Many businesses, big or small, may have what is called a “Code of Conduct”. A Code of Conduct (“Code”) includes rules and responsibilities that a business promises to abide by. The Code may cover a variety of aspects of the running and operation of the company including treatment of customers, handling of finances or the business’ overall objectives. The Code is ultimately viewed as a governance document. However, if a business publishes their Code online, to what extent is this legally binding on external parties?

How is a Code of Conduct Considered Legally?

Businesses more commonly use their Code as a self-regulatory tool rather than a legal instrument. What this means is that unless a company specifically references the Code in a legal instrument (i.e. a contract) and requires all parties to abide by its terms and conditions, it will not always legally bind any parties.  

For example, if you are running a charity and publish a Code of Conduct online which relates to the use of charitable donations, this is not in itself binding. However if a member of the public decides to donate to your charity and you include in the donation terms and conditions that all charitable donations will be used according to the Code of Conduct, those terms will legally bind you and your business. 

What is the Relevance of Contract Laws Generally?

Any legally binding document must satisfy the following elements of a contract. A Code of Conduct cannot bind parties if no contract exists. The elements then include:

  1. Offer and acceptance;
  2. Consideration;
  3. Intention to create legal relations; and
  4. Competency.

The Code of Conduct may be legally binding if it satisfies the above elements and if it was found that a contract was formed.

What About Voluntary Codes of Conduct?

Occasionally the government creates a voluntary code of conduct that various businesses can opt into. The business itself does not draft this and if a business chooses to opt into a voluntary code of conduct, whether or not this is binding on customers will be determined by exploring the same issues above. Companies should consider the entire circumstances surrounding a voluntary code as it may bind another party. For example, the Victorian Supreme Court decided in National Australia Bank Limited v Rice [2015] VSC 10 that the National Australia Bank needed to comply with the Banking Code of Practice.

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If you are a business that has published a Code of Conduct online, it is recommended as best practice to comply with what you have publicised. Although it may not always be considered contractually binding, there are other causes of actions that another party may initiate, for example misleading or deceptive conduct. If you have any questions about complying with your Code of Conduct, get in touch with our business lawyers on 1300 544 755. 

Kristine Biason

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