This article appeared in the July 2016 issue of Club Life.
Good quality food is a must in any successful club and as catering is a specialised skill, many clubs outsource catering to an external caterer. One of the key ingredients to any successful arrangement with an external caterer is a comprehensive agreement that deals with the rights and obligations of both the club and the caterer (and we normally recommend a guarantor).
Like any relationship, the beginning of negotiations is when everybody is on their best behaviour. It is not unusual for the club and caterer to think everything will be great and work out fine. However, one serious risk is allowing a caterer to start operating from the club before the agreement is finalised. This is because once a caterer is using the premises both parties may have very different views as to what the final terms of the agreement should be, and in some cases the paperwork gets left to one side and forgotten. That is, the caterer may be operating on an oral agreement with express and implied terms and ultimately it may require a court or tribunal to determine what those terms actually are.
A comprehensive agreement should expressly deal with the club’s right of termination, and of course deal with the risk of a minimum five-year term under the Retail Leases Act. (Hint: If your agreement is for less than five years and does not contain a certificate referring to section 16(3) of the Retail Leases Act you should probably give us a call). [Note: the five year minimum term which applied at the time of publishing this article has since been repealed].
Unfortunately, a caterer breaching its obligations under a catering agreement is not uncommon. This could be as straightforward as non-payment of the caterer’s licence fee or as severe as a failure to comply with the relevant food safety standards. The consequences of a breach can be harmful to the club’s business, especially when the breach involves poor customer service or unsatisfactory food – patrons are unlikely to distinguish between the club and its caterer and these days they may spread word of a bad experience through social media.
If your club is dissatisfied with your caterer’s performance, or believes the caterer is in breach of its obligations, seek advice early regarding the club’s rights (and obligations) when dealing with the caterer. It is usually in everybody’s interest to start a dialogue and to try to work constructively to improve the caterer’s performance, but often the appropriate course of action is for the club is to issue the caterer with a formal “breach notice” (assuming the caterer’s conduct does not amount to a fundamental breach of the agreement).
A breach notice will require the caterer to remedy the breach. Usually, the club will need to give the caterer a period of 14 or 30 days to then remedy the breach. If the caterer fails to remedy the breach as set out in the notice, the club may be entitled to terminate the catering agreement.
If a club wants to terminate a catering agreement following the caterer’s failure to comply with the notice, it is crucial that the breach notice was valid. If it was not, the caterer may claim that the club has wrongfully terminated the agreement and sue the club for damages.
It is worth remembering that any breach notice is likely to be read not only by the caterer but also the caterer’s solicitor and ultimately a judge or tribunal member. Seeking advice too late may mean that the club can no longer rely on the caterer’s earlier breaches as grounds for termination and has to start the entire breach notice process all over again.
Ultimately, good food can make a good club great and clubs need to ensure that they have an appropriate agreement in place and act quickly and carefully in the event that a problem arises.
For more information contact Bruce Gotterson on b.gotterson@pigott.com.au
Click on the image below to see the article as it appeared in Club Life July 2016.
This article is intended to provide general information in summary form on a legal topic, current at the time of publication. The contents do not constitute legal advice and should not be relied on as such. Formal legal advice should be sought in specific circumstances.