How small businesses can avoid legal pitfalls


A contract of guarantee is, subject to any qualifications made by the particular instrument, a collateral contract to answer for the debt, default or miscarriage of another who is, or is contemplated to be, or to become, liable to the person to whom it is given.

A contract of guarantee is used where there are three parties and one party seeks a contractual obligation that a third party will undertake the obligations of the other party if they default and are unable to perform their contractual obligation.

A guarantee is often used to enforce a third party repayment of the principal loan amount. It only becomes active if the borrower cannot repay the amount when it is due and payable.  In this example the original loan is a contract between the lender and the borrower. The guarantee is an ancillary or secondary contract between the borrower and a third party that is triggered upon the breach of the primary contract. If the first party borrower does breach their obligations, the lender has a right to call in the guarantee and recover funds from the guarantor.

When making or signing a guarantee it is important to;

  • Monitor the repayments of the third party;
  • Have a policy of full disclosure of financial situation;
  • Understand the extent of your liability; and
  • Never sign unless you have the ability to fund upon default.

If you have any queries or problems with a guarantee contact Victor Tse and Associates.


A contract is a legally binding agreement between two parties voluntarily undertaking to perform obligations for good consideration.

Contracts need not be in writing subject to exceptions such as those outlined in the Instruments Act 1958. Further, in order to be binding they must have a number of elements known as Offer, Acceptance, Intention, Consideration, Certainty and acknowledgement of any Formalities.

Because a contract has formal legal rules, it is possible that one or both parties believe they are operating under a contract, when in fact no valid contract exists. Conversely, because a contract does not need to be in writing, the parties could be liable under contract law even though they only agreed on terms verbally.

Whether a valid contract exists is not always obvious, and a careful investigation and consideration of all the facts of your situation will be necessary to determine the scope of your legal obligations.


If you have found yourself in a contractual situation and either don’t want to be, or believe that the other party is not performing their legal obligations it will be important to carefully monitor your behaviour so as not to give them a chance to escape legal accountability.

Whenever entering into a contract it is important to define the terms with sufficient specificity so that if the performance is lacking in either quality of performance, time of performance or failure all together you will be able to proceed with a legal action against the other party to secure your investment.

If the words ‘time is of the essence’ are inserted into the contractual terms it conveys the important information that the parties are asserting that delay is unacceptable. Therefore if one of the parties is late in delivery it ought to be actionable by the other side.

If a party fails to perform some of the secondary obligations or peripheral issues in the lead up to the performance of the main obligation that may be enough to establish ‘anticipatory breach’ which is an action predicated on the assumption that as the other side has failed to perform some smaller obligations that they intend not to perform the main obligation.

Alternatively it may be grounds for breach if it can be shown that the term that was unperformed was an essential condition. In order to make that determination, careful scrutiny of the contract will have to be undertaken including the use of contract interpretation to discover the intention evinced by the language used.

A complete failure to perform will usually be recoverable as long as the existence of the contract can be determined.

If you have any contractual issues please contact us to discuss further. Contract is a complicated area of law and there may be several issues to be thought through carefully.


Trade Practices provisions are commonwealth law introduced to enhance the welfare of all Australians by promoting competition and fair trading and providing for consumer protection.

General trade practice of business operating in Australia is regulated by what was called the Trade Practices Act 1974 and is now the Australian Consumer Law 2010. Whilst the name has changed to represent the object of the act the content of the law is generally the same. The purpose of these provisions is to provide protection to consumers from business activities that are either anti-competitive or regarded as unfair to consumers. As this is designed as a protection to consumers, it also operates as a general code of conduct for businesses operating in Australia. If you own or operate a small business in Australia, particularly if you are used to operating in a foreign jurisdiction there are some important provisions in the act that you ought to be aware of. The list below is not designed to be comprehensive, if you are considering starting a business or are operating one that you think may be in breach of one or more provisions, make an appointment with Victor Tse and Associates to discuss your options.


Section 18 Australian Consumer Law: ‘a person must not in trade or commerce, engage in conduct that is misleading or deceptive or likely to mislead or deceive’

Misleading and deceptive representations in relation to goods that you are providing to the market may be in breach of s 18 Australian Consumer Law 2010. The law is designed to protect consumers of goods and ensure that when they seek information about a product, that the consumer is able to rely upon the information provided. The test that a court will use to determine if the law is misleading depends on the audience to who it was directed. The court will ask whether a ‘reasonable person’ of the segment of the population to who it was directed would be ‘likely to be misled’ by the representation.  Because the test is of a reasonable person it will not be in breach of the law if someone was actually misled but that person developed an understanding that was ‘extreme or fanciful’. In order to avoid legal risk ensure that representations about products that you are selling are true and verifiable and avoid making grand statements. If you have an issue with s18 of the Australian Consumer Law make an appointment with Victor Tse and Associates.


The Australian Consumer Law lists a number of general practices that are considered unfair, and are illegal under the act. Severe penalties may apply for contraventions such as

  • Offering rebates gifts and prizes
  • Bait advertising
  • Participation in a pyramid scheme
  • Multiple pricing
  • Harassment and coercion


Section 21(1) Australian Consumer Law ‘a person must not in trade or commerce, in connection with the supply or possible supply of goods or services to another person, engage in conduct that is , in all the circumstances, unconscionable’

Unconscionable conduct is a difficult to define term. A court will act where the conduct of the business person has been unfair to the extent that the court feels as if it must intervene.  However the Australian Consumer Law does specify factors that the court must address in the dertermination of unconscionable conduct, such as;

  • The relative strengths of the bargaining power of the supplier and the consumer
  • Whether the consumer was required to comply with conditions that were not reasonably necessary
  • Whether the consumer was able to understand any documents relating to the supply po possible supply of goods or services
  • Whether any undue influence or pressure was applied
  • Whether any undue influence or pressure was exerted on, or unfair tactics used against the consumer
  • The extent to which the consumer could have acquired equivalent products form alternate suppliers