This article appeared in the December edition of ClubLife Magazine. You can download a PDF version of the article here.
Good quality food is a must in any successful club and as catering is a specialized skill many clubs outsource their 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.
It is not unusual for the club and caterer to think at the beginning of negotiations that everything will work out fine. However, one serious risk is if a club lets a caterer in to start operating from the club before the agreement is finalized. 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 if not resolved the situation may ultimately 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.
Unfortunately, a caterer breaching its obligations under a catering agreement is not uncommon. The consequences of a breach can be harmful to the club’s business, especially when the breach involves poor customer service or unsatisfactory food, as patrons are unlikely to distinguish between the club and its caterer and now days can be prone to spreading 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, we recommend seeking legal advice early as to what are the club’s rights (and obligations) when dealing with the caterer. Sometimes a frank and open discussion will resolve the issues however, 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 valid 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.
However, if a club wants to terminate a catering agreement following the caterer’s failure to comply with the notice, it is crucial that the club is certain that it has in fact issued a valid breach notice. This is because if the Club has not issued a valid breach notice there is the risk that the caterer will claim that the Club has wrongfully terminated the agreement and sue the club for damages.
It is often 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 a ground for termination and must start the entire breach notice process all over again.
Further Information and Contact Details
If you wish to discuss the contents of this article or would like us to assist with the preparation of any service agreements, including catering agreements, please contact any member of the Clubs team on 8251 7777 or by email:
- Bruce Gotterson: gotterson@pigott.com.au
- Ray Travers: travers@pigott.com.au
- John Ralston: ralston@pigott.com.au
- Michael McCluskey: mccluskey@pigott.com.au
- Matt Goodwin: goodwin@pigott.com.au
- Julian Hawkins: j.hawkins@pigott.com.au
This Newsletter is produced by Pigott Stinson. It is intended to provide general information only. The contents of this Newsletter do not constitute legal advice and should not be relied upon as legal advice. Formal legal advice should be sought from us in respect of the matters set out in this Newsletter. Liability limited by a scheme approved under Professional Standards Legislation