procedures and standards that should be applied when representing and promoting the Not For Profit, a process for dealing with the inappropriate or unauthorised use of the Not For Profit’s brand and visual identity, and provide a mechanism for management, monitoring and review of the Brand.
• Develop Guidelines for Usage of the Not For Profit Brand. The guidelines are simply the rules by which the Brand may be used. They may incorporate how the Brand should be visually displayed and how not to display the Brand and who the guidelines apply to.
• Audit and manage the Brand.
• Assign a person the role of Brand standard/ambassador.
• Integrate Brand protection/ management into Strategic Plan and Business Plan.
• Ensure your Brand is distinctive and does not infringe another’s Brand. Choose your mark carefully because not all marks are entitled to protection. Generic marks (ie. the common name of a product or service offered, for example NETBALL for netballs), or descriptive marks (those describing a feature, function, quality, characteristic, use or user of the product or service offered), marks that are common surnames, geographically descriptive marks, national symbols or scandalous marks are generally not protected. Ideally before a trademark is chosen, the mark should be searched and cleared for availability.
• Register your trade mark/s. Register the Not For Profit’s name, logos, slogans with IP Australia. Although registration of the Not For Profits marks is not required to obtain and maintain trade mark rights, it can be extremely helpful in enhancing and enforcing them (and reduce costs in enforcing tem).
• Register your domain name as a trade mark. Obtain domain name registrations for all available names you plan to use.
• Ensure you maintain registration of the Not For Profit’s trade marks and domain names.
• Monitor for impermissible use of the Not For Profit’s Brand, including trade mark. Enforce your rights where necessary. This does not always mean you institute legal proceedings but may be as simple as sending a letter to cease and desist. Do periodic Web searches.
• Prohibit use by third parties use of the Not For Profit’s trade name or trade mark as an account name or avatar (ie., a user or account holder’s representation of itself, or the alter ego whether in the form of an image, symbol, icon, logo, username, or text string)
• Ensure you licence/consent to use of your Brand. Whenever the Not For Profit permits other to use its Brand, whether that is its members, chapters and other affiliated organisations, and others, it is imperative for the Not For Profit to put strict conditions and limitations on the use of its Brand. Failure to do so can carry the risk of losing trade mark rights, create liabilities for the Not For Profit, damage the Not For Profit’s reputation and goodwill etc.
• Use copyright and trade mark notices. Use copyright notices (e.g., ©2013 NFP Association. All rights reserved.) on all works published by the Not For Profit and trade mark notices on all trademarks owned and used by the Not For Profit (e.g., TM for unregister or pending marks and ® for registered marks)
• Make sure you own or have a right to use your IP. Ensure that the Not For Profit owns or has the permission to use all IP (e.g. text, photos, videos) that it uses in publications, on its website, or another other media.

Contractual – the constituent document

An organisation’s constituent document (that is, the constitution, rules, trust deed or charter) is in effect, a legal contract between the organisation and its members.  It is also a contract between the organisation, its members and its governing body (that is, the board, management committee or trustees).

As the constituent document is a legal contract, it can be sued upon. Failure by a party (being the organisation, the members and the governing body) to comply with the terms of the constituent document can give rise to legal action.

The constituent document and the ACNC and ATO

For your organisation to be registered as a charity and subsequently endorsed by the ATO to access tax concessions or as a deductible gift recipient, then the constituent document must contain three clauses (appropriately worded):

• the object clause;
• the clause prohibiting the distribution of any profits to the individual members or governing body; and
• the dissolution or winding up clause.

Once registered, the organisation must review its activities, objects and operations to ensure they are consistent with those clauses. Any inconsistency with those clauses may have the effect of the organisation’s charity registration or tax endorsements being revoked.

The Office of the Australian Information Commissioner has released its Guide to Securing Personal Information. This replaces the previous “Guide to Information Security”.

The new Guide will help agencies and organisations to meet their obligations under the Australian Privacy Principles (APPs) to take reasonable steps to protect personal information. It puts more emphasis on the information lifecycle and specifically addresses the requirements in APP 11 (security of personal information).

For the first time, the Guide includes a cloud computing section which outlines the requirements that apply when information handling is outsourced to a third party provider, and a checklist to help organisations determine whether to use a cloud computing service.

You can view the Guide here.

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Any individual (including sole traders), company, unincorporated or incorporated association, body corporate, partnership or trust (organisation) that is a small business operator is exempt from complying with the Privacy Act 1988 (Cth) (Privacy Act) and the Australian Privacy Principles (APPs) set out under the Privacy Act.