Reading time: 3 minutes

Most companies utilise direct debit and credit payment systems to increase efficiency. The downside to direct debit and credit systems is that they must be continuously checked to ensure that the payments are rightfully accepted and distributed by the company.

A recent decision handed down by the NSW Supreme Court has reminded businesses just how important it is to keep track of their accounts and contractual relationships, and how no one should ever assume a contract continues because both parties continue to comply. In our contract law update, we set out the issues in Electric Life Pty Ltd v Unison Finance Group Pty Ltd [2015] NSWCA 394, as well as explain why you should carefully check your company’s accounts.  

What Was The Problem?

Electric Life Pty Ltd (the “Renter”) rented equipment from Unison Finance Group Pty Ltd (the “Owner”). The Rental Agreement commenced on the 10th of November 1998. The Rental Agreement had an “Initial Term” of 48 months and from thereafter would ‘automatically’ renew without any notice required from either the Owner or the Renter. Unfortunately for Electric Life Pty Ltd, they mistakenly made quarterly direct debit payments until the 20th of November, 2012, more than 14 years after the agreement began, amounting to payments more than $57,600.40. These payments were made even though the equipment no longer existed.

The Court had to decide whether the Rental Agreement provided for only one renewal period or an unlimited number of renewal periods.

What Was The Outcome?

Even though there was some argument that the Renter made the payments due to their own mistake (and sloppy bookkeeping) by failing to provide notice, the Owner was nevertheless ordered to pay back the Renter for all payments made after the initial term plus one renewal period, that is 10 November 2003. The contract was deemed to have not automatically renewed after this date. To allow the Owner to keep all the payments would result in unjust enrichment as the Owner did not seek the return of the equipment. As the Renter believed that the agreement expired at the end of the first renewal, the Court was prepared to accept their interpretation of the contract.

Key Takeaways

If you are in charge of your company’s accounts, do not be sloppy! Look at the accounts regularly, and know what each payment is for. Also, if you are the recipient of any direct debit payments, always check to make sure that you have the right to receive these payments from the customer. Just because a contract was enforced and put in action does not mean it remains operative at all times.

Questions? Get in touch with LegalVision’s contract lawyers on 1300 544 755.

Webinars

Redundancies and Restructuring: Understanding Your Employer Obligations

Thursday 7 July | 11:00 - 11:45am

Online
If you plan on making a role redundant, it is crucial that you understand your employer obligations. Our free webinar will explain.
Register Now

How to Sponsor Foreign Workers For Your Tech Business

Wednesday 13 July | 11:00 - 11:45am

Online
Need web3 talent for your tech business? Consider sponsoring workers from overseas. Join our free webinar to learn more.
Register Now

Advertising 101: Social Media, Influencers and the Law

Thursday 21 July | 11:00 - 11:45am

Online
Learn how to promote your business on social media without breaking the law. Register for our free webinar today.
Register Now

Structuring for Certainty in Uncertain Times

Tuesday 26 July | 12:00 - 12:45pm

Online
Learn how to structure to weather storm and ensure you can take advantage of the “green shoots” opportunities arising on the other side of a recession.
Register Now

Playing for the Prize: How to Run Trade Promotions

Thursday 28 July | 11:00 - 11:45am

Online
Running a promotion with a prize? Your business has specific trade promotion obligations. Join our free webinar to learn more.
Register Now

Web3 Essentials: Understanding SAFT Agreements

Tuesday 2 August | 11:00 - 11:45am

Online
Learn how SAFT Agreements can help your Web3 business when raising capital. Register today for our free webinar.
Register Now

Understanding Your Annual Franchise Update Obligations

Wednesday 3 August | 11:00 - 11:45am

Online
Franchisors must meet annual reporting obligations each October. Understand your legal requirements by registering for our free webinar today.
Register Now

Legal Essentials for Product Manufacturers

Thursday 11 August | 11:00 - 11:45am

Online
As a product manufacturer, do you know your legal obligations if there is a product recall? Join our free webinar to learn more.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2022 Law Firm of the Year Winner 2022 Law Firm of the Year - Australasian Law Awards