Drafting may be defined as the synthesis of law and fact in a language form. This is the essence of the process of drafting. All three characteristics rank equally in importance. The failure of lawyers to appreciate the principles of law, the facts, or the language form may result in the provision being void. Such a result they are paid to avoid. Laymen go to them on the premises that they will show expertise in the preparation of legal documents. (Robinson 1973, p.1) 1. Recitals, Definitions & Interpretation 1.1 Recitals Recitals set the background and help give some context to the transaction; they can also be a convenient way of recording the parties’ intentions, which could become valuable interpretation tools for a court in the event of a dispute. Alternatively, the parties may expressly choose to state that they do not form a part of the contract. Recitals are not an operative part of the contract. However, a court may consider them (if relevant) in deciding upon an interpretation of a particular part of the contract in dispute. 1.2 Definitions The definitions section defines certain specific terms in the agreement. It should be contained in the operative part of the agreement usually at the beginning sometimes near the end and definitely not with the recitals. Capitalised terms in an agreement (aside from proper names) are usually a prompt for the reader to refer to the definitions section for a full definition of the term. 1.3 Interpretation A set of guiding principles that overlay a document. What an informed reader would expect to find as a guide and what an uninformed reader is relieved to find in the document. Otherwise general rules will apply: The document is to be read as a whole; Contra proferentem Expressio unius est exclusion alterus; Ejusdem generis 1.4 Extract from a standard form of deed Recitals A. [insert details].4 B. [insert details]. The parties agree in consideration of, among other things, the mutual promises contained in this deed: Definitions and interpretation Definitions In this deed: Business Day means a day on which banks are open for business in the city where the notice or other communication is received excluding a Saturday, Sunday or public holiday. Encumbrance means an interest or power: (a) reserved in or over an interest in any asset including any retention of title; or (b) created or otherwise arising in or over any interest in any asset under a bill of sale, mortgage, charge, lien, pledge, trust or power, by way of, or having similar commercial effect to, security for the payment of a debt, any other monetary obligation or the performance of any other obligation, and includes any agreement to grant or create any of the above. Government Agency means any government or any governmental, semi-governmental, administrative, fiscal or judicial body, department, commission, authority, tribunal, agency or entity. Material Adverse Effect means a material adverse effect upon: (a) Party 2’s ability to perform any of its obligations under this deed; (b) the value of [relevant property/assets/subject of the Transaction]; (c) the business or operations of Party 2; or (d) the enforceability of this deed. Power means any right, power, authority, discretion or remedy conferred on Party 1 by this deed/or any applicable law. Interpretation In this deed: (a) words importing the singular include the plural and the converse; (b) words importing a gender include all genders; (c) where a word or phrase is defined, its other grammatical forms have a corresponding meaning; (d) an expression importing a natural person includes an individual, a firm, a body corporate, an unincorporated association and any Government Agency; (e) a reference to any thing (including any right) includes a part of that thing but nothing in this clause 1.2 implies that performance of part of an obligation constitutes performance of the obligation; (f) a reference to a clause, party, annexure, exhibit or schedule is a reference to a clause of, and a party, annexure, exhibit and schedule to, this deed and a reference to this deed includes any annexure, exhibit and schedule;5 (g) a reference to legislation or to a provision of legislation includes any modification or re-enactment of it, a legislative provision substituted for it and a regulation or statutory instrument issued under it; (h) a reference to a document includes all amendments or supplements to, or replacements or novations of, that document; (i) a reference to a party to a document includes that party’s successors and permitted substitutes (including persons taking by novation) and assigns; (j) a reference to a deed other than this deed includes an undertaking, deed, agreement or legally enforceable arrangement or understanding whether or not in writing; (k) a reference to an asset includes all property of any nature, including a business, and all rights, revenues and benefits; (l) a reference to a document includes any agreement in writing, or any certificate, notice, deed, instrument or other document of any kind; (m) a deed, representation or warranty in favour of two or more persons is for the benefit of them jointly and each of them individually; (n) nothing in this deed is to be interpreted against a party on the ground that the party put it forward; (o) a reference to liquidation includes official management, appointment of an administrator, compromise, arrangement, merger, amalgamation, reconstruction, winding-up, dissolution, deregistration, assignment for the benefit of creditors, scheme, composition or arrangement with creditors, insolvency, bankruptcy, or any similar procedure or, where applicable, changes in the constitution of any partnership or person, or death; (p) an accounting term is a reference to that term as it is used in accounting standards under the Corporations Act, or, if not inconsistent with these standards, in accounting principles and practices generally accepted in Australia; (q) the meaning of terms is not limited by specific examples introduced by expressions “including” or “for example”, or similar expressions; (r) a reference to Australian Dollars, A$ and $ is a reference to the lawful currency of Australia; and (s) the Corporations Act is a reference to the Corporations Act 2001 (Cth). 1.5 Extract of Definitions clause from AMPLA Joint Venture Agreement Unless the context otherwise requires, the following expressions have the respective meanings in this agreement (including the Recitals): Approved Programme and Budget means a programme and budget relating to Joint Venture Activities during a particular period which has been approved or deemed to have been approved by the Management Committee under this agreement. Auditor means a registered company auditor under the Corporations Act appointed by the Management Committee at the cost of the Joint Venture to conduct an audit each Year of the accounts of the Joint Venture. Authorisation is any consent, authorisation, registration, filing, lodgement, notification, agreement, certificate, commission, lease, licence, permit, approval or exemption from, by or with an Authority (including the Tenements) required to undertake Joint Venture Activities. 6 Authorised Officer means the person nominated by a party in its Particulars, or any person replaced as its authorised officer by notice given in accordance with this agreement. Authority is any government department, local government council, government or statutory authority or any other party under a Law which has a right to impose a requirement or whose consent is required with respect to Joint Venture Activities. Bankable Feasibility Study means a Feasibility Study that is of a standard suitable to be submitted to a financial institution as the basis for lending of funds for the development and operation of the mine contemplated in the study and is capable of supporting a Decision to Mine. Called Sum means the Percentage Share of funds required to be contributed by a Joint Venturer, in accordance with this agreement to finance Joint Venture Activities under an Approved Programme and Budget. Commencement Date means the date on which the last of the Conditions Precedent have been satisfied or waived in accordance with this agreement or, if there are no Conditions Precedent, then the date of this agreement. Conditions Precedent means the conditions set out in Schedule 1 which are required to be satisfied or waived for this agreement to be effective. Corporations Act means the Corporations Act 2001 (Cth). Defaulting Joint Venturer means a Joint Venturer which has committed a breach of this agreement, whether as an Unpaid Monies Default Event or a Breach Default Event or to which (or to a Related Body Corporate of which) a Breach Default Event relates. Decision to Mine means a decision made by the Management Committee to proceeds to Development and Mining of a Deposit within the Tenements. Deposit means an ore body located within the Tenements. Development means the development of a commercial Mining operation for Minerals. Due Date means the date on which a payment is due under this agreement. Emergency means a situation involving actual or reasonably apprehended substantial damage to or loss of Joint Venture Property or injury to persons or loss of life. Encumbrance means any mortgage, pledge, lien, charge or other form of security or interest in the nature of a security interest. Expenditure has the meaning given to that term in Schedule 3. Expert means a person suitably qualified and capable of making an expert determination under this agreement in accordance with, and subject to, the Institute of Arbitrators & Mediators Australia Expert Determination Rules. Exploration means searching for, discovery and delineation of commercial deposits of Minerals in the JV Area and the evaluation of such deposits, including prospecting, surface mapping, sampling, aerial mapping an reconnaissance, drilling, trenching and related field work, geophysical and geochemical testing, core sampling; assaying; exploration declines; test mining; analysis and evaluation of activities undertaken and results obtained, conducting preliminary feasibility studies, preparing Feasibility Studies reports, planning, supervising and administering all activities undertaken. Feasibility Study means a study of technical, commercial and economic feasibility of Development and Mining in the JV Area and producing Minerals in significant commercial quantities, which includes all available exploration, geological, engineering and other relevant date and capital and operating cost estimates and (if appropriate) marketing studies in sufficient detail to enable options for optimum Development, Mining and Treatment to be identified in reasonable detail, including:7 (a) Exploration Results and estimates of Mineral Resources, and Proven and Probable Ore Reserves as defined in the JORC Code; (b) the proposed methods of Development, Mining and Treatment, including the extraction, beneficiation and transportation of the Ore and the Treatment and production of Minerals, including waste disposal; (c) an estimate of operating levels, environmental costs, shutdown and rehabilitation costs, including an estimate of required capital expenditure and operating costs; (d) an economic evaluation of the proposed Development, Mining and Treatment and the marketing and sale of the Minerals including a comparative analysis of the effect of various assumptions, financing methods, operating costs and taxation; and (e) a schedule of relevant Authorisations required to be obtained before Mining may commence,’ and includes any preliminary, scoping or pre-feasibility study. GST Act means A New Tax System (Goods and Services Tax) Act 1999 (Cth). Gross Negligence means such wanton and reckless conduct as constitutes an utter disregard for the harmful, foreseeable and avoidable consequences which result from that conduct. Insolvency Event means the happening of any of the following events in relation to a body corporate: (a) it is unable to pay all its debts as and when they become due and payable or it has failed to comply with a statutory demand as provided in section 459F(1)of the Corporations Act; (b) a meeting is convened to place it into voluntary liquidation or to appoint an administrator; (c) it, or any other person, makes an application to a court for its winding up, being an application that is not stayed, withdrawn or dismissed within 7 days; (d) an order is made for it to be wound up; (e) the appointment of a controller as defined in section 9 of the Corporations Act of any of its assets; (f) it proposes to enter into or enters into any form of arrangement (formal or informal) with its creditors or any of them, including a deed of company arrangement; or (g) it becomes an insolvent under administration as defined in section 9 of the Corporations Act. Joint Venture Activities means all Exploration activities involved in the acquisition, use, development, operation and maintenance of Joint Venture Property and all other activities, undertakings, and operations engaged in by the Joint Venturers under this agreement, but do not, unless otherwise agreed in writing, include Development, Mining, Treatment or the marketing or sale of Minerals. Joint Venture Expenditure means all costs reasonably and properly incurred by the Manager on behalf of the Joint Venture in connection with Joint Venture Activities pursuant to an Approved Programme and Budget or incurred in an Emergency or as a permitted overrun. Joint Venture Intellectual Property means all copyright, patents, patent applications, discoveries, inventions, and similar rights developed by the Manager pursuant to an Approved Budget in the course of Joint Venture Activities. Joint Venture Interest means the following rights, liabilities and obligations of a Joint Venturer determined under this agreement and expressed as a percentage:8 (a) the obligation, subject to the terms of this agreement, to contribute its Percentage Share of all Expenditure and other Joint Venture costs; (b) the ownership of and the right to receive in kind and to dispose of for its own account its Percentage Share of Minerals produced by the Joint Venture; (c) the beneficial ownership as a tenant in common of an undivided share in its Percentage Share of Joint Venture Property; and (d) all other rights, liabilities and obligations accruing to or incurred by the Joint Venturers in or arising out of this agreement in its Percentage Share. Joint Venture Property means all rights, titles, interest, claims, benefits and all other property of whatever kind, real or personal, from time to time owned by any Joint Venturer for the purposes of the Joint Venture, and includes the Tenements and the Joint Venture Intellectual Property. Joint Venturer means a party which holds a Joint Venture Interest, but does not include a party in its capacity as Manager. JORC Code means the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves as adopted by the Australasian Joint Ore Reserves Committee (JORC), which is sponsored by the Australian mining industry and its professional organisations, for the purposes of compliance with the Listing Rules. JV Area means the area of the Tenements set out in Schedule 2 and any other Tenements applied for or acquired for the purposes of this agreement, or such other area as is agreed in writing by all Joint Venturers. Law is Commonwealth and State legislation including regulations, by-laws, and other subordinate legislation, Authority requirements and guidelines of the Commonwealth, the Nominated State and local governments and Authorities with which the Contractor is legally required to comply, and common law and equity, in respect of undertaking Joint Venture Activities under this agreement. Listing Rules means the Listing Rules of the Australian Stock Exchange Limited or, to the extent that a party or its Related Body Corporate is bound thereby, the listing rules of another recognised stock exchange. Majority Vote means a resolution voted in favour by representatives entitled to vote and be present at the meeting holding in total not less than the Passmark. Excluding for this purpose the votes held by a Defaulting Joint Venturer. Management Fee means the remuneration payable to the Manager under this agreement which is intended to reimburse it for the indirect or overhead corporate, administration and other service costs of managing the Joint Venture not otherwise reimbursed to the Manager as direct Expenditure for Joint Venture Activities. Manager means the person or entity named as Manager in Schedule 1 or such other person or entity as may be engaged or appointed by the Management Committee as Manager from time to time under this agreement. Mineral or Minerals means the mineral or minerals set our in Schedule 1. Mining means all operations associated with the extraction and Treatment of Ore on a commercial basis, including pre stripping, and removal and disposal of overburden and waste. Mining Act means the mining legislation listed in Schedule 1. Native Title Claims means either:9 (a) any claim, application or proceeding in respect of Native Title Rights which is accepted by the Native Title Tribunal or the Registrar thereof pursuant to the Native Title Act 1993 (Cth); or (b) any claim, application or proceeding in respect of those rights, interests and statutory protections of and relating to aboriginal persona as set out in the legislation of the Nominated State or the Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth). Native Title Rights has the same meaning as the expressions “native title” or “native title rights and interests” as defined in section 223(1) of the Native Title Act 1993 (Cth) and includes those rights, interests and statutory protections of an relating to aboriginal persons as set out in the relevant legislation of the Nominated State or the Aboriginal and Torres Strait Islander Heritage Protections Act 1984 (Cth). Nominated State is the State or Territory of Australia set out in Schedule 1. Ore means mineralised material located within the JV Area from which Minerals can be economically recovered. Particulars means the particulars of a party given on page 1 of this agreement, or any particular amended by the party by notice given in accordance with this agreement. Passmark means the requirements needed to be satisfied as set out in Schedule 1 to pass a resolution of the Management Committee by a Majority Vote. Percentage Share means, in relation to a Joint Venturer, the percentage that corresponds to the percentage of its Joint Venture Interest. Proposed Programme and Budget means a work programme and budget for a given Year, or other agreed period, in relation to the conduct of Joint Venture Activities proposed by the Manager. Rehabilitation Obligations means the obligations of the Joint Venturers under the Act, all Tenements and Authorisations, and all applicable statutory and contractual obligations relating to the rehabilitation, revegetation and cleaning up of the JV Area during the following completion of Joint Venture Activities. Related Body Corporate means a related body corporate as defined in the Corporations Act. Shutdown Costs means all costs associated with shutting down all Joint Venture Activities within the JV Area including the costs associated with satisfaction of the Rehabilitation Obligations and any redundancy or termination benefits or payments to any consultant or contractor or employee who is engaged by the Manager in the conduct of Joint Venture Activities, but only to the extent of the period for which an employee was engaged in Joint Venture Activities. Tenement means the mining tenement or tenements listed in Schedule 2 and includes any lease, licence, claim, permit or other authority issued or to be issued under the Mining Act to the Joint Venturers for the purposes of the Joint Venture which confers or may facilitate the enjoyment of such right, and includes any application for, and any extension, renewal, conversion or substitution of, any of those tenements. Third Party means a person not a party, or the Related Body Corporate of a party, to this agreement. Treatment means the processing, smelting, and refining of Ore up to and including a product stage, and includes crushing, weighing, sampling, assaying, refining, treatment, transportation, handling, storage, loading and delivery of the Mineral and its associated Ore, overburden and waste. Ultimate Holding Company means an ultimate holding company as defined in the Corporations Act. Unanimous Vote means a resolution voted in favour by all representatives entitled to vote and be present at the meeting in respect of the matters set out in Schedule 1, excluding for this purpose the votes held by a Defaulting Joint Venturer. 10 Wilful Misconduct means an act or omission that is a reckless and intentional disregard of: (a) any provision of this agreement; (b) any Approved Programme or Budget, except in the case of an Emergency; (c) any Law required to be observed in connection with Joint Venture Activities; or (d) the terms or conditions of a Tenement, but does not include any error or judgement or mistake made by the Manager or any of its directors, employees, agents or contractors in the exercise, in good faith, of any function, authority or discretion conferred upon the Manager. Year means a year commencing on and including the first day of July and ending on and including the following thirtieth day of June. 2. Notices Notices not conforming to the guidelines outlined in the services of notices provision could be deemed to have been given much later than was actually the case, or in a worst case scenario, not to have ever been given Notices are either a trigger, or to record significant events in a contract. For this reason it is important that the service of notices provision be scrutinised carefully to ensure that it is practically workable and effective. A typical clause will usually provide for: the name of the representative of the party and the address at which any notice must be served; the method of services; and circumstances in which a notice is deemed to have been served. Advances in communications technologies have seen interesting changes in these in recent years. 2.1 Extract of notice clause from a lease Notices (a) A notice or other communication in connection with this Lease must be in writing and may be given by the relevant party or its solicitors or agents and may be left at the address of the addressee or sent by prepaid ordinary post to the address of the addressee set out in the Schedule; (b) Unless a later time is specified in it a notice or other communication takes effect from the time it is received; (c) A letter is taken to be received if left at the Premises at the time it is left and in the case of a posted letter on the third day after posting. 11 2.2 Extract of notices clause from AMPLA Joint Venture Agreement 21 NOTICES 21.1 Form of Notice Unless expressly stated otherwise in this agreement, any notice, certificate, consent, approval, waiver or other communication in connection with this agreement (Notice) must be in writing or given by electronic transmission, signed by the sender (if an individual) or an Authorised Officer of the sender and marked for the attention of the person identified in the Particulars or, if the recipient has notified otherwise, then marked for attention in the last way notified. 21.2 When Notices are taken to have been given and received (a) A Notice is regarded as given and received: (i) if delivered by hand, when left at the address given in the Particulars; (ii) if sent by pre-paid post, on the 3rd day following the date of postage; (iii) if given by fax, on production of a transmission report by the machine from which the fax was sent which indicates that the fax was sent in its entirety to the recipient’s fax number, unless the recipient informs the sender that the Notice is illegible for incomplete within 4 hours of it being transmitted; and (iv) if sent by email, at the time shown in the delivery confirmation report generated by the sender’s email system. (b) A notice is delivered or received other than on a day on which trading banks are open for business in the capital city of the Nominated State (Business Day) or after 5.00pm (recipient’s time) is regarded as received at 9.00am on the following Business Day. A Notice is delivered or received before 9.00am (recipient’s time) is regarded as received at 9.00am. 3. Assignment & Novation 3.1 Assignment An assignment clause usually allows a transfer of rights, benefits and obligations under a contract from one party to another. A party will usually wish to ensure that it continues to deal with the party it originally contracts with. There may even be an option of terminating the contract in the event of an attempt at substituting the other party or in the event of a change of control in the other entity. It is often desirable to have a process to have the final right of approval of any change in the other party. In contractual relationships, where one of the parties has the “upper hand” over the other 5 assignment clauses can often operate unilaterally preventing the lessee from assigning. Some documents may expressly permit the chosen party to assign its interest at will and without the necessity of requiring the weaker party’s approval 6 (eg winery in a grape purchase contract). A change of control clause should also be considered. Such a clause governs the situation where there is a change in the ownership or control of a party to the contract. It should define the events constituting a change of control. It will provide that any change of control (that falls within such definition) will: 12 Trigger a certain set of events such as termination; or May be deemed to be an assignment. Such a deeming provision will then trigger the same information and approval processes necessary in an assignment situation. 3.2 Novation Novation is a method of releasing a party from the contract and introducing a new one in his or her place. Novation differs from assignment in that novation requires the consent of all the parties to the existing contract. The new contract may be between the parties to the existing contract only or new parties may be substituted. The consideration for the new contract is the mutual discharge by the parties of the obligations under the old contract. 3.3 Extract of assignment clause from standard deed 6.7 Assignment [Alternative 1 – General Assignment Clause] (a) Rights arising out of or under this deed are not assignable by one party without the prior written consent of the other party. (b) A party must not unreasonably withhold its consent./ A party may withhold consent in its absolute discretion. (c) A breach of clause 6.7(a) by one party entitles the other party to terminate this deed. (d) Clause 6.7(c) does not affect the construction of any other part of this deed. [Alternative 2 – Assignment clause that binds one party only] Party 1 may assign its rights under this deed and each Collateral Security without the consent of Party 2. [Alternative 3 – Assignment prohibited] [/] The rights created by this deed are personal to the parties and must not be dealt with at law or in equity. 3.4 Extract of assignment clause from standard lease 6 Assignment and Subletting 6.1 No interest to be created without consent Subject to clause 6.2, the Lessee is not to assign this Lease or create in favour of any person an interest in this Lease or the Premises, or allow any person to use or occupy the Premises, without the Lessor’s consent. 13 6.2 Requirements for assignment of subletting The Lessee may assign the Lease and the whole of the Premises or sublet a part or the whole of the Premises if: (a) at least 14 days before the date of the proposed change in the occupation of the Premises, the Lessee: (i) applies for the Lessor’s consent; and (ii) supplies to the Lessor evidence acceptable to the Lessor that the proposed assignee or subLessee is experienced in and of good reputation in relation to conducting a business permitted by this Lease, and is financially able to conduct that business; and the Lessor consents to the assignment or sublease; (b) The Lessee delivers to the Lessor, before the date of the proposed change in occupation, a completed agreement (or deed), in a form prepared or approved by the Lessor’s solicitors, by which: (i) the proposed assignee or sub-lessee agrees with the Lessor to be bound by this Lease as from the date that the assignment or sublease takes effect; and (ii) any guarantor required under this clause gives to the Lessor a guarantee and indemnity in the terms of that clause in respect of the liability of the assignee or sub-lessee; (c) the Lessee has remedied any outstanding default on the Lessee’s part or the Lessor has waived the default; (d) the Lessee pays to the Lessor on demand the Lessor’s expenses, including legal costs, (i) incurred in making enquiries to satisfy itself concerning the matters specified in clause 6.2(a)(ii); and (ii) in connection with the preparation, completion and stamping of the assignment or sublease and any other related documents, and the stamp duty on all those documents; (e) if requested by the Lessor, the Lessee arranges for the proposed assignee or sub-lessee to obtain from a bank or other person acceptable to the Lessor a guarantee of the obligations under this Lease to be assumed by the proposed assignee or sub-lessee; (f) in the case of an assignment, the Lessee has withdrawn any caveat lodged by it in respect of its interest in the Premises; and (g) nothing in this clause 6.2 affects an assignment to a company which has similar underlying ownership to the Lessee if the parties comply with clause 6.2(b). 6.3 Lessee remains liable The Lessee remains fully liable under this Lease if the Lessee assigns this Lease or creates an interest in this Lease or the Premises in favour of any other person, whether or not the Lessee has complied with the requirements set out in clause 6.2. 6.4 Change in control If the Lessee is a company, and there is a change in control of the Lessee (or if the Lessee is a subsidiary, any change in the control of its holding company): (a) the change in control is to be taken to be an assignment of the Lessee’s interest in the Lease; and14 (b) if requested by the Lessor, the Lessee is to obtain from a bank or other person acceptable to the Lessor, a guarantee of the Lessee’s obligations under this Lease on terms acceptable to the Lessor. The Lessee shall be deemed to have complied with this clause 6.4(b) by provision of a guarantee by the directors of the Lessee; and in this clause 6.4: (i) “control” means control of the composition of the board of directors or control of more than 50% of the shares with the right to vote at general meetings; and (ii) words defined in the Corporations Act have the meanings given to them by that Act. 6.5 Exclusion of statutory provisions The provisions of sections 80 and 82 of the PLA do not apply to this Lease. 6.6 Costs and expenses The Lessee is to pay to the Lessor on demand all fees and expenses payable by the Lessor to any agent or consultant engaged by the Lessor in connection with a proposed assignment or sub-letting. 4. Entire Agreement The effect of an entire agreement clause is to prevent the parties relying upon any discussions, statements, understandings or other documents that are not expressly embodied or contained in the contract. The effect of the clause is to make the contract a single ‘stand alone’ document containing the whole of the agreement of the parties. Its purpose is to prevent the parties claiming subsequently that the contract does not accurately reflect the agreement reached or the understanding of the parties. All successive drafts and versions of a contract (particularly the final one to be signed) should be checked to ensure that there are no terms not previously discussed or negotiated. The effectiveness of entire agreement clauses will ultimately depend upon the parties’ approach and conduct in the negotiation of the contract and its terms. In order to be totally confident in relying on the clause, compliance will usually be required with the applicable laws and requirements relating to: Unconscionable conduct; Misleading and deceptive conduct; and False and misleading representations. 4.1 Extract of entire agreement clause from standard business sale agreement 22.12 Entire Agreement (a) This agreement supersedes all previous agreements in respect of its subject matter and embodies the entire agreement between the parties. (b) The Buyer acknowledges that no representations, warranties, promises, undertakings or agreements have been made by the Seller or any Related Corporation or any person acting, or purporting to act, on behalf of the Seller or a Related Corporation in connection with the sale of 15 the Business or the Business Assets other than as expressly set out or referred to in this agreement [or a Related Agreement]. (c) The Buyer acknowledges that it has not relied on any statement, representation, warranty, promise, undertaking or agreement (whether express or implied, oral or written) resulting from or implied by conduct made in the course of communications or negotiations in connection with the sale of the Business or the Business Assets, which is not set out in this agreement [or a Related Agreement]. (d) [Seller addition] Nothing in this clause 22.12 will exclude any liability which the Vendor would otherwise have to the Purchaser in respect of false, misleading or fraudulent statements made by the Vendor prior to the date of this Agreement. 4.2 Extract of no reliance or inducement clause from AMPLA Joint Venture Agreement 22.8 No reliance or inducement Each party warrants and agrees that when entering into this agreement it relied exclusively on the following matters independently or any statements, inducements or representations made by or on behalf of any other party (including without limitation by the officers, employees or agents or any other person acting on behalf of a party): (a) its own inspections, investigations, skill and judgement; (b) the terms expressly contained in this agreement; and (c) opinions and advice obtained independently of any other party. 5. Mediation Contracts to mediate have been held to be valid where they describe clearly the steps which the parties are required to take or they incorporate a structure for a mediation. A clause which required the parties to attempt in good faith to resolve a dispute or claim through ADR procedure recommended by a mediation centre was regarded as enforceable. A clause was held uncertain where it simply stated that a dispute shall be submitted to a ‘Third Party Mediation procedure’. A mediation clauses has also been held uncertain where it does not state the person who is to nominate an expert failing the agreement of the disputing parties or where it does not provide who is to bear the costs of a mediator. 5.1 Extract of issue resolution clause from AMPLA Joint Venture Agreement 16 Issue Resolution 16.1 Limitation on proceedings The parties agree that it is a condition precedent to the commencement of any litigation proceedings by a party in respect of a dispute under, or in relation to, this agreement (Issue ) that the party has complied fully with the agreed process of resolving an Issue (Issue Resolution Process) under this clause (regardless of the level or levels on which the Issue has previously been considered) except where the Issue is the non-payment of monies due or:16 (a) if the party seeks urgent interlocutory, injective or declaratory relief ; or (b) if the other party has failed to observe the requirements of this clause and the party seeks to enforce compliance with the Issue Resolution Process, in respect of the Issue. 16.2 Issue Resolution Process The Issue Resolution Process for this agreement is set out in Schedule 5. Schedule 5 Issue Resolution Process [Example only] 1.1 Issue Resolution Process (a) Where an Issue arises between the parties, a party may give notice to the other parties initiating an Issue Resolution Process in respect of the Issue (Issue Notice) which Issue Notice must: (i) state that the notice is given under this subclause; (ii) describe the nature of the issue; and (iii) nominate a representative of the party who is authorised to negotiate and settle the Issue on the party’s behalf. (b) (Representative of other parties) Each other party must within 7 days after receipt of an Issue Notice nominate in writing to the other parties a representative authorised to negotiate and settle the Issue on its behalf. (c) (Negotiation by Representatives) The parties’ representatives must negotiate in good faith with a view to resolving the Issue within 21 days after the receipt of the Issue Notice, (or such longer period as those representatives agree), failing which the Issue must be immediately referred to the Chief Executive Officers of the parties. (d) (Chief Executive Officers) The Chief Executive Officers must negotiate in good faith with a view to resolving the Issue within 14 days of the Issue being referred to them (or such longer period as the Chief Executive Officers agree) failing which, the Issue may be immediately referred by a party by notice to mediation or Expert determination under this agreement. 1.2 Mediation Mediation of an Issue must: (a) be conducted in the Nominated State by the person or body agreed to by the parties or, failing agreement within 35 days after receipt of the Issue Notice, as nominated by the President for the time being of the Law Society of the Nominated State on request by either party; (b) be conducted in accordance with such rules as may be agreed to by the parties or, failing agreement within 35 days after receipt of the Issue Notice, in accordance with the rules nominated by the person or body agreed or nominated to conduct the mediation; (c) be at the cost and expense of the parties equally (expect that each party must pay its own advisers, consultants and legal fees and expenses) unless the parties otherwise agree; (d) if not earlier resolved, be continued for a period expiring on the date being 14 days after the nomination of the mediator (or such other period as the parties may agree) after which either 17 party may at any time after that date seek Expert determination in accordance with this agreement or commence litigation proceedings in respect of the Issue. 1.3 Issue Resolution Process not to interrupt Joint Venture Activities The parties must ensure that neither the commencement nor conduct of any Issue Resolution Process, including mediation, or Expert determination, causes any interruption to Joint Venture Activities or to the performance by the parties of their respective obligations under this agreement, nor will It affect any of the Activities or a party under this agreement is materially affected by the submission of the matter in dispute of arbitration, litigation or by the result of the litigation or arbitration. 1.4 Clause does not apply to matters where consent required If this agreement refers to the parties reaching agreement on a matter or the consent of any party being given then, except where this agreement requires that consent or agreement is not to be unreasonably withheld, the Issue Resolution Process cannot be used to resolve a dispute between the parties in relation to the reaching of that agreement or the giving of that consent. 6. Arbitration Many commercial contracts provide that disputes between the contracting parties shall be resolved outside the courts, or at least that the parties shall attempt to resolve their disputes outside the courts before they litigate with each other. An arbitration clause often sets out the manner of appointment of the arbitrator and of proceedings. Often the clause provides that if arbitration is not acceded to, any claims will be treated as waived and absolutely barred. The ability of a court to enforce compliance with the arbitration process depends on whether the clause providing for arbitration is sufficiently certain, whether the dispute is within the scope of the arbitration clause, and the circumstances in which a court will exercise discretion to enforce compliance with a prescribed arbitration process. An arbitration clause which purports to finally and exclusively prescribe the method in which disputes may be resolved will be void for attempting to oust the jurisdiction of the courts altogether. A clause which provided that a dispute cannot be litigated, but must only be submitted to arbitration, was held to be unenforceable. Careful attention must also be paid to drafting arbitration clauses where third parties are involved or ancillary agreements would unintentionally escape the arbitration process agreed in the principal contract. Failure to provide for related project documents to be brought within the same dispute resolution process could result in a forum fragmentation. 6.1 Short form arbitration clause In the event of a dispute arising out of, relating to or in connection with this agreement or its validity, the dispute must be determined by arbitration in accordance with the Commercial Arbitration Act 1985 (WA). Possible additions: 1. Appointment of arbitrator The parties agree to appoint an arbitrator from XXXX. If the parties do not agree on the arbitrator to be appointed, either party may request the President of XXXX to appoint an arbitrator. XXXX: refer to appropriate appointing body. 18 2. Legal Representation Each party may be represented by a legal practitioner [or any other representative] 3. Negotiation If a dispute between the parties arises out of, relates to or is in connection with any aspect of this agreement, or the validity of this agreement, the parties undertake with each other to use all reasonable endeavours, in good faith, to settle the dispute by negotiation. 4. Dispute Notice and Representatives For the purpose of facilitating the process of negotiation referred to in clause XX: (a) the party claiming that the dispute has arisen is to give notice to that effect to the other party which: (i) briefly identifies the subject matter of the dispute; and (ii) designates a representative for the negotiation who will have authority to settle the dispute on behalf of that party; and (b) the other party is then to promptly designate by notice to the party giving the Dispute Notice, its representative for the negotiation who will have authority to settle the dispute on behalf of the other party. 5. Procedure All evidence and submissions to the arbitrator are to be in writing unless the arbitrator otherwise directs or the parties otherwise agree. 6. Arbitrator’s authority The arbitrator is to have authority to give a party any relief which could be ordered by a court having the appropriate jurisdiction. 7. Related Disputes The arbitrator may, in the arbitrator’s discretion, determine any dispute raised by either party in the course of the arbitration additional to that or those referred to in the Dispute Notice, subject to: (a) the additional dispute being capable of being referred to arbitration in terms of this clause; and (b) any conditions as to costs or otherwise which the arbitrator may propose. 8. Privacy The Arbitration proceedings are to be conducted in private, and information disclosed by any party in the course of the proceedings is to be kept confidential by the parties and their advisers, except as otherwise agreed by the parties or directed by a court. 9. Obligations continue Pending and during the arbitration, the parties are to continue to perform their obligations under this agreement. Variables (i) If an international element, add the following words:19 “The International Arbitration Act 1974 and the Uncitral Model Law set out in schedule 2 of that Act do not apply to this agreement.” (ii) Insert a relevant industry organisation or a general nominating body such as the Institute of Arbitrators & Mediators, Australia, the Law Society of WA, The Institute of Chartered Accountants or possibly the International Chamber of Commerce in an international situation. 7. Costs Practitioners are not entitled to fix their own costs in excess of the maximum specified in the applicable costs determination unless the practitioner has made a costs agreement. The costs agreement must (from 1 July 2009) be made in accordance with Division 6 of the Legal Profession Act 2008 or the corresponding provision of a corresponding law to be enforceable. Solicitor-client costs represent the amount a client is obliged to pay his or her solicitor as the price of professional work, the solicitor's entitlement thereto having its genesis in the costs agreement between solicitor and client. Party-party costs on the other hand refers to the amount which the person to whom the order is directed must pay to another party to the litigation as partial indemnity for the professional legal fees and expenses incurred by that party in the course of the litigation. The duty to pay party-party costs is ordinarily sourced not from a contract but from an order of a court or tribunal. If for example a costs clause in the contract says "The Lessee covenants with the Lessor to pay the Lessor's solicitors costs”, if a costs agreement has been entered into between the Lessor and their solicitor this has the potential to result in higher recoverable costs payable by the Lessee if the words to the following effect are added: “on a solicitor-own client basis”. If on the other hand no costs agreement has been entered into between the Lessor and their solicitor the maximum that the Lessee will be liable to pay is the amount permissible under the applicable costs determination relevant to the contract. Further as a third party payer the Lessee would be entitled to apply to a taxing officer for an assessment of the whole or any part of a bill for legal costs (Legal Profession Act 2008 Part 10 Division 8 s295). 8. Law/Forum 8.1 Choice of law Courts tend to respect the parties choices as to law, and as to a place(s) whose courts they have agreed can (or must) determine their dispute (ie the forum). Parties will be held to the consequences of foreign jurisdiction clauses agreed to as part of the contract, absent strong reasons to the contrary. 8.2 Choice of forum A choice of forum clause on the other hand, manifests a selection by the contracting parties of a place (jurisdiction) whose courts they accept as either having exclusive or non-exclusive jurisdiction to resolve contractual disputes over issues arising between them. In the absence of such a choice, common law conflicts of law principles may need to be applied in ascertaining which court or courts can determine a dispute or even hold off (stay) a court from doing so, in favour of courts of another place.20 8.3 Extract of governing law and jurisdiction clause from standard stand-alone charge 17.5 Governing law and jurisdiction (a) This deed is governed by the laws of [insert relevant jurisdiction]. (b) The Chargor irrevocably submits to the exclusive/non-exclusive jurisdiction of the courts of [insert relevant jurisdiction]. (c) [The Chargor appoints [insert name of process agent if Chargor has no presence in relevant jurisdiction] of [insert address] in relation to proceedings in [insert relevant jurisdiction] as its agent to received service of any legal process on its behalf without excluding any other means of service permitted by the law of the relevant jurisdiction.] (d) [The Chargor irrevocably waives any objection to the venue of any legal process on the basis that the process has been brought in an inconvenient forum.] (e) [The Chargor irrevocably waives any immunity in respect of its obligations under this deed that it may acquire from the jurisdiction of any court or any legal process for any reason including the service of notice, attachment before judgment, attachment in aid of execution or execution.] 9. Restraint of trade The buyer of a business who pays for goodwill will normally seek to secure the future value of that goodwill by placing restraints on the capacity of the seller to continue to deal with customers, employees and suppliers of the business. At common law, in the absence of any contractual restraint, a seller will be able to establish a new business, in competition to that which has been sold, even if the seller has sold the goodwill in the business. There are some limitations imposed by common law on the seller’s activities; although the seller is entitled to do anything in the conduct of a new business that an outsider would be entitled to do, the seller would be unable to solicit customers from his previous business. However the protection provided by the common law is usually insufficient for a buyer and therefore specific provisions need to be included in the contract. As a general proposition, covenants in restraint of trade are contrary to public policy and therefore, as a matter of general law, void and unenforceable. However the law will allow such a restraint if it is reasonable. Whether a restraint is reasonable will depend on questions of fact. There are four variables which need to be considered in relation to the restraint of trade. The persons who are to be subject of the restraint obligations; The geographical extent; The time period; and The proscribed conduct which is to be the subject of the restraint. In order to comply with the requirements particular care must be taken if it is decided to include a ‘cascading’ restraint of trade clause. 21 A cascading clause is where more than one item is included in the schedules dealing with restrained business, restraint area and restraint period, each of the combinations will be an operative restraint (unless it is found to be invalid). Care should be taken when describing the time and area elements of the restraint covenant to ensure that the description is not meaningless. For example if an area is to be described by reference to a radius, the point from which it is measured should be specified. Care should be taken in describing the ‘conduct which is to be restrained’. In all cases a purchaser should select reasonable restraints and consider carefully what businesses should be prohibited and the duration and extent of the restraint that will be required to ensure that the purchaser will have an adequate opportunity to obtain full benefit of the goodwill of the relevant business and to appropriate it to itself. 9.1 Extract of competition clause from standard business sale agreement Definitions Restraint Area means each of the following: (a) Western Australia; (b) South Australia; (c) Northern Territory; (d) Victoria; (e) New South Wales; (f) Queensland; (g) Australian Capital Territory; (h) Tasmania; and (i) the Commonwealth of Australia. Restraint Period means: the period of four calendar years commencing on the Completion Date; the period of three calendar years commencing on the Completion Date; the period of two calendar years commencing on the Completion Date; and the period of one calendar commencing on the Completion Date. 14. Competition 14.1 Restrained Business In consideration of the Buyer agreeing with the Seller to purchase the Business and Sale of Assets under this agreement, and in consideration of the Buyer agreeing to make an offer of employment to the Key Employee, the Seller and the Key Employee undertake and agree with the Buyer that the Seller and the Key Employee will not, during the Restraint Period within a Restraint Area:22 (a) directly or indirectly conduct, carry on or promote on his own account or in any other capacity (including in partnership or joint venture); or (b) be directly or indirectly engaged, concerned or interested in (whether as a trustee, principal, agent, shareholder, member, unit holder, director, secretary, executive officer, beneficiary, employee, independent contractor, consultant, adviser, manager, financier or in any other capacity), any company, trust, joint venture, partnership or any other form of incorporated or unincorporated entity or structure, which is directly or indirectly engaged, concerned or interested in, or conducting, carrying on or promoting, any business similar to or competitive with the Business as conducted at any time during the period of 2 years prior to the Completion Date (other than as a shareholder or unit holder holding less than 5% of the issued shares or units of a company or trust listed on ASX). 14.2.1 Restrained Conduct On and from the Completion Date, in consideration of the Buyer agreeing with the Seller to purchase the Business and the Sale Assets, and in consideration of the Buyer agreeing to make an offer of employment to the Key Employee, the Seller and the Key Employee undertake and agree with the Buyer that the Seller and the Key Employee will not, directly or indirectly, whether alone or with any other person or party in any capacity including without limiting the generality of the foregoing trustee, principal, agent. Shareholder, member, unit holder, director, secretary, executive officer, beneficiary, employee, independent contractor, consultant, adviser, manager, financier or in any other capacity whatsoever during the Restraint Period within a Restraint Area: (a) solicit, canvass or secure the custom of any person who is at the Completion Date, or who was at any time in the 2 years prior to the Completion Date, a client of the Business in connection with or in relation to any business or services which are similar to or competitive with the Business; (b) represent themselves as being in way connected with or interested in the Business or any business carried on from time to time by the Buyer or a Related Corporation of the Buyer; (c) except where disclosure is required by law or reasonably necessary to obtain professional advice, disclose to any person, or use to their advantage, or to the detriment of the Buyer or any Related Corporation of the Buyer, or cause to be so used or disclosed, the name of any client of the Business, or any of the Confidential Information and shall at all times keep such information confidential; or (d) solicit the services of or employ any person who is at the date of this agreement, or subsequently becomes, an employee of, or consultant to, the Buyer or a Related Corporation of the Buyer. 14.2.2 Individual Restraints Each of the restraints contained in clauses 14.1 and 14.2 resulting from the various combinations of the Restraint Period and the Restraint Areas constitute and shall be construed as separate, severable and independent provisions from the other restraints in regard to the Seller and Key Employee. 14.2.3 Acknowledgment as to reasonableness of Restraint The Seller and the Key Employee acknowledge, agree and declare that each of the restraints contained in clauses 14.1 and 14.2 are reasonable in their scope and duration having regard to the interests of each party to this agreement and go no further than is reasonably necessary to protect the Buyer’s interest as Buyer of the Business and the Sale Assets. 14.5 Consequences of breach of Restraint The Seller undertakes and agrees to indemnify the Buyer and keep the Buyer indemnified in relation to any breach of the restraints by them or an Associate of them, contained in clauses 14.1 and 14.2 and acknowledges that the Buyer, in addition to any other remedy which may be available to it in law or equity, will be entitled to interim, interlocutory and permanent injunctions to prevent a breach, or 23 threatened or anticipated breach, and/or compel specific performance, of the restraints contained in clauses 14.1 and 14.2. 10. Retention of title A retention of title clause is a provision in a sale of goods contract that delays the transfer of title to, or property in, the goods from the seller to the buyer until certain conditions are met (usually, at the minimum, the payment of the price of the goods). The purpose of such a clause is to provide a security interest in the goods that the seller can thereafter use to recover them if the buyer becomes insolvent or bankrupt. This allows the seller to recover or reclaim the goods if the buyer fails for any reason to pay the purchase price of the goods as the goods remain the seller’s property and have not become the buyer’s property. 10.1 Types of retention of title clauses Simple clause: the seller retains ownership of the goods until the buyer pays the full price for the goods sold under the particular contract. All moneys (or current account) clause: the buyer is required to pay the seller all amounts outstanding under all sale of goods contracts between the seller and the buyer. Extended clause: the seller reserves ownership of the goods against the buyer and any subbuyer or disponee of any interest in the goods. Prolonged clause: this clause uses the three previous four stages and also claims property, or an interest, in any manufactured or processed goods of which the goods supplied by the seller to the buyer have become part during the course of manufacturing or reworking. 10.2 Key aspects of retention of title clauses The seller must ensure that the retention of title clause is a part of the contract of sale. It is not enough for the retention of title clause to be contained in, or impressed upon, an invoice or some other post-contractual document such as a packing slip or dispatch notice. If goods are still in the possession of the buyer and have not been resold or physically incorporated into other goods or amended in such a way as to prevent them being identifiable, the retention of title clause will take effect. The retention of title clause must retain title to the goods, not confer title on the buyer and seek to obtain title or an interest in the goods by means of a charge-back mechanism. The retention of title clause must adequately identify the goods. The seller should name the goods specifically in the contract of sale and place suitable identification symbols and marks on the goods to indicate that the goods are the property of the seller. The retention of title clause should constitute the buyer a bailee of the goods. As a bailee, the buyer will have the legal and economic risks of the goods but will not have ownership of them. A bailment is sufficient to displace the usual rule in sale of goods law that risk prima facie passes to the buyer with the transfer of the property of the goods, and so it remains with the seller until the property passes to the buyer. No retention of title clause should be included in a contract without carefully considering its suitability for the transaction at hand. 24 The retention of title clause must deal with the prospect that the buyer may re-sell the goods in the course of its business. The usual step that the seller takes is to transfer its interest away from the goods to the sub-sale proceeds. Many retention of title clauses impose conditions which provide the seller with the right to enter onto the buyer’s property and recover the goods if the buyer defaults. In the case of cross-border sales the seller and buyer are physically separated. Therefore, speaking practically, if the seller inserts such a provision in the contract the seller must have the right to enforce its rights of recovery and of pursuit by using an agent. 10.3 Extract of retention of title clause Title to Products delivered by the Supplier to the Buyer does not pass until payment in full has been made except when the Buyer resells the goods in the ordinary course of business. In that case, title will pass to the Buyer immediately prior to the resale. 11. Force majeure Force Majeure is a term in a contract. It permits a party to the contract to be released from its obligation to perform the contract, sometimes permanently, sometimes only for the duration of the force majeure event, if an agreed event beyond that party’s control (the force majeure event) occurs. Frustration occurs when, without fault of either party, performance of the contract has radically changed. Performance must be impossible as distinct from impractical. The test is “whether the situation resulting from the [relevant event] is fundamentally different from the situation contemplated by the contract.” Frustration brings the contract to an end. It discharges the parties from their obligation to perform their contractual duties. Right, remedies and liabilities which have arisen before frustration remain. Being a contractual clause the parties determine how force majeure will affect the contract. Conceptually a force majeure event is one which: Is beyond of the control of the party relying on the force majeure clause; and; Could not have been prevented by the party relying on the clause taking reasonable steps to prevent the event from occurring. 11.1 Short form force majeure clause If by reason of any fact, circumstance, matter or thing beyond the reasonable control of the seller or the buyer either is unable to perform in whole or in part any obligation under this agreement that party is relieved of that obligation under this agreement to the extent and for the period that it is so unable to perform and is not liable to the other party to this agreement in respect of such inability. 11.2 Long form force majeure clause Where a party is unable, wholly or in part, by reason of an act of God, strike, lockout or other interference with work, war declared or undeclared, blockade, disturbance, lightning, fire, earthquake,25 storm, flood, explosion, governmental or quasi-governmental restraint, ex-appropriation prohibition, intervention direct or embargo, unavailability or delay in availability of equipment or transport, inability or delay in obtaining governmental or quasi-governmental approvals consents permits licences authorities or allocations, and any other cause whether of the kind specifically enumerated above or otherwise which is not reasonably within the control of the party affected (“force majeure”), to carry out any obligation under this agreement and that party: (a) gives the other party prompt notice of that force majeure with reasonably full particulars thereof, and, insofar as known, the probable extent to which it will be unable to perform or be delayed in performing that obligation; and (b) uses all possible diligence to remove that force majeure as quickly as possible; (c) that obligation is suspended so far as it is affected by force majeure during the continuance thereof provided that; (d) an obligation to pay money is never excused by force majeure; (e) the requirement that any force majeure shall be removed with all possible diligence shall not require the settlement of strikes, lockouts or other labour disputes, or claims or demands by any government on terms contrary to the wishes of the party affected. Final comment Drafting calls upon all the skills of lawyers. Good lawyers are those who readily understand their clients, are quick to appreciate the facts in which documents are to operate, are responsive to changes particularly those relating to business and social conditions, and have a better than average command of the law yet accept the need to draft documents in a simple language. They are careful. They do not use a form of words unless they have considered its purpose and how it achieves it. They have a wide experience of law and life; that experience cannot be acquired overnight. Lawyers who seek to be good draftsmen must draft, must write provisions. They cannot do this unless they have an adequate understanding of the principles governing the construction of provisions. Thus they must understand the nature of the language of the law and the nature of generality of expression. Without understanding these elements, they will be found to rely on the forms in the officer and precedent books rather than on principles. (Robinson 1973, pp 7–8). Acknowledgments AMPLA Exploration Joint Venture Agreement (Minerals). 2008. Andranti, F. 2004. Understanding commonly used contract terms: boilerplate clauses. Sydney: Corporate Legal Education & Development. Butterworths Australian Legal Dictionary. 1997. Sydney: Butterworths. Dal Pont, GE. 2003. Law of Costs. Sydney: LexisNexis Butterworths. Robinson, S. 1973. Drafting: Its Application to Conveyancing And Commercial Documents. Sydney: Butterworths. Thomson J, Warnick L, and Juris K. 2008. Commercial Contracts Clauses: Principles and Interpretation. Australia : Lawbook Co Arbitration Clause. Encyclopaedic Australian Legal Dictionary, 16 February 2009. 26 Restraint. Australian Encyclopaedia of Forms & Precedents, 16 February 2009 Retention of Title Clauses. Australian Encyclopaedia of Forms & Precedents, 16 February 2009. For more information: Paul Kordic Principal T +61 8 9420 7100 E firstname.lastname@example.org rockwellolivier.com.au We know that close and effective (relationships) matter to you and we offer services that draw on our significant knowledge and our experience.