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The common saying \u2018prevention is better than cure\u2019 is true for one\u2019s health, however, it is also accurate for drafting legal documents. \u2018Prevention\u2019 in this case refers to having your affairs and documentation in order to avoid costly conflict or litigation in the future. Documents that can be prepared in advance to avoid this include (but are not limited to):<\/span><\/p>\n Why should I prepare these documents with a lawyer?<\/b><\/p>\n The purpose of these documents, especially if they are carefully drafted by a lawyer after the provision of advice, is to clearly establish what is to occur and who has which responsibilities in a particular situation. They can be enforced by legislation or the common law to protect the interests of parties, and ensure everything eventuates as planned. Many of these documents also contain dispute resolution provisions in case a disagreement does arise.\u00a0<\/span><\/p>\n Lawyers will anticipate where arrangements or agreements of this kind have gone wrong in the past, and provide advice about what protections can be put in place. For example, a loan between family or friends can operate effectively without a loan agreement. But what if the borrower fails to pay it back? Having provisions for interest, security and\/or a guarantor might prevent a legal dispute in the future. Similarly, careful estate planning can prevent your loved ones from becoming embroiled in time-consuming, stressful litigation. <\/span>Prevention is usually cheaper than cure, too. Many of the above legal documents can be prepared for only hundreds of dollars, whereas litigation can, in some cases, run into the tens or hundreds of thousands of dollars.<\/span><\/p>\n Case Study: Masters v Cameron<\/b><\/p>\n The importance of careful legal preparation was made clear in the landmark contracts case of <\/span>Masters v Cameron<\/span><\/i> [1954] HCA 72.\u00a0<\/span><\/p>\n Facts<\/b><\/p>\n In this case, company manager Violet Cameron agreed to sell a property to a married couple (Mr and Mrs Masters) for a specified price. The agreement came in the form of a written memo, which contained a clause stating that the agreement was \u2018subject to the preparation of a formal contract of sale which shall be acceptable to [Cameron\u2019s] solicitors on the above terms and conditions’. <\/span>After paying the deposit, the Masters ran into financial difficulty and sought to withdraw from the purchase. They claimed they were not legally bound to continue with the sale as the written memo did not constitute a legal contract.<\/span><\/p>\n Outcome\u00a0<\/b><\/p>\n The High Court determined that there are four main categories of agreements. The three relevant categories were:<\/span><\/p>\n The Court in <\/span>Masters v Cameron<\/span><\/i> held that as the memo contained a clause stating it was subject to a formal contract and checking by solicitors, the agreement fell into the third category and was not binding on the parties.<\/span><\/p>\n Significance<\/b><\/p>\n This case demonstrates the utility of organising clear, legally binding documents at first instance. Cameron would have been able to enforce the sale of the property and avoid the tens of thousands in High Court legal fees if the parties had immediately executed a legally binding contract with their solicitors, for a far lower cost.\u00a0<\/span>So continue to reflect on your personal circumstances. Are your personal and business affairs in order? It is worth a small investment to ensure they are up to date and watertight, to prevent an expensive cure in the future!<\/span><\/p>\n How can Hume Taylor & Co assist?<\/b><\/p>\n\n
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