One opportunity has been seized by big Pharma company, Bristol-Myers Squibb, through its recent acquisition of Inhibitex, a biopharmaceutical company, at a cost of US$2.5 billion. Inhibitex is currently developing a promising new hepatitis C drug, which though currently only in Phase II development has shown great potential. With over 150 million people worldwide suffering from hepatitis C and over 75% of liver disease being attributed to the illness, producing an effective drug to combat or manage the disease is foremost in the mind of the Pharma industry today; and Bristol-Myers Squibb is not alone. Only last November, Gilead Sciences, Inc agreed to pay US$11 billion for Pharmasset, Inc, another company refocusing on the development of further hepatitis C treatments and with Merck, Vertex and Johnson & Johnson also rumoured to be targeting the hepatitis C market, we can see that big Pharma are on the hunt.

Laura Mole, a member of MAB’s Pharmaceutical and Life Sciences Sector team says, “This latest acquisition by Bristol-Myers Squibb is living proof that the industry is changing and big Pharma are almost panic buying in order to build and diversify their portfolios. This is shown by the acquisition of not only market ready products but also drugs still in the development stages. It is clear that with the Patent Cliff threatening, and with Bristol-Myers Squibb itself to fall victim with its soon-to-expire patent protection on blockbuster drug Plavix, any opportunity to grow and protect will be taken. Small/mid sized Pharma had better be ready for the bidding war to come.”

In Apple’s business model, it calls itself an agent and gets a commission on the sale price. In genuine agency situations, the supplier is free to tell the agent what price to sell at. However, if it is not a genuine agency situation, this is forbidden. The EU rules as to what amounts to a genuine agency are complex. They include looking at who bears the financial risk or commercial risk in the sale of the books.

The Commission will now investigate. If found guilty, the parties to anti-competitive arrangements can be fined up to 10% of their turnover, the agreements are unenforceable and third parties can sue for damages.

The High Court ruled that, based on Foxtons’ terms and conditions, all Foxtons had to do to receive commission was for there to be an unconditional exchange of contract with the purchaser. As that had happened, it was entitled to commission, even though completion did not take place.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: “Following this case, estate agents should check their terms and conditions to make sure that they are entitled to commission should there be exchange of contracts but no completion.”

The Supreme Court said that where there was ambiguous wording, it did not need to conclude that a particular interpretation would produce an absurd or irrational result before having regard to the commercial purpose of the agreement. Neither interpretation flouted business common sense here. It was still appropriate to prefer the interpretation which was most consistent with business common sense. It was important to look at what a reasonable person with all the background knowledge reasonably available to the parties at the time of the contract would have understood the contract words to mean. The bank’s interpretation would produce a surprising and uncommercial result. On the bank’s interpretation, guarantees would cover every situation other than the one in which the buyer would need it most – the insolvency of the shipbuilder. The bank had no commercial reason for why the buyer would have agreed to that and so the buyer’s interpretation made more business commercial sense as it was consistent with the commercial purpose of guarantees.

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.

On a trial of preliminary issues, the High Court ruled that S and then Rossetti had been commercial agents and had the protection of the Commercial Agents Regulations. Those Regulations implement the European Union’s Commercial Agents Directive, which provides for the agent to be entitled to additional compensation beyond the ordinary common law position on termination of the relationship. The Court also decided that the transfer from S had amounted to an assignment and the agency contract had effectively lasted for four years, regardless of the change of agency. The agreement was therefore terminable on at least three months’ notice, as that was what the Regulations provided.

In addition, the High Court decided that the agents could act for more than one competing principal and that was not forbidden by the Regulations and the agreement between the parties had not prohibited the agent from representing a competing supplier. A requirement under the Regulations to act dutifully and in good faith did not stop the agent from representing more than one competing principal, but the agent must act openly, not take advantage and act loyally.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: “People often enter into agreements with agents informally. This case shows that if they want to stop their agents from representing competing suppliers, they need to set this out in a written agreement.” 

The results of the survey from the Chartered Institute of Arbitrators can be found here: http://www.ciarb.org/conferences/costs/2011/09/28/CIArb%20costs%20of%20International%20Arbitration%20Survey%202011.pdf.

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?

Munir Yakub Patel is due to appear before Southwark Crown Court on 14 October 2011 for allegedly “requesting and receiving a bribe intending to improperly perform his functions” (a breach of section 2 of the Act.) It is alleged that Mr Patel told an individual, who had been summonsed to court for a motoring offence, that he could influence the course of the proceedings in exchange for £500.

The Bribery Act, which came into force on 1 July 2011, increases the maximum penalty for bribery from seven to 10 years imprisonment. Further details of the Act are here.

The Act has also introduced a corporate offence of failure to prevent bribery by persons working on behalf of a business. To avoid breaching the Act, employers must demonstrate that they have adequate procedures in place to prevent bribery. For more details of what employers should be doing to avoid breaching the Act, please click here to read an article by our head of employment, Michael Delaney.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: “The Bribery Act is the biggest legal development of the year and given its very wide reach and political force behind it, it is no surprise to see a prosecution so soon after it came into force.  What this prosecution shows is that the law is there not just to catch big businesses on complex international deals, but also small payments made on a local level too.  Prosecutors will take action regardless of size.  Every business should be aware of the Act and should take appropriate steps to stop its employees, agents and other representatives from breaking the law, particularly as their actions can in turn leave their business criminally liable too.”

The case involved the provision of services by workers to Autoclenz, which in turn had a contract to provide valet services to British Car Auctions. In the contracts between Autoclenz and the individual workers, they were described as providing the services as subcontractors on a subcontract basis, they could provide a substitute worker (subject to complying with the standards set out in the agreement), there was no mutuality of obligation and the workers could refuse work. In addition, they wore BCA’s rather than Autoclenz’s overalls (as had been worn previously). Although Autoclenz provided the cleaning products and equipment and arranged insurance cover, Autoclenz deducted a fixed amount for the cleaning products and equipment and insurance cover from payments. The workers were responsible for paying tax and national insurance to HMRC. On the key relevant issues of control, mutuality of obligation and personal service, HMRC took the view that the workers were self-employed. Everything seemed to point in that direction.

The workers claimed to have been employees, though, and claimed employment rights. The matter ended up before the Supreme Court, which ruled that they were in fact employees. The workers were therefore entitled to minimum wage and statutory annual leave. Of most importance to businesses and service providers is the approach the Court took to considering whether to disregard the terms stated in the written contract. The Court said that those terms needed to reflect the reality of the position from inception and throughout, and the actual agreement of the parties – rather than the stated position in writing. The Court dismissed an argument that it could only set aside the stated position if there was an intention to mislead; an intention to mislead was not relevant. The Court said that all the evidence of the situation should be examined, including the written terms and how the parties conducted themselves in practice. The mere fact that a particular provision, such as a right of substitution, is not exercised does not mean that it is not genuine. But the evidence of how the parties conduct themselves can be so persuasive as to set aside what has been agreed in writing.

In this case, the following four key terms were what had really been agreed: (1) valet workers would perform services for Autoclenz within a reasonable time and in a good and workmanlike manner; (2) the workers would be paid for that work; (3) they were obliged to carry out the work offered to them and Autoclenz was obligated to give them that work; and (4) the workers must do the work personally and could not provide a substitute.

The Supreme Court argued that one critical difference between employment and ordinary commercial contracts is inequality between the parties. In an employment situation, the person obtaining the services often finds it easier to dictate terms. Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, questions that reasoning. He says: “There are many situations where there is inequality of bargaining power in a commercial contract context and that does not mean that they are really employees. It’s just the fact of the commercial matter that some commercial entities find themselves in a position that they have to accept terms imposed by the other party.”

Paul adds: “The case does, however, provide useful guidance on whether someone is an employee or self-employed. This can have important tax and employment rights consequences. Although the case provides guidelines, each case must be judged according to its own particular circumstances. As can be seen in this case, it is possible for HMRC and the courts to come to different conclusions as to the status of the service provider. MAB provides assistance in helping clients through this tricky area. Please contact me if you would like our help on this.”

The High Court said that, on the facts of this particular case, the side letter was not enforceable. It was no more than an agreement to agree. The judge said that the Court had to ask three interlinking questions: whether there had been an intention to create legal relations, whether there was an agreement to agree, and whether the terms were sufficiently certain. On the facts, the terms were not certain as they talked about paying a price of “not less than”, there was no certainty as to how the combination of shareholder debt and shares was to be made up, and the parties were looking to agree other terms later. It also referred to the terms as follows: “such terms shall include, without limitation, the following…” and that added to the uncertainty.

The judge concluded that the side letter was an agreement to agree, with insufficient certainty of terms and the parties could not have intended to create legal relations on that basis.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: “Parties sometimes use side letters as a way of smoothing over a difficult position in a transaction. But the parties should be clear as to its purpose – is it intended to have legal effect? If so then the parties should be clear as to what they mean. If the side letter is not intended to have legal effect, then serious thought should be given as to the rationale for having the letter in the first place. Either way, the parties should use clear language as to the terms and as to whether the side letter is intended to have legal effect.”

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.

The Court of Appeal disagreed with KF. D had always acted within the scope of his authority and had not agreed to take on any additional liability. Also, he was not liable for failure to identify the principal. He had always identified the principal even if he got the name wrong. KF did not provide any evidence to show that the mistaken legal name had induced it to enter into a contract that it would otherwise not have done. Further, KF could have found out the correct name if it had wanted to do so.

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.”

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.

The High Court has agreed with the OFT that such a minimum term was unfair and designed to take advantage of the naivety and inexperience of the average consumer and were weighted in favour of the gym or health club causing a significant imbalance in the parties’ rights and obligations. Gym members would not anticipate all the events which might render the use of the gym impractical and the agreements did not address the tendency of users to overestimate the amount that they would want to use the gym when signing up. Accordingly, those provisions were unfair contrary to the Unfair Terms in Consumer Contracts Regulations 1999 and were unenforceable.

In addition, the practice of describing members who wanted to terminate their agreements as defaulters and registering or threatening to register that with credit reference agencies was an unfair commercial practice and harmed the collective interests of consumers, contrary to the Consumer Protection from Unfair Trading Regulations 2008.

Now, the OFT has published a report evaluating the impact of its 2001 decision. It has concluded that, as a result of its intervention, the prices in the hospital sector have risen so that other people can compete, Napp’s market share has dropped significantly, and prices in the community sector have come down (and by far more than the OFT had required in its decision). This has therefore been a significant success for boosting fair competition.

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.

There is the thorny issue of facilitation payments – payments made to officials to speed up processes, for example to get an export licence through quicker.  Lots of business are asked to pay these, but what should you do, as the Bribery Act makes it clear that you should not pay them?

Corporate hopitality – can you take clients to Lords or out to lunch?  Can you send them a client to say “thank you”?  One interesting question that came up yesterday was whether you can take away the personal partners or families of the people you want to impress?

But a big thank you must go to Lord Triesman and the Sunday Times.  Thank you for providing a very live case study about alleged corruption by certain members of football’s international governing body, FIFA.   Can the Bribery Act catch them if they have done anything wrong?  Would accepting a gift that is for a charity or a “good local cause that helps the community” rather than the member of the committee’s back pocket amount to a bribe?  And what is the story with Qatar’s bid, because according to Transparency International Qatar is deemed to be a less corrupt place than the UK, as can be seen here: http://www.transparency.org/policy_research/surveys_indices/cpi/2010/results?  Should England have played ball to have won the right to host the 2018 World Cup?  Or should England be keen to be the winner of the more humble fair play award?

In your own business, can you afford not to play keepy uppy with what your competitors are doing?  Or can you afford not to play ball with the requirements of the new Bribery Act?  Do you play a gung ho formation and just go for it, or play it with a solid defence?

These are the dilemmas facing businesses.  But there are very serious issues at stake and businesses can’t afford to bury their heads in the sand.  To continue the sporting analogy, you might want to make your own luck, and speak to us to find out more what tactics to pursue.

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 High Court ruled that H owed F no duties under the agency agreement. The agreement was between H and B. If B had assigned its rights under the contract to F, that did not have the effect of transferring the whole agreement. A transfer of the whole agreement would have needed the consent of all three parties – ie B, H and F – in the form of a novation. Since there was no novation, all B could assign to F was the benefit of the contract, ie its right to receive commission payments. F could therefore not receive compensation payments from H under the Regulations.

In this case, S supplied goods to J with a retention of title clause. That clause stated that in the event of J becoming the subject of a formal insolvency procedure, S could by notice prevent J from selling or parting with possession of any of those goods. In the meantime, as in most contracts, it was implicit that the buyer could deal with the goods. However, J did actually go into administration. S failed to serve notice to prevent further dealing with the goods. S claimed that J’s subsequent dealings amounted to wrongful interference with its goods.

The High Court initially, and now the Court of Appeal, disagreed with S. The contract did allow S to terminate J’s right to deal with the goods if J went into an insolvency procedure, but that express termination right – that had not been exercised – clearly showed that the parties did not intend that the right should terminate automatically in an insolvency event. The Court added that it was open for the supplier to state the basis on which the buyer could deal with the supplier’s goods. They could agree that the buyer’s right to deal with the goods in the ordinary course of its business would be limited by express contractual provision, but unless the parties expressly agreed to that the court would not imply such a term. The Court said that trading in an insolvency process was not in the ordinary course of business.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: “This case shows that a court would be likely to uphold an automatic restriction in the supply contract on the buyer from dealing with the goods if the buyer goes into an insolvency type process. It is open for the supplier to agree the basis on which the buyer can deal with goods that remain owned by the supplier. Traders should look at their own standard terms and conditions and get them updated as necessary without delay.”

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.

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 European Parliament has meanwhile indicated that it supports the 28^th contract law regime. Other options floated by the Commission range from full harmonisation in place of all Member States’ contract laws through to non-binding recommendations.

The High Court ruled against Amberley. The Court of Appeal (CA) has now dismissed Amberley’s appeal. The CA considered whether the parties intended to grant Amberley such a unilateral right, and noted that unilateral variation clauses are enforceable, even if they are detrimental to the other party. However, those clauses had to be clearly drafted in order to be enforceable. In this particular clause, the CA took a narrow interpretation as the wording was not clear enough for what Amberley had wanted. The CA ruled that Amberley only had the right to ‘review’ the rents as costs increased and not impose a unilateral increase. The contract gave no indication of what such a review would involve, who would perform it, how often or on what basis. The CA thought the contract meant that Amberley would conduct the review but if it wanted to increase rents following the review, it needed to get a resident’s approval before doing so.

This is an important case for businesses to be aware of. If a unilateral clause is intended, then the clause should state this specifically. Otherwise, there is a risk the courts will give the clause a narrow interpretation and rule that it is not unilateral.

The CPR prohibits unfair commercial practices that may adversely affect a consumer’s decision-making. Businesses cannot trade unfairly or mislead consumers, and the CPR lists 31 specific trading practices that are considered unfair.

The defendant in this case, Purely Creative Limited (PCL), had breached the CPR in a number of ways, as the scratch card that PCL promoted gave a consumer the impression that they won a prize when, in reality, they had not or they would have to pay to get that prize.

The High Court ruled that PCL had breached the CPR under the specific items 5 and 6 (which prohibit misleading consumers by action or omission) and 31 (which prohibits the creation of a false impression that the consumer has already won, will win, or will on doing a particular act win, a prize or other equivalent benefit, when in fact either (a) there is no prize or other equivalent benefit or (b) taking any action in relation to claiming the prize or other equivalent benefit is subject to the consumer paying money or incurring a cost).

The High Court did not agree with the OFT that item 31 would be infringed if the process involved the consumer having to spend any money at all. If there was a minimal cost such as a postage stamp or money that did not reach the promoter’s pocket, that would not be a misleading commercial practice. However, it would be a problem where the promoter receives a payment to offset the cost of the prize may create a misleading impression that the prize is won rather than paid for by the consumer. The OFT would only need prove that the recommended route to claim the prize involved a cost, and providing an alternative claims route with a de minimis cost would not be a valid defence for the promoter.

The High Court also clarified the standard that needed to be met. The Regulations prohibit misleading standards against average consumers. An average consumer is reasonably well informed, observant and circumspect. In other words, consumers who take good care of themselves should be protected, rather than ignorant, careless or hasty consumers. In dismissing PCL’s argument, the court ruled that the average consumer would not have read all the terms and conditions of the promotion.

As this is the first examination of the CPR in the High Court, the outcome is an interesting one, showing just the sort of unfair practice that the OFT is seeking to restrict, as well as showing how the CPR will be interpreted by the courts in future.

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 High Court said that a deed had an additional execution formality beyond a simple signature in order to become effective. It needed to be ‘delivered’. There were three ways in which a deed could be delivered: (a) unconditional delivery, whereby the deed is irrevocable and takes place immediately; (b) delivery in escrow, where the deed is irrevocable, but only comes into effect upon the happening of an event; or (c) revocable until it is dealt with in a certain way. Deeds executed by companies are presumed to be delivered as a deed on execution unless a contrary intention can be proved. If a party wanted to have the right to revoke, it should ensure that an express right was included in the deed. There was no evidence of an intention for it to be revocable in this case. It had been sent to SQM in escrow, on condition that SQM was to sign and return it; once these conditions had been discharged without unreasonable delay, the deed took effect and could not be recalled.

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.

Although a small proportion of the University’s highest value IP is likely to be withheld from the scheme, the hope is that the commercial use will show both the quality of the research completed to develop the patent and the advantage to commerce of making use of the new technologies. The move is expected to be particularly popular among small and medium businesses that are looking for ways of standing out from the crowd without significant expenditure.

On appeal, the Court of Appeal has overturned the strike-out. It said that there was a real prospect of CSE establishing at trial that the terms and conditions were incorporated into the contract. The ultimate question was whether a reasonable person in the parties’ position would have understood the words as referring to CSE’s contractual terms as being the basis for doing the work.  The Court of Appeal thought that CSE’s interpretation was a more likely interpretation of the words used. One judge added that the phrase ‘terms and conditions available upon request’ must have been intended to have had some meaning.

This was only a ruling over an interim issue. This case shows that the argument that the terms applies had a prospect of success. As to whether or not the terms and conditions were actually deemed to have been incorporated must be decided upon at the full trial. It will be interesting to see what is decided there, because the outcome of this case may impact on how clearly people need to refer to or attach their terms and conditions when they want them to apply to their contracts. It will also be interesting to see what the court says over the fact that the terms were referred to below, rather than above, the signature box. The cost and management time spent on fighting this issue could, of course, have been avoided if the supplier had had clearer processes.

If you want to obtain advice about ensuring your terms and conditions are incorporated into your contracts, please contact us.

Unfair trading is prohibited by the Consumer Protection from Unfair Contract Trading Regulations. However, consumers are generally not able to take action in the event of unfair trading. Instead, action under those Regulations is taken by the Office of Fair Trading or the local Trading Standards office.

A new report by the Law Commission is aimed at reviewing the current law in due course, and states that whilst consumers have no direct course of action in many instances, in those instances where direct action is available, for example under the law of undue influence and duress, the law is largely redundant as consumers cannot understand it sufficiently to make use of it.

It is expected that a consultation paper will be issued by the Law Commission in early 2011, highlighting how the law should be reformed. The Law Commission’s initial report can be found here: http://www.lawcom.gov.uk/docs/misrep_summary_evidence_web.pdf.