Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: “This case shows the need for organisations to have clear IT and Internet usage policies. Organisations should also make sure that those policies have been updated since the increased use of business and personal social networking sites.”

The High Court initially and now the Court of Appeal sided with Digby. There were constant references to “sole agency” in the contract, but its meaning was not straightforward. The term was not defined anywhere in the contract. There was an obligation on Digby to promptly inform GEG of all enquiries or discussions but this was to enable GET to take part in those negotiations. The contract provided that GEG would earn commission if it had negotiations concerning the property. The Estate Agents Act 1979 and the Estate Agents (Provision of Information) Regulation 1991 collectively required the agent to provide clear information to the vendor about what sole agency meant in the manner prescribed in the Regulations, but this was not done. It did not describe commission as being payable if the lead “was introduced by another agent during that period”. GEG was therefore in breach of the statutory requirements and D did not have to pay commission.

The European Court of Justice has backed up the French Competition Board’s decision. The ECJ looked specifically at the question of selective distribution networks. It said that establishing those networks are not prohibited by Article 101 if resellers are chosen based on objective criteria, where those criteria are applied uniformly and non-discriminately, where the characteristics of the products need to preserve the quality and ensure proper use, and the criteria only go as far as is necessary. However, provisions within those networks may still end up offending against competition law. The ECJ has not accepted arguments relating to the need to provide individual advice to customers and to ensure their protection against incorrect use of products in the context of non-prescription based products to justify an Internet sales ban. Contract provisions that effectively prohibited Internet sales meant that the benefit of the block exemption did not apply. That said, it would still be for the national court to ascertain whether the contract had an individual exemption, as the failure of an agreement to fall within block exemption parameters does not automatically mean that it will not be found to be individually exempt on other criteria.

The High Court originally and now the Court Appeal have ruled in favour of Bombardier. Although Bombardier should not have been late, the contract provided for a clear procedure to deal with the material default. Gesner had not followed it. Accordingly, Gesner was the one in breach. 

This case shows the dangers of getting contract enforcement wrong. If you don’t follow the procedures set out in the contract, the victim can end up becoming the villain.

The High Court agreed with Playup’s claim. Givemefootball’s failure to deliver to the number of opted-in recipients amounted to a repudiatory (or fundamental) breach of contract. Playup was entitled to walk away from the contract. Buying in data did not satisfy the requirement to supply “opted-in” recipients. Although the agreement did not specify what a user should have opted-in to, it must have meant that they would have opted-in via the PFA website. The whole point of the agreement was to give Playup football access to the avid fans who were involved with the PFA Fans Awards rather than anyone who liked sport and could have come from another source, in order to maximise the chances of getting a positive response. Otherwise, Playup could have used its marketing budget for a cheaper and less targeted advertising campaign, such as through Google. “Targeted” had to mean just that and the other wording used in the contract reflected that purpose. The inclusion of the words “owned or controlled” by Givemefootball in relation to the databases was the result of careful drafting and did not infer bought in data.

The High Court added that the contractual requirement for data subjects to have provided prior consent to Givemefootball to receive direct marketing from Playup meant that the consent would have had to be made to Givemefootball rather than a third party data seller and the individual would have consented to receive the direct marketing from Playup or a class of which Playup was a member.

A lot of business is done in relation to marketing and promotional campaigns. Where one party agrees with another to run a targeted campaign, this decision makes clear that the campaign must be just that: targeted. That does not allow for buying in data from third parties to supplement the numbers, unless this still makes the campaign just as targeted.

More to the point, though – how can WikiLeaks cry foul over breach of confidentiality, when leaks have been the whole basis of its publications?

Amanda Smith issued proceedings against Headline Publishing alleging fraud, breach of contract, misrepresentation and negligence on the grounds that Headline Publishing had deliberately attempted to get a negative report from a barrister that would allow it to refuse to publish the book. She alleged that there had been a breach of contract because the book had not been published.

The High Court ruled that Headline Publishing had not committed any fraud, misrepresentation, breach of contract or negligence by failing to publish the book. Due to the privacy and libel issues the book contained, Headline Publishing was entitled not to publish the book.

So all’s well that ends well – as far as the publisher is concerned anyway.

The High Court has agreed with H. In fact, H succeeded on another point, so the decision on the meaning of good faith is only persuasive rather than binding. However, the Court said that the contractual duty of good faith meant that the parties had to disclose all material facts to each other. CAL’s failure to mention that it needed to obtain funding from a third party were material facts and denied H the opportunity to make an informed decision. Although CAL had acted honestly, it still breached the clause. The Court added that it was not actually necessary to decide whether full disclosure would have altered H’s decision. The duty had still been breached and that was enough.

In 2009, the High Court ruled in Internet Broadcasting Corporation (t/a NetTV) v Mar LLC (t/a MARHedge) that there is a rebuttable presumption that an exclusion clause should not apply to a deliberate personal repudiatory breach of a contract. In that case, the High Court ruled that extremely clear drafting would be needed for a court to rule that the parties intended an exclusion clause to cover a deliberate personal repudiatory breach. The Court had said that there was a presumption that a party would not intend to limit their liability for really serious deliberate breaches (such as deliberately walking away from a binding contract).

What happened in this case?

In this case, AstraZeneca (AZ) and Albemarle International (AI) entered into an agreement for AI to supply a product called DIP to AZ that AZ then distilled to produce propofol. AZ foresaw that it might, at some point in the future, be more beneficial to be supplied with propofol rather than DIP, and the agreement contained a provision that, if AZ did want to make such a change to its process, it would give AI first refusal on the supply of propofol.

AZ later told AI of its intention to enter into an agreement with a third party (“S”) for the supply of propofol. AI objected as it wanted to continue to supply and cited the first refusal provision in the agreement. Negotiations ensued, but, despite AI matching the third party offer of supply, no agreement was reached, and AI served notice to terminate for AZ’s breach of the first refusal provision which had not been remedied on demand. During the negotiations, AZ attempted to stockpile the goods, whilst AI refused to supply two additional orders made by AZ under the agreement, although this did not affect AZ’s operations. Things got rather messy as allegations were thrown around about who was breaching the agreement.

AZ issued proceedings against AI for breach of contract as AI had failed to supply the two additional orders. AZ argued this was a repudiatory breach entitling AZ to terminate the agreement and claim damages. AI denied the claim, and further argued that any liability it might have was, in any case, limited by an exclusion clause in the agreement. AZ argued that AI could not rely on the exclusion clause because (following the ruling in the NetTV case) the breach was deliberate and repudiatory. AI then counter-claimed for breach of contract due to the alleged failure to give it first refusal on the right to supply propofol, but AZ denied liability.

The ruling

The High Court ruled that AI was, on the facts, in breach to AZ for its failure to fulfil one of the two additional orders and was liable in damages for that breach. However, it went on to rule that failure in respect of one or two orders did not amount to a repudiatory breach of a minimum three year contract.

Meanwhile, AZ was also liable for failing to honour the first refusal provision and AI was entitled to terminate the contract as a result of that breach. However, despite that liability, the High Court had to decide whether the exclusion clause excluded or limited the liability of either party and in particular whether AI could claim for its loss of profits despite an apparent provision excluding liability for lost profits. Meanwhile, although AI’s failure to supply was not serious enough to be repudiatory and although the breach was not deliberate (as AI had had legal advice that suggested that it would not be breaching the agreement in the circumstances by failing to supply), the court went on to consider the issue of deliberate repudiatory breach anyway.

Right of first refusal

Where AZ had decided to move to buying propofol rather than DIP and it was considering an offer to supply from a third party, AZ was under an obligation to provide AI with full details so that AI could match the opportunity. Of course, issues may arise in the course of negotiating that could mean that AI would not supply on the terms offered by S, but if AI was willing to match the terms that AZ was minded to accept from a third party (as happened here) then AZ was obliged to accept AI’s offer. The right of first refusal clause had to mean something. AZ was obliged to provide full disclosure of the terms of the proposed deal with S and act in good faith to AI. The only sensible construction of a right of first opportunity was to give AI sufficient opportunity and right to match the offer and not just as AZ was about to award the contract to S. AZ was in breach of the right of first refusal clause, and AI had rightly given AZ 30 days to remedy the breach and then rightly terminated the contract when the breach was not remedied.

Waiver

The court added that AI’s willingness to continue negotiating after that 30 day period had expired did not amount to a waiver of its rights. It could still terminate despite not exercising that termination right immediately.

Deliberate Repudiatory Breach

The High Court ruled that, if there had been a repudiatory breach by AI, it had not been deliberate as AI had followed legal advice that it was acting within its contractual rights (albeit the legal advice had been incorrect). As such, there was no question that the exclusion clause applied and limited AI’s liability. However, the Court went on to consider what would have been the position had the breach been deliberate and repudiatory. It said that the decision in NetTV had in fact been misguided, and that deliberate repudiatory breaches should not be treated any differently from any other breach. The High Court said that, although it was not necessary to consider whether or not an exclusion clause applied to a deliberate personal repudiatory breach, it would be inclined not to follow the NetTV ruling if it did.

Limited “Contra Proferentem” interpretation of exclusion clause in relation to breach of right of first refusal provision

The exclusion clause said “No claims by AZ of any kind whether as to the products delivered or for non-delivery of the products, or otherwise, shall be greater in amount than the purchase price of the product…; and failure to give written notice of claim within 60 days from the date of delivery, or in the case of non-delivery, from the date fixed for delivery, shall constitute a waiver by AZ of all claims with respect thereto. In no case shall AZ or Albermarle be liable for loss of profits or incidental or consequential damages.”

AZ argued that it was not liable for AI’s lost profits arising out of its breach of the right of first refusal provision. However, the Court ruled that, in line with English law rules of interpretation on liability clauses, the exclusion clause had to be construed against the party seeking to rely on it if there was the slightest bit of doubt in the meaning (a rule known as “contra proferentem”). AZ’s interpretation would have meant that the first refusal provision would have been no more than a statement of intent, leaving AZ with no incentive to comply with it, which a court would always seek to do everything to avoid if there is no alternative construction.

In this case, the alternative construction was that the second sentence in the exclusion clause (ie the exclusion of lost profits) had to be read in the same light as the first sentence within the same paragraph – ie applying to late or non-delivery of DIP products. On that interpretation, it was not intended to deal with loss of profits arising out of not giving AI the opportunity to supply propofol.

Comment

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments, “This ruling is important because it deals with four important issues relating to commercial contracts – deliberate repudiatory breach, the meaning of rights of first refusal, waiver during contract negotiations and contra proferentem.

 ”The ruling in NetTV stated that deliberate repudiatory breaches can, in some circumstances, be covered by an exclusion clause but only if express words are used. This ruling suggests the opposite, in that liability would be restricted or excluded for deliberate repudiatory breach just as much as with other forms of liability. Those comments are not strictly binding on future cases, as the High Court did not need to make a ruling on that issue, as it had already ruled that the breach was not deliberate or repudiatory anyway. This uncertainty is not particularly helpful for businesses that need to know how to draft contracts going forward, but the best advice would be to draft appropriate wording to reflect the level of risk the parties are willing to take and not leave it to the courts to decide.

“The part of the ruling dealing with the narrow interpretation of an exclusion clause against the party seeking to rely on it – the ‘contra-proferentem rule’ – which meant that breach of the right of first refusal provision in the agreement was not covered by the exclusion clause is actually just a very useful reminder of existing rules. Exclusion clauses should be professionally drafted by specialist lawyers. A party to a contract should play devil’s advocate when drafting an exclusion clause and try to understand what a court might see from the outside looking in, rather than just looking on what might be beneficial for the business itself.

“The interpretation of the phrase “right of first refusal” was also extremely useful. That phrase is sometimes used in a contract but this ruling gives real insight into what that actually means.

“Finally, the decision that one party had not waived its rights of termination when it continued to negotiate for a few weeks in good faith was also helpful.

“All in all, this is a major judgment that affects all commercial dealings. We will have to see, though, whether the ruling will be appealed.”

FP issued proceedings for alleged breach of contract, infringement of copyright and passing off, claiming that the defendants had breached the trading agreement by adopting a logo that was a replica of the ‘Edge’ title logo used on the cover of the gaming magazine. The defendants were also accused of making statements that FP and the defendants were associated.

The High Court has ruled that the use of the obvious replica logo by the defendants had fundamentally breached the agreement, which allowed FP to terminate. In addition, their actions were considered by the High Court to be passing off (as FP had goodwill, there had been a misrepresentation and customers would be confused), as well as copyright in the logo having been infringed.  Furthermore, despite the fact that there had been passing off due to statements being made on the defendants’ website, their trade mark was also held to be revoked for non-use as the US-based defendants did not conduct any genuine business in the UK – despite having infringing statements on their website that were directed at UK customers.

The ECJ ruled that the supplier had to not remove and replace but also install the replaced goods despite not having been responsible for the original installation as the goods had been faulty on delivery and consumers needed to have an absolute right for them to be put right without suffering loss. Alternatively, the supplier would have to bear the cost of someone else doing so. The ECJ further said that if only one remedy is possible then the seller cannot refuse to provide that remedy even if the cost of removing and reinstalling would be disproportionate to the value. In this case, the tiles cost €1,382 and the cost of removing and replacing was €5,830. The seller would not have been liable for the replacement if the reason for the defect was the poor installation (that the supplier was not responsible for), although proving who was at fault may not be easy.

• Failed to deliver the products within the timeframe required by the Distance Selling Regulations.
• Failed to respond or otherwise comply with consumers’ decisions to exercise their statutory rights to cancel their contracts under those Regulations.
• Failed to be available in a rapid and effective manner for consumers to contact him, as required by the Electronic Commerce Regulations.
• Misled as to the availability of the products and the timeframes, contrary to the Consumer Protection from Unfair Trading Regulations.

The OFT took action under the Enterprise Act and brought proceedings against the website operator after written undertakings previously given by it to offer refunds to customers were not complied with. The OFT has said that it will continue to monitor the website’s future practices.

SGC owns two other UK-based gaming and amusement machine operators – The Global Draw and Games Media. Global Draw is estimated to have a 43% share of the gaming and amusement machine market.

The Court of Appeal has upheld the High Court’s decision to award summary judgment in favour of the US company. The purpose of the agreement had been to demarcate the field of goods rather than deal with the classes in which the goods could be registered. It was not necessary to imply a term dealing with this. The ruling will ensure certainty amongst contracts and in particular to give effect to coexistence agreements.

As previously reported, the case centred on a franchise agreement for a recruitment consultancy. The High Court agreed that Antal had terminated the contract wrongly, and had itself breached the contract in doing so.

However, the claim for damages on the basis of a reduction in the company’s value as a result of the breach was rejected, with the High Court ruling that, unless the company had been put out of business by the breach, loss of value was not the correct measure for assessing the losses. The High Court’s reasoning was based largely on the fact that the value of the company before and after the breach was hypothetical, thereby making damages for loss of value difficult to assess. Since the company had chosen to pursue the valuation route rather than making a claim for loss of profits, the loss of profits route was barred to them, leaving them only with nominal damages.

The High Court said that Guna was in breach of the agreement and should have transferred the registrations. It struck out Guna’s competition law defence. For that defence to work, it should have produced detailed evidence. Instead, the evidence was only general and sketchy. These were complex issues and the arguments needed to be fully made out and argued with good supporting evidence. It may have been that Nelsons’ market share was very high and that its actions were not permitted in the circumstances, but this was not clear from the evidence presented. As the defence was uncertain, what was left was that Guna was in breach of contract.

The High Court agreed with MMP. The franchisee was responsible for the actions of its employee. It disagreed with the franchisee’s  argument that her actions were outside of the course of her employment and were a matter for her private life. This was about an employee who had misused personal data obtained from a CV obtained through her employment.  This was a breach of her employment contract, but MMP was still responsible.

However, the franchisor’s purported termination of the contract was wrongful and that action in itself was a repudiatory breach of contract as it showed an intention not to perform the contract. The reason was that the relevant clause which had been breached said that MMP must not “do anything to adversely affect our name, Trade Marks or other Intellectual Property”.  On a true construction of those words, Antal would have needed to provide evidence that MMP’s conduct had in fact damaged the Antal brand.  It had not provided that evidence.  A mere fear or concern of the harm or reputation that would be done was not sufficient on the wording used in the agreement.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: “This case should act as a warning to businesses to be careful when selecting and managing their staff.  However, even more stark is the consequence of failing to have an agreement that says what the franchisor or other business thinks it says.  Care should be used before terminating an agreement, or the otherwise innocent party ends up being the wrongful party.  It should also have made the contract wording tighter by talking about damage to its reputation “in the franchisor’s opinion” so that it would not have to attain evidence to prove that the damage did actually occur.”

The High Court agreed with Vestergaard. Although there had been no written agreement, Skovmand had breached an express term of the oral contract that he had had with Vestergaard to the effect that the consultant would keep information arising out of his work for them confidential. Even if there had been no express term, though, it was an implied term of the contract that he would keep the information confidential. Once Skovmand had stopped working for Vestergaard, the scope of the obligation of confidence only extended as far as ‘trade secrets’. This approach for consultants was analogous to the position of employees. After the relationship had terminated, the consultant could use information forming part of his own skill, knowledge and experience – whether for his own benefit or for third parties – even if it was learnt during the course of the relationship. The information used by Skovmand here – technical details kept in a database – had amounted to Vestergaard’s trade secrets.

• The judge said that the following factors would help to decide whether any particular information amounted to a trade secret:
• The nature of the work – here, the consultant was engaged in a role likely to produce inventions.
• The nature of the information – experiment results should be protected as trade secrets, just as are formulae and manufacturing processes.
• Engager’s attitude – Vestergaard regarded the information as confidential.
• Steps taken to protect the information – Vestergaard took lots of steps to protect the information.
• Separability of the information – the information could be separated from Skovmand’s general skill and knowledge.
• Commercial value of the information – the information was clearly regarded has commercially valuable here.
• Usage and practices of the trade – little evidence was available on this factor in this particular case.

The case has now gone to the Court of Appeal. The Court of Appeal largely upheld the High Court’s ruling, although it found that one of the employees had not breached the confidence on the particular facts of the case. As far as the consultant’s expertise was concerned, the Court of Appeal ruled that Skovmand could have scientifically reached the particular formulation from his own research, but that did not mean that he actually did so rather than take the short-cut of use of Vestergaard’s trade secrets. There was enough evidence relied upon by the High Court to justify its ruling that Vestergaard’s database had been relied on to create the competing product; it was not simply a matter of Skovmand’s general skill and knowledge.

The investigation began three years ago after the Commission was tipped off by Henkel, a German company. The investigation related to alleged price fixing in eight European Union countries.

The companies had the fines discounted by 10% after they had admitted being part of a cartel. Unilever was fined €104 million and Proctor & Gamble €211 million. Henkel, due to its role in tipping off the EC, avoided a fine.

A dirty cartel with its dirty laundry being aired in public – the jokes on this story are endless, but we’ll spare you. At least the jokes are clean, though, if nothing else.

Under the provisions of the Directive, payment periods are limited to 30 days with interest at either a rate agreed between the parties or a default rate (8% above Bank of England base rate) payable on any late payments. A creditor can also claim a minimum fixed sum of €40 in case of late payment as well as compensation for the costs of recovering the payment.

Where a payment period is agreed in a contract, it can be specified to be up to 60 days provided it is not unfair on the creditor. However, a 60 day payment period is permitted in any situation where the debtor is a public body.

The Directive entered into force at legislative level on 16 March 2011, but European Union Member States have until 16 March 2013 to implement the Directive into each country’s laws.

The High Court found that SR had breached the clause requiring him not to solicit TR’s customers, and this was shown by him having taken his Outlook contact list. This justified an injunction. However, the fact that he had set up in business within five miles should not be held against him as that clause was too wide to be enforceable. Although five miles was a reasonable distance given the nature of the business, most of SR’s work for TR had not involved recurring business and was therefore not capable of creating a customer connection worth protecting. The restriction on him from setting up in business within five miles was therefore unreasonably wide in the circumstances and so it was unenforceable. TR was already well protected by the other two restrictions.

The franchise agreement contained three different provisions in separate sub-clauses: the non-solicitation clause prohibited soliciting clients and staff for one year in respect of the Restricted Area; the non-supply clause prohibited supply of competing goods for one year in respect of the Restricted Area; and the non-compete clause prohibited engaging in a competing business in respect of the Restricted Area. The “Restricted Area” was defined only in the non-compete clause, by reference to the franchise territory but also some other surrounding areas. The agreement also contained a severability clause, which is often used to encourage a judge to treat each provision separately and remove any offending words.

The parties fell into dispute. They did agree that the non-solicitation clause was valid in all of the Restricted Area. However, the non-compete clause would be invalid if it extended to the whole of the Restricted Area as it was too wide. The High Court therefore had to rule on the ability to sever any offending words.

The High Court ruled that it would not sever the Restricted Area in order to save the unenforceable non-compete clause. If the Court would have reduced the wording so that the definition referred just to the original territory, this would have changed the meaning of the defined term in the other sub-clauses (the non-solicitation clause and non-supply clause), which did not need changing in order to make them enforceable. Therefore it was not possible to sever.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: “This case shows the danger of using the same defined term, and particularly defining the term itself, within particular sub-clauses if the intention by drafting separate sub-clauses is that offending unenforceable sub-clauses may be severed with the rest left intact.”

The High Court ruled that W was not entitled to anything under the 2005 agreement as, unless otherwise agreed between the parties, the term “introduce” in an agency agreement would mean that the agent had to be the effective cause of the introduction. In this case, W was not the effective cause, but it was someone whom he had introduced to CAI. CAI did not pay W to introduce his contacts, but CAI paid them directly. W was not introducing people who were running the project, but other people that W knew about who could make the relevant introductions. If W would have paid those other middlemen out of his own commission, the ruling may have been different.

In contrast, under the 2008 agreement, the High Court said that “pursuant to your initiatives” would be interpreted much wider and should not be interpreted the same way as “introduce”. W was therefore entitled to commission under that agreement. “Introduce” could only happen once, whereas lots of things could happen “pursuant to” initiatives.

This ruling shows how slightly different words can lead to totally different legal meanings. To avoid claims from more than one middleman for the same commission, and to clearly reflect what the parties really intend, they should use clear words in their contracts.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: “It is clear from the fines that the regulator has issued since the introduction of their new powers to fine £500,000 for serious breaches of the Data Protection Act, that they are looking to clamp down on unencrypted laptops, even if they are password-protected. This happens a lot. What should concern anyone that processes data about people is the way in which the regulator also seems happy to dish out fines to organisations that use other service providers to help with the processing of their data. This may apply to anyone who has a website hosted, outsources payroll, or any other outsourced service.”

Atos failed to fully understand the complexity of De Beers’ requirements, resulting in significant delays to the project, but this was due, in part, to De Beers’ inability to finalise the scope of the project. There was misunderstanding on both sides and the project did not progress as well as had been hoped. As a result of the delays, De Beers decided to withhold payment of an interim invoice.

In response, Atos Origin refused to continue work on the project unless the contract was renegotiated, as it believed that the project had altered substantially in cost, specification and deadline. Atos Origin demanded that the contract be renegotiated to reflect the change in scope. Although negotiations took place, a variation to the original agreement could not be agreed and no further work took place.

Both parties claimed that the other had repudiated the agreement, breaching its terms by indicating that they no longer wished to be bound by it.

The High Court ruled that both parties had contributed to the failure of the contract. De Beers had not had a right to withhold payment of the interim invoice, but that non-payment did not amount to a repudiatory breach. However, in stopping its performance of its obligations under the contract, Atos Origin had committed a deliberate and wrongful breach of contract, which amounted to a wrongful repudiation of the agreement.

The High Court noted that Atos Origin did actually have a right under the contract to suspend work whilst waiting for De Beers’ payment, but the way in which Atos Origin communicated the threat to suspend services was an indication that Atos Origin was not willing to continue on the terms of the existing agreement, and would only proceed on their own terms.

The High Court ruled that De Beers was entitled to recover £4.4 million to cover the cost of modifying its old software system and purchasing a replacement system, less costs it would have incurred had Atos Origin not terminated the contract, totalling nearly £3 million. As such, Atos Origin was liable to pay De Beers some £1.4 million in damages, not including any claims for interest.

Simon Weinberg, a solicitor at Matthew Arnold & Baldwin LLP and assistant editor of Upload-IT, comments: “This case shows how important it is to be realistic and to have clear intentions in negotiations over an IT contract, together with commercial sensitivity in any subsequent renegotiation or variation. Suppliers must understand their customers’ requirements and ensure that they have the necessary expertise to fulfill their obligations under any agreement they enter into. At the same time, customers must limit the risk they expose themselves to, making sure that they participate in their project and that they are doing as much as possible to prevent the failure of the project.

“Here the High Court ascribed blame to both parties, and could so easily have ruled that no damages were payable. Business-critical IT contracts are essential to any business and can be expensive. It makes sense to negotiate them properly and to ensure the parties’ expectations are properly reflected in a clear written contract.”

The High Court originally and now the Court of Appeal decided that a contract had been formed between the parties. It was a question of construction as to whether the further contract to be executed was a condition of the contract being formed or a mere expression of the contract already agreed. The Court referred to D’s acceptance of the quotation with the statement that D “hereby accept the terms of your quotation subject to your Board approval” as showing that the only condition for the contract proceeding was C’s board agreeing to the deal. This was clearly done because C accepted D’s offer. Therefore, C’s statement that a formal contract would follow in due course was merely an indication that the parties’ contractual desires would be reflected in a further document.

This case could have been decided either way. On the facts, the courts decided that the parties had intended for a contract to have been formed. It was the change in circumstances to D that led to D’s claims. However, instead of the parties spending large legal cost, wasting management time and incurring aggravation and uncertainty in going to the Court of Appeal, the situation could have been avoided if the contract wording and processes had been clearer.

The High Court ruled that all the losses were direct losses. The supplier was therefore liable for all the damages claimed.

There is nothing startling about the result. What is surprising is that many suppliers are still under a misapprehension about how much they are covered by a crucial clause which seeks to limit their exposure for something going wrong. A lot of businesses think that economic losses are indirect and they are therefore not liable for them. This is wrong. Physical damage or economic loss (such as loss of profits, loss of revenue, loss of reputation, etc) can be either direct or indirect. It depends on the circumstances according to an interpretation based on a legal case from 150 years ago.

Liability clauses go to the heart of why businesses have contracts – in order to give certainty. However, many people are trading under a misunderstanding of the level of the risk that they have accepted.

Under UCTA, any terms restricting a seller’s liability for breach of contract, where the buyer is either a consumer or deals on the seller’s standard terms and conditions, must comply with a reasonableness test. In the initial ruling, the High Court had issued summary judgment in favour of the seller on the grounds that deciding whether the clauses were reasonable or not did not require a full trial.

The Court of Appeal agreed with the High Court’s ruling, pointing out that both of these BIFA clauses had been ruled to be reasonable in previous cases in the Court of Appeal. Whilst reasonableness claims under UCTA are considered by the courts on a case-by-case basis, the ruling suggests that any attempt to claim that these BIFA clauses are not reasonable in future will require unusual circumstances to be present, the lack of which will mean the same conclusion – the clauses are reasonable. In respect of the set-off clause in question, the Court of Appeal said that the exclusion of the right to set-off did not stop the buyer from refusing to pay any incorrectly charged sums as the exclusion only stopped setting off against sums due. The Court also said that the wording of the nine month limitation clause stopped the bringing of cases whether the cause of action had been known or not before expiry of that period.

It is also worth noting that the Court of Appeal commented that although the relative bargaining power is one of the criteria under UCTA for deciding reasonableness, the relative size of the parties was not likely to be important in deciding whether the clauses were reasonable if a small but commercially experienced buyer had a number of competing suppliers to choose from. That was the case here.

The advert therefore breached the CAP Code.  The CAP Code is a code of practice governing the content of adverts and marketing communications and is administered by the ASA. Although the Code does not have legal force, it is best practice to comply with it, as failure to do so can result in bad publicity and ultimately an inability to obtain advertising space.

The ASA required that the advert is not used again unless it is changed in accordance with the ruling.

The full text of the wording can be found here.

It remains to be seen whether the Supreme Court accepts Safeway’s application, although if it takes into account the unanimous decision of the Court of Appeal, it is unlikely to do so. If the Supreme Court does choose to review the case, directors and employees of an organisation will again be at risk of being ruled to be liable for breaches of competition law by that organisation.

The High Court had agreed with him, and now so has the Court of Appeal. The implied licence gave permission to go no further than was necessary to achieve what had been in the contemplation of the parties’ minds at the time the licence had been given. It had been in the contemplation of the minds of the parties that his photos would be used for printed newspapers at the time. However, the issue surrounded the new digital online medium, that had clearly not been considered. So could be said to have been in the parties’ minds? The Court of Appeal ruled that use in the form of continued availability in a new globally and permanently accessible online medium could not be said to have been within their contemplation. That use was not necessary to give effect to the original intentions of the parties, and would adversely affect his ability to exploit his copyright in the photos. The further use would be subject to the parties reaching further agreement with further licence fees being paid to him. Grisbrook was therefore within his rights to refuse permission for his photos to be used online by the newspaper in their back issues.

This result will cause a massive headache for newspaper publishers seeking to make available their publications online. If one contributor is able to stop them from supplying their photos in digital back copies, this could have the effect of preventing the whole back issue from being supplied again, unless the publisher incurs expense in re-jigging the original version. This shows why there should be clearly written legal agreements which envisage future technologies within the licence, rather than rely on unwritten implied licences.

That test for what constitutes an offer is whether a person with the parties’ knowledge of the background, acting reasonably, would have understood the document (or relevant part) in question to be an offer, by which the sender or producer of that document intended to be bound by it.

In this case a mistake was made in the initial offer letter. The Court of Appeal ruled that the mistake was obvious and clearly unintentional, and the recipient of such an offer would know it to be a mistake. As such, the recipient of the offer should not have considered it to be an offer, and should not have believed that they could issue an acceptance to it. Therefore, the relevant term of the contract referred to in the offer was yet to be agreed.

The full text of the judgment can be found here.

It remains to be seen how strictly the courts will construe this ruling. It shows that the Supreme Court is ensuring any relevant material is brought before a court in order that the court make an accurate decision, but may mean parties are increasingly concerned about the content of their without prejudice communications in attempting to agree a settlement agreement.

The advice has to be the same as when drafting any contract – clarity is key. When negotiating a settlement, make sure your communication is clear and in plain English to avoid any confusion.

For the full text of the judgment click here.

Simon Weinberg, a solicitor at Matthew Arnold & Baldwin LLP, comments: ‘The fines send a strong message to anyone handling data that not only do new fining powers exist for breaches of the DPA but also that the ICO is actually willing to use those powers. They highlight two things in particular that the ICO will not tolerate: poor care over particularly sensitive data (such as child abuse in the Council’s case) and the common mistake of failing to encrypt laptops that contain personal data (in A4e’s case).’

The High Court ruled that the rights had reverted to the songwriters. The Court of Appeal has now agreed. The clause was not an agreement to re-assign to the copyright in the future but an automatic reverter provision. The Copyright Designs and Patents Act 1988 did not say that assignments had to be absolute – they could be for part of the copyright period. An assignment with an automatic reverter, as in this case, was a type of partial assignment permitted by the Act.

On appeal, the Court of Appeal has now ruled that B’s argument that there should be an implied term was wrong. The contract had provided that the product would be tested by an inspector at the time of loading and that decision was final and binding unless there was a manifest error. The Court of Appeal said that the implied term would render such an inspection meaningless. It could not possibly have been impliedly agreed by the parties. The parties had clearly had a desire for contractual certainty.

However, that was a pyrrhic victory for P as it lost on the other point. The implied term of Section 14 of the Act was not excluded by Clause 18 because of the poor wording of that Clause. Under English law, there was a difference between ‘conditions’ and ‘warranties’. Section 14 of the Act was a ‘condition’, but Clause18 did not exclude ‘conditions’.

This can be the danger of using a contract not written with English law in mind. This problem often arises when people use a US-originated contract and substitute the words ‘English law’ instead of the other US governing law. Unless exclusion clauses are drafted properly to reflect English law requirements, they may not work. That’s what one of the parties found out to its cost here.

The car was advertised as a “1930 Speed Six Bentley”, and the defendant warranted that the car had a 1930 Speed Six engine. The car was bought by the claimant on hire purchase through three contractual agreements, each of which described the car as a “1930 Speed Six Bentley”. A year after receiving delivery of the car, the claimant discovered that the engine of the car was actually a 1927 reconstructed standard engine. The claimant claimed against the defendants for damages for breach of warranty and damages for breach of contract, the damages amounting to the hire purchase installments paid and the deposit submitted initially.

The court ruled that the value of the reconstructed engine was significantly lower than the original engine that the claimant believed they were purchasing. The pre-contract representations were inaccurate and misleading in relation to the engine, and the contractual agreements merely accentuated this inaccuracy. The claimant received all the hire purchase payments that she had made as damages, as she was entitled to rescind the contract and the payments were recoverable as reliance damages.

Eminence Property Investments Limited (EPIL) was selling a number of flats to Mr Heaney. The contract for sale incorporated the Standard of Conditions of Sale, which make time of the essence only in the event that a notice to complete is served on either party. In a situation where the purchaser failed to complete on receipt of such a notice, the seller would have the right to rescind the contract, retain the deposit and claim damages.

The seller served a notice to complete, but gave the incorrect date for the completion deadline, using 15 December instead of 18 December. The purchaser did not complete the sale contracts and, on receipt of a notice of rescission on 17 December, responded by stating that the expiry date for the notice to complete was wrong, and that in sending the notice of rescission the seller was itself rescinding the sale contracts, requesting the return of the deposit, and putting itself in repudiatory breach of the contract.

The High Court ruled that the notices of rescission were a repudiatory breach of the contract, as they were a clear refusal by the seller to perform its obligations under the contract.

However, the Court of Appeal has now rejected that view, ruling that the sending of the notices of rescission was not a repudiatory breach. The ruling stated that it was clear that the purchaser knew the seller wanted to enforce the contracts, and that the High Court was mistaken in not considering all of the facts. From a reasonable purchaser’s point of view, it was unclear what the seller’s intention was.

The test for a repudiatory breach was restated, in that it was whether, looking at all the circumstances objectively from the perspective of a reasonable person in the position of an innocent party, the contract breaker has clearly shown an intention to abandon and altogether refuse to perform the contract. In this particular case, it could not be said that there had clearly been shown to be an intention to abandon the contract. Motive is irrelevant if it is used just to show the subjective intention of the person involved.

Of most importance, though, is the Court of Appeal’s comment that each case must be entirely dependent on its facts. Citing previous cases as precedents to determine whether the contract had been repudiated in a subsequent case is of limited use. Whether or not any particular contract has been repudiated in any particular situation is fact sensitive.

In this particular case, a liquidated damages clause in a contract between AB and H’s subsidiary involved the subsidiary having to make a payment within a particular time or AB could terminate the contract and be paid 20% of the contract price. H guaranteed the payment of its subsidiary. AB terminated for default and sued H and H’s subsidiary. They refused to pay the 20% and argued that it was an unenforceable penalty. AB successfully sued for summary judgment.

The High Court stated that there was no arguable case of the liquidated damages clause being a penalty. It is possible for a liquidated damages clause to be neither a pre-estimate of loss nor a penalty. It could still be enforceable if it was commercially justifiable, as long as the main purpose was not to deter the other party from breach. A clause which was negotiated, as here, was likely to be seen as being commercially justifiable as providing a balance between the parties. Evidence of negotiation over the clause can be used to show whether or not a clause had a commercial purpose. In commercial contracts, what the parties have agreed should normally be upheld.

This case shows that anyone looking to agree a liquidated damages clause and later argue it is an unenforceable penalty are playing a dangerous game. Courts look to take a freedom of contract approach and uphold a negotiated agreement where possible. Parties wanting to ensure their liquidated damages clause is enforceable should keep clear records of negotiations. That said, a party wanting to enforce such a clause should not do anything to suggest that the clause may be a penalty by calling the clause a penalty or stipulating an amount that is out of all proportion.

The need for software escrow agreements has increased dramatically with the economic downturn, with many software suppliers experiencing financial difficulties and failing to fulfill their support obligations and having increased risk of going out of business. The lack of a software escrow agreement in such a situation could leave the software licensee in serious difficulty if they want to keep using their business-critical software.

The High Court agreed that Etihad’s delay of about 10 weeks from finding out all the facts on which it relied for termination to the date of termination was too long. This was despite there being a ‘no waiver’ clause in the contract which had said that neither party waives the right to exercise rights under a contract by delay, as no waiver clauses only help and do not work indefinitely.

The Court of Appeal has now reversed the High Court’s decision. How long would amount to affirming the continuation of the contract is a question of fact based on the facts of the case. However, the Court of Appeal gave some very useful guidance. It said that the position would depend on:

• How clear the breach is to the innocent party.
• Whether the timing of the transaction was of the essence. Someone selling perishable goods would need to know the position very quickly.
• Whether silence and doing nothing would be misleading and make the other party assume the contract was continuing.

In this particular case, Etihad had held discussions and meetings with Force India to try to resolve things between mid-November and mid-January. Etihad terminated a couple of weeks after it was not satisfied with the proposals being offered in the discussions. It had been fair for Etihad to consider its position. Force India would have known that Etihad was considering its position. In addition, the delay had occurred during a break between Formula One seasons, so there had been no urgent need for a quick decision. In this case, a delay of about three months had not been a problem.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin and editor of Upload-IT, comments: ‘Each case turns on its own facts, but this decision is very useful. When an innocent party finds out that the other party has seriously breached the contract, it is left in a difficult position. It might want to terminate the contract, but if it wrongfully terminates because the other party’s breach is not serious enough then the supposedly innocent party could be the one acting wrongfully. The stakes are therefore high. The innocent party may want to consider its position and also see if it can still work things out with the other party. However, delay can prove fatal to exercising those rights.

‘This case sets out useful guidance as to whether a delay would be too long. There are also useful things that parties can do in practice to enhance their position. In general, having a well-drafted ‘no waiver’ clause in the contract should help. In addition, when a breach happens, the innocent party can take steps to show that it is considering its position so that the other party cannot assume that there has been a waiver based on silence, and that there is no urgent need for a decision (which the breaching party’s failure to disagree with may confirm). There are other steps that the party in breach can do too to protect its position. For more advice on a particular situation, please contact us.’

The High Court did not see the merit in Force India’s position.  There was an obligation to provide a minimum of 6,000km to drive the car. That was not conditional on driving on Friday morning Grand Prix sessions or obtaining a licence – that involved additional rights. The terms of the agreement were that Force India would decide on the dates and the driver would participate in driving on those dates to the best of his ability. In fact, the driver had refused to drive at just one particular test date and that would have accounted for 266km of his entitlement. The minimum number of kilometres was therefore reduced by 266km, but otherwise the driver was entitled to damages for the rest of the difference (ie about 3,700km), amounting to compensation of US$1,865,000 at US$500 per km. That’s enough of a refund to drive the formula one company round the bend.

The move seems like a step in the right direction for small businesses. If nothing else, the problem of late payment is in the public eye for all to see. The only issue? So many amendments have been proposed to the Late Payment Directive that MEPs may not vote on it until next April, at the earliest. There will therefore be a delay. But then, how important is it if things are late?

The High Court agreed with the BBC that the duty of confidentiality would have remained on an on-going basis, and this applied not just to Ben Collins’ service company in contract law but also  to Mr Collins in equity. However, it was too late to keep the cat in the bag. Mr Collins’ identity as The Stig had been widely reported in a number of places, so the information was now deemed to have been in the public domain. The Court said the purpose of an interim injunction to protect confidentiality was not merely to punish a defendant for his previous unlawful action but it was to maintain the status quo and protect damage before it was too late. The BBC may, of course, still maintain a right to claim for financial losses arising out of any breach of confidentiality.

If the BBC had been a bit quicker off the mark, there may have been a different result, but it seems that the makers of Top Gear were just not quick enough here. Maybe The Stig himself may have done better if he had been on the BBC’s side in this case?

The High Court ruled that Umbro had breached the licence by allowing Dick’s to dip into the off-field market. However, it also agreed that Hudson Bay had breached the licence by doing likewise the other way. The Court of Appeal has now agreed with the High Court’s ruling. The reasoning turned on pockets. FIFA (the regulatory body) had regulations which said that on-field clothing could not have pockets; in contrast, off-field clothes generally did have pockets. There were other differences such as the size of logos, but that was the main distinguishing design difference. Hudson Bay argued that it had asked for authorisation to stock a design without pockets, which had been agreed to by the head of Umbro’s US subsidiary. However, that person did not have actual or ostensible authority to bind Umbro UK, which was the party to the licensing agreement. That lack of authority was borne out by other surrounding facts in the case, such as the delay in executing the original agreement which had been negotiated by Umbro US so that Umbro UK people could sign it.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: ‘This case is interesting because of the sporting subject matter. But it raises another more serious point. When someone wants to get something approved or agreed by the other party in a contract, they should ensure that the individual they are dealing with has authority to bind that other party. Where in doubt, this should be checked with a board director.’

The credit crunch came along and there were delays by BDW, culminating in Gold purporting to accept BDW’s repudiatory breach of the contract. The High Court agreed with Gold. However, BDW alleged that Gold’s refusal to agree to renegotiate the deal including the minimum prices (to allow the contract to continue after the credit crunch) amounted to a breach of the duty of good faith. The High Court said that was not what was intended by the good faith obligation. Good faith required parties to observe reasonable commercial standards of fair dealing and faithfulness to the agreed common purpose and consistent with the justified expectations of the other party. It did not require one party to renegotiate a contract because the other had made a bad bargain. The duty did not require Gold to give up a freely negotiated financial advantage. The contract also expressly stated that neither party would increase their profits or reduce their losses at the other’s expense.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: ‘With the economic downturn, we have seen a lot of people want to get out of agreements that had been entered into in the good times but which did not seem quite so good when the economic climate deteriorated. This is the latest in the line of cases where the courts have shown an unwillingness to interfere to help someone get out of what had become a bad bargain. In another recent case, the Court refused to allow the economic downturn to be a justification to refuse to perform under force majeure. For more on that case, click here: http://www.mablaw.com/2010/01/economic-downturn-not-a-justification-reason-to-invoke-force-majeure-provisions-%e2%80%93-tandrin-aviation-v-aero-toy-store-high-court/.’