1. the oral agreement had been breached when Graham sought to exploit the sauce for his own commercial gain; or, alternatively
2. the information given to Graham when Bailey demonstrated the recipe to him attracted a duty of confidence which had been breached when Graham commercialised the sauce.

Graham argued that he had arrived at the recipe through his own hard work and experimentation, and that the claims were an attempt to take advantage of his commercial success when marketing the sauce.

The High Court ruled that there was no breach of contract and no breach of a duty of confidence on the grounds that:

-          the evidence established that Graham had developed the source himself and that there had been no agreement between the parties. The agreement that Bailey and Williams alleged existed made no sense as there was no reason for Bailey to enter into such an agreement to reveal his secret recipe in order for Graham to take it to market. The burden of proof was on Bailey and Williams to prove that the agreement existed – they had failed to do so and therefore no breach of contract was possible; and

-          Bailey had failed to prove that the sauce recipe had been imparted to Graham in circumstances that gave rise to a duty of confidence. In any case, the recipe that was the subject of Bailey’s claim was not sufficiently certain to have a duty of confidentiality attached to it.

The dragons’ investment was well protected and just as well that Graham did not need to face their fire…

The relationship broke down in 2008 and was terminated in December 2009 by R and Stoneygate. P issued proceedings for breach of contract, suing Stoneygate for arrears of commission due under the agreement, both before and after termination. R argued that post-termination commission was not payable, and that the agreement was not enforceable in any case as it was an unreasonable restraint of trade.

The High Court ruled in favour of R, ruling that the agreement was invalid and unenforceable – it was a restraint of trade on the grounds that it imposed substantial restraints on R over a significant period of time, on terms that were uncommon in the industry, and had been agreed by inequitable negotiation between P and R when R was 17 and had not received legal advice. The High Court also ruled that, even if the agreement was enforceable, post-termination commission was not payable under the terms of the agreement. P appealed to the Court of Appeal on a number of points.

The Court of Appeal ruled that:

1. on construction of the agreement, post-termination commission was payable in relation to arrangements procured by P and for which Stoneygate received payment after completion; and
2. the agreement was a restraint of trade, despite the fact that R’s primary occupation was as a footballer and his primary earning potential was not through the image rights that were the subject of the agreement – the exploitation of image rights was almost always going to be ancillary to another occupation, and was just as capable of protection under the restraint of trade doctrine as any other occupation.

Due to the fact that the agreement was a restraint of trade, P could not recover accrued entitlements as the agreement was unenforceable in the first place.

Simon Weinberg, a solicitor in the Commercial/IP/IT team at Matthew Arnold & Baldwin LLP and assistant editor of Upload-IT, commented, “In this case, it was extremely difficult for the courts to see past the fact that, when the agreement was negotiated and entered into, one of the parties was a 17-year-old without legal representation; the bargaining powers of the parties were unequal from the start, undermining the basis for the agreement. The fact that its terms restricted Rooney’s own exploitation of his image rights until he was 25 was always likely to lead to arguments of restraint of trade once he did receive appropriate legal advice. This case serves as a useful reminder that, when negotiating a contract, it is important to ensure that the other party has legal representation; if they do not have that legal representation and the agreement seems to be one-sided, there is a risk that the foundations of that agreement will be challenged in future. If you convince the other side to sign without legal advice, and the terms of the agreement seem too good to be true, they probably are.”

1. an offer;
2. acceptance of that offer;
3. consideration – ie something provided by each party to the other; and
4. an intention between the parties to create legal relations.

In this case, an oral contract was agreed for a fixed two year term, and this was not disputed. However, the parties ended up in court as they disagreed on whether it had been agreed that the contract could be terminated on three months’ notice. The County Court initially ruled that the three month notice period for termination had been agreed, but the decision was appealed to the Court of Appeal.

The Court of Appeal upheld the ruling and dismissed the appeal. On the evidence that had been provided, the Court of Appeal agreed that the County Court was entitled to conclude that a three month termination provision was part of the oral contract.

Simon Weinberg, solicitor at Matthew Arnold & Baldwin LLP and assistant editor of Upload-IT, commented, “This is not a ground-breaking ruling in itself. However, it is a useful reminder, if a reminder is needed, that relying on oral contracts is risky. Conversations can be interpreted in a number of ways – they rarely lead to any certainty and only increase the risk of relying on them in order to enter legal relations. Written agreements are safer, and the parties to proceedings such as these will, in hindsight, have preferred to spend money on the certainty of a written agreement in the first place rather than spend much more time and money on having a court decide what they had actually agreed.”

Following a failed claim by DDC in the High Court to have the contract rectified for mistake, the Court of Appeal upheld DDC’s appeal. The Court of Appeal’s ruling ordered the rectification of the agreement, based largely on the behaviour of DDH’s chief negotiator – it seems that, if DDH had been unaware of DDC’s mistake in their understanding of the final agreement, and had never sought to rely on that mistake, the Court of Appeal would have denied the appeal and not ordered for the contract to be rectified. Rectification is the discretionary remedy of correcting mistakes made in recording agreements.

The ruling can be considered from two points of view. On the one hand, DDC were extremely lucky to get away with rectification when they did not understand the consequences of a contract that they were entering into – this case should be a reminder to parties to a contract to make sure they get legal advice in good time to properly understand its terms before signing it. On the other hand, DDH’s chief negotiator should have made it absolutely clear to DDC that the agreement did not reflect the commercial understanding – his knowledge of the mistake and his failure to inform DDC resulted in his organisation being liable to pay DDC the £2.4m that a correctly worded contact would have required plus the costs of the litigation. This case shows the danger in relying on the terms of an agreement when you know it is interpreted differently by the other side.

E accepted that, by a literal reading of the commission agreement, commission was not payable. Instead, he argued that the purpose of the share sale was to achieve the same result as was intended by the initially envisioned but aborted property sale, and the agreement should be read as such – that the share sale was the effective sale of the property. The High Court had initially rejected his claim.

The Court of Appeal has now agreed with the High Court’s ruling on the basis that, whatever the purchaser and L intended to achieve by the share sale agreement, it was not relevant to the construction of the commission agreement. The key to understanding the commission agreement was to look at its language, and by that interpretation, the literal meaning was clear – L did not need to pay any commission to E. Neither E nor L had considered the sale of the property by means of a share sale, so they cannot have intended the commission agreement to deal with such a situation.

Simon Weinberg, a solicitor at Matthew Arnold & Baldwin LLP and assistant editor of Upload-IT, comments: “When the High Court decision came out, we helped a number of estate agents update their terms and conditions to seek to avoid the effects of the Estafnous case. The appeal court’s decision to uphold the lower court’s ruling further emphasises the need for estate agents to make sure that their terms and conditions allow them to get commission if the shares in a company owning the property are sold rather than the property itself.”

The complaint was that the website had been misleading as it had not set out that the surcharges were not optional in order to make a purchase from the website. It was also argued that the website was misleading in the way it set out VAT on purchases, as the price quoted was with the figure excluding of VAT, whereas in all cases VAT would apply.

The ASA upheld both parts of the complaint, ruling that there had been a breach of the CAP Code in terms of misleading advertising and pricing. The CAP Code is the code of practice aimed at ensuring adverts, including material written on businesses’ own websites and social networking websites, are fair and not misleading. The ASA is a regulator in charge of enforcing the CAP Code.

This issue is increasingly in the public eye. The Office of Fair Trading recently told travel companies to make credit and debit card surcharges clearer on their websites. In addition, the Consumer Rights Directive recently adopted by the European Union requires pricing to be more clearly set out.

Many people may be under the misapprehension that they have until the Consumer Rights Directive is brought into force under English law (likely to be about two years from now) before they have to make all charges clear up front in an online order process. In fact, as this ruling shows, failure to be up front and clear on pricing is already a breach of the CAP Code and the ASA enforces the CAP Code even for something said on an organisation’s own website. Although a breach of the Code does not have legal effect, it can result in bad publicity and an inability to obtain advertising space in the future.

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.

A contractor was employed to perform building works on a property. The contract included a limitation clause which stated:

“No action or proceedings under or in respect of the [contract] shall be brought against the Contractor after:

(i)                   the expiry of 1 year from the date of Practical Completion of the Services; or

(ii)                 where such date does not occur, the expiry of 1 year from the date the Contractor last performed Services in relation to the Project.”

Dean Construction (DC) never formally certified practical completion, and Inframatrix Investments (II) issued proceedings, claiming that the works were defective.

The Technology and Construction Court (TCC) ruled that II’s claim had been issued more than 1 year from the date on which DC last performed the services under the contract. The TCC therefore struck out the claim.

Whilst this ruling is only in respect of a strike out application by DC, it should be noted that the TCC clearly ruled that the bespoke limitation period applied and could be relied on by DC. This is a reminder that, if a business wants a specific limitation period to apply to a contract, it must expressly state that limitation period in the contract, but once it is stated, provided it is reasonable, the limitation period can be relied on. Crucially, though, it must be reasonable– otherwise, the attempted limitation may not be enforceable under the Unfair Contract Terms Act.  What is reasonable depends on the facts of the case.

The Court of Appeal ruled that there was a breach of contract and that the Lowes were entitled to reject the staircase. The reason for the Court of Appeal’s ruling was that, under section 14 of the Sale of Goods Act 1979, the staircase had to be fit for purpose and of a satisfactory quality. This section had been implied into the contract for the staircase as the Lowes had relied on the skill and judgement of WMJL as the seller of the goods in question. The High Court had ruled that WMJL should at least have warned the Lowes that the design requested would need the approval of a building control officer to ensure compliance with building regulations, and the Lowes had relied on receiving this advice from WMJL – the Court of Appeal agreed with the High Court’s interpretation but ruled that it entitled the Lowes to reject the staircase. WMJL knew that the staircase, when provided as specified in the contract, would breach building regulations, and should have warned the Lowes of this, such that the staircase could not therefore be considered reasonably fit for purpose and the claimants were entitled to recover the price paid.

Barclays disputed that it owed Nylon any money for expenses, and issued legal proceedings to obtain a declaration from the High Court that Barclays was under no obligation to pay Nylon those expenses. The High Court agreed with Barclays and ruled that it was under no obligation to pay the expenses that Nylon had claimed.

Barclays also asked the High Court to confirm that Barclays did not have to pay Nylon its profits on its original capital investment, which Nylon rejected, again arguing that Barclays was obliged to do so under the terms of the LLP agreement. Nylon applied for a stay to bring an end to the proceedings brought by Barclays, which was initially rejected but appealed to the Court of Appeal.

The Court of Appeal has now rejected that application for a stay, saying that a satisfactory outcome could only be obtained by a full trial with evidence, entitling Barclays to continue with proceedings. However, in giving its ruling, the Court of Appeal noted that the parties had reached a settlement and had asked the Court of Appeal not to actually give its judgment on Nylon’s appeal. The Court of Appeal decided, however, that there was no reason why the judgment should not be given, despite the settlement that had been agreed.

The main implication from this ruling is that, whilst the parties had reached a settlement, the Court of Appeal still issued the judgment. However, the case is also a useful reminder of the need for clarity and certainty in drafting commercial agreements, including those that define investment relationships.

• the service of the claim form was valid;
• its standard terms and conditions had been incorporated by the purchase order; and
• section 52 of the Sale of Goods Act 1979 applied, allowing SSL to apply for injunctive relief.

The High Court ruled that service on the director in England was valid, as the director was senior enough in TTK’s company to be served with proceedings. However, SSL’s terms and conditions had not been incorporated into the joint venture agreement by the purchase order as TTK had never seen the terms and conditions, and therefore could not be bound by them. As a result, section 52 of the Sale of Goods Act 1979 could not apply as the applicable law was Indian law, and the High Court could not grant interim relief. TTK’s business and property were all based in India, and it had no English presence, such that any order of the English court would have to be enforced only in India. The High Court saw no reason why its jurisdiction could extend to this case. It stated that the action should have been brought in India.

Particularly when dealing with foreign-based companies, businesses should make every effort to ensure that the governing law and jurisdiction of any agreement is English law, if that is your preferred route. It must be remembered that terms and conditions can only apply if they are properly incorporated, which means that all parties must have actually seen them and had a chance to read them. In this case, the claimant seemed to forget these two points and spent time and money trying to obtain a judgment when an English court had no jurisdiction over the case at all. It proved a costly mistake. It is one thing to pay for a law firm to draw up decent terms and conditions, but that is only half the battle. The other thing to make sure that the terms and conditions actually apply.

Creative Commons covers roughly 500 million pieces of copyrighted material, and copyright owners can choose from a variety of free legal licences for their content that protect them in situations ranging from sharing material with anyone for any use to protecting their material from being manipulated or used commercially. The intention is to allow copyright owners to mix and match licences to suit their own aims – owners can choose whether they need to be named in any use of the material, whether the material can be shared once it has been used, and whether the material can be used commercially.

Whilst Creative Commons has been criticised for a possible lack of clarity in its terms, others have said it is a useful stop-gap measure only if the copyright laws in the UK are reformed – some have argued for the creation of a ‘fair use’ defence for use of copyrighted material, which is used in the US, but the recent Hargreaves Report on reform of intellectual property law in the UK rejected the argument for the creation of a ‘fair use’ defence.

In this case, the parties had entered into a contract under which Blackpool Airport Ltd (BAL) had to use all reasonable endeavours to provide a low cost base for Jet2, and under which both parties had agreed to use best endeavours to promote Jet2’s low cost services from BAL. The parties agreed before the case that the court should consider, for this case, the best endeavours and all reasonable endeavours clauses used in the agreement to have the same meaning i.e. that they should both be considered all reasonable endeavours clauses. Neither party obtained significant legal advice on the provisions of the agreement before entering into it.

The agreement did not specify the operating hours of the airport. Initially, the airport opened or stayed open outside of its published operating hours for early or late flights respectively, as it seemed common ground between the parties that Jet2 needed flexibility to operate. However, BAL made an operating loss over that period and, after four years, refused to accept flights that were scheduled for arrival or departure outside of its published operating hours, giving Jet2 just one week to comply.

Jet2 issued proceedings against BAL for breach of contract. BAL argued that its ‘all reasonable endeavours’ obligation did not oblige it to act against its own commercial interests – i.e. to allow the flights to continue to run outside of its operating hours despite the airport making a loss as a result.

The High Court ruled that BAL had breached the agreement, rejecting BAL’s justification of protection of its commercial interests. The High Court ruled that the initial intention of the parties in the agreement could not have been for BAL to change what it did on an ongoing basis based on what profit it was making as a whole – this profit was affected not just by Jet2’s flights, but also by a number of other problems it faced. The High Court stated that those other problems should have been considered in a risk assessment by BAL before entering the agreement, and did not justify BAL restricting or stopping performance of its obligations under the agreement if it became unprofitable.

The High Court distinguished this case from other cases concerning endeavours clauses as the relevant clause here related to matters all within BAL’s control i.e. whether or not to schedule flights outside its published operating hours. Other cases in this area tend to be where the clause relates to matters outside of the relevant party’s control, and in such instances a party would be justified in not risking its commercial interests in an attempt to achieve a result outside its control. In this case, BAL was not justified as the result was entirely within its control.

This case is another instance where obtaining legal advice and ensuring stricter drafting of the agreement could have saved both parties significant amounts of time and money. It is always better to have an express obligation in an agreement rather than an obligation qualified by an endeavours clause, as it allows much less scope for arguments on interpretation. If the operating hours of the airport had been specified in the agreement from the outset, a dispute of this magnitude could have been avoided.

The Directive would give consumers across the EU the right to change their mind about a purchase made within two weeks of receiving the goods or entering into a contract for services. It would also mean that traders must give consumers precise information relating to an order, including the total price, the particulars of the goods ordered and clear contact details of the trader. The Directive contains other rules covering the passing of risk and timeframes for delivery or performance. Express consent would be needed for premium charges for fast delivery. The Directive specifies further rules for digital downloads.

The European Parliament’s press release can be found here and the text of the Directive here. It is expected that the Directive will be finally approved by the European Council of Ministers in the next few months, and Member States will have two years following that approval to bring it into force in their countries.

In this case, the owner and licensee of the CTM for the word ‘STUNNING’ in relation to perfumes issued proceedings for trade mark infringement arising out of unauthorised use of the mark, and the High Court had to consider the CTM Regulation. The CTM Regulation states that CTM assignments have to be in writing, but does not specify any formalities in relation to CTM licences.

The High Court ruled that, if the owner provided its consent, the licensee could bring proceedings for infringement. The High Court also ruled that, in this case, an infringement of the CTM had taken place. The position in respect of the EU-wide CTM contrasts with what happens when a UK-only registered trade mark is infringed – in that case, the licence has to be in writing before a licensee can take action.

The Court of Appeal ruled that the contract set out the only circumstances in which a party could be excluded from a right to rescind, and the developer had breached another provision of the contract which did not exclude that right. As such, if a contract expressly qualifies a right to rescind, any other breach of the contract will not preclude that right, thereby making the rule that a party may not rely on their own breach (which has been reiterated in recent case law) irrelevant in such a case.

The Court of Appeal also considered whether the developer had waived the right to rescind by electing to affirm the contract. The Court of Appeal ruled that such decisions had to be made on a case by case basis but that, in this case, the developer was entitled to wait after the date for fulfilling the conditions had passed before serving notice to rescind, and in the meantime was entitled to continue to progress in other areas relating to the contract without waiving its right. It is important to note that the continued performance of a contract does not always mean that a party has waived its right. However, these areas must be handled very carefully and specialist legal advice sought to ensure that a contractual right is not deemed to have been waived.

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 RFU applied to the High Court for a “Norwich Pharmacal order” to be made against Viagogo – a court order that requires the disclosure of certain documents by the respondent to the applicant, including details of third parties against whom the applicant may have a legal claim. In this case, RFU wanted Viagogo to disclose personal data of those who advertised or sold tickets on its website in order to seek redress against wrongdoing.

The High Court granted the order, ruling that the RFU was genuinely seeking redress for the alleged wrongdoing. Viagogo had argued that the RFU was actually trying to damage Viagogo’s business, but this was rejected by the High Court. The High Court justified the grant of the order on the grounds that there was no straightforward or alternative means for the RFU to obtain the information in order to take action. Whilst the High Court took into account the provisions of Viagogo’s privacy policy, the High Court ruled that it was not breached by the order.

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.

Ofcom ruled that the clause was a breach of the Television Licensable Content Service licences for Sky Sport 1 and Sky Sports 2 and of the Communications Act 2003. Ofcom required the relevant clause to be removed from the agreement.

Ed Davey said, “ Our objective is to introduce a final Bill in the Second Session, although we will look at the opportunity for introducing the Bill earlier if parliamentary time allows. One reason for publishing the draft Bill as soon as possible is that if parliamentary time allows, we may be able to make it a first Session Bill, but that is not within my control.”

The background to the draft Bill which will set up a “supermarket ombudsman” is that the Groceries Supply Code of Practice was recommended by the Competition Commission following its market inquiry into the supply of groceries and report in April 2008. The Commission concluded that, although the exercise of buying power by grocery retailers was in general a good thing for consumers, it could raise concerns in certain circumstances. For instance, if retailers transfer excessive risks or unexpected costs to their suppliers in the hope of gaining a competitive advantage, it is likely to blunt suppliers’ incentives to invest in new capacity, products and production processes. Which in turn could be bad for consumers, and the Code of Practice is intended to remedy the problem.

The groceries supply code will apply to all companies active in the sector with an annual retail groceries turnover of £1 billion or more. Its provisions are now included in all retailers’ contracts with their grocery suppliers. It gives suppliers greater security, which should encourage them to invest in their operations. In essence, the code is about introducing clear standards and greater certainty.

The Competition Commission concluded that the code would be far more effective if it was enforced by an adjudicator. The idea is to dispel the climate of fear among suppliers, who felt they risked being black listed by the big supermarkets if they invoked the previous Code of Practice. The Commission does not have the power to establish an ombudsman. After failing to win agreement amongst the retailers to establish such a body on a voluntary basis, it asked the previous Government to act. The Coalition Government agrees that the Code of Practice needs to be independently monitored and enforced if it is to succeed.

The “supermarket ombudsman” will act as arbitrator in disputes arising under the code, and will have investigatory powers and, one assumes, powers to fine and censure retailers in the more serious cases of code abuse. We will know more when the draft Bill is published.

But who will ultimately benefit from the new Code and the appointment of an ombudsman? The consumer, the food supplier or both? Only time will tell. But one thing is for sure, the large grocery retailers in the UK will not be hiding under their duvets in fear of the new Bill. The Government will not want to risk being too onerous on them. After all, with a weak UK economy forecast for the foreseeable future, the last thing any Government will want to do is to alienate a sector which continues to increase trade and revenue even in these times of austerity. The big supermarkets provide UK plc with a lot of tax revenue, which is much needed in the Treasury coffers in the current climate. The ombudsman may be on his way, but he is unlikely to be changing too much any time soon.

Channel Four had attempted to argue that, where the substantive parts of the agreement were exempt, there was no obligation to disclose the whole agreement where an application for disclosure had been made under the FOIA. However, the tribunal ruled that those parts of the agreement not exempt from disclosure should be disclosed in a redacted version of the agreement. The tribunal pointed out that the clear intention of the legislation was to protect the rights of the public to access certain information, and the ability to avoid disclosure of an entire document due to certain sections being exempt did not fit in with that.

The High Court has seen a similar case appear before it recently, where the landlord of a pub, Mr Turner, was showing Premier League matches that were received from ART, a broadcaster in the Middle East and Africa. The Magistrates’ Court had convicted him and fined him £500 under the Copyright, Designs and Patents Act 1988, and the Crown Court upheld this conviction after he had appealed it.

However, Mr Turner appealed the conviction to the High Court, arguing that the Crown Court should have considered European Union law and had not done so. The High Court agreed with Mr Turner, ruling that the Crown Court had misunderstood the ruling in the case of Karen Murphy, the landlady referred to above currently in front of the ECJ.

The High Court ruled that the appeal should be allowed outright, rather than just postponing the decision until the decision in Karen Murphy’s case has been given by the ECJ; however, the High Court made clear that they were allowing the appeal outright due to the fact that Mr Turner had now acquired an undoubtedly legitimate licence to show Premier League football in his pub, and the fact that the initial prosecution had taken place four years ago. It is unclear what the High Court’s ruling would have been if Mr Turner had been continuing his alleged illegal activity at the time of the hearing.

We eagerly await the final score from the ECJ in the Murphy case.

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.

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.”

Where, as in this case, the fundamental motivation for the transfer was a fear on the part of the director that he was going to be subject to a major claim against him arising out of his misappropriation of funds in a bank account in respect of which he had fiduciary obligations, the director could not of his own volition tranfer some of his shares in the company by way of a gift to his daughter and wife.  The company had not authorised the director to issue share certificates to his wife or daughter or to record them as shareholders in the company’s register of members. Accordingly, legal title had not been effectively transferred.  In effecting the gifts, the director had tried, without success, to realise an immediate and outright transfer of his beneficial interest. However, no amount of benevolent construction of those transactions could lead to a conclusion that the director was intending to declare himself a trustee in respect of  his shareholding. Moreover, the director had failed to take the necessary steps sufficient to enable his wife and daughter to obtain a transfer of the shareholding without further recourse to assistance from him. All they received were documents purporting to be new share certificates in their names which the director had created without the company’s authority. The result was that, without the director’s assistance in making available the duly completed stock transfer forms, neither his wife nor his daughter could perfect the intended gifts. Accordingly, no beneficial interest had been transferred.

This case highlights once again that people trying to put their personal assets (in this case shares) beyond the reach of creditors will come unstuck if their motivation is to defeat the interests of those creditors. Furthermore, the case also highlights the importance of company board meetings approving share transfers. A proper transfer of shares requires: (i) the transfer to be approved by the directors passing the requisite resolution (usually at a duly convened board meeting, but as an alternative, the resolution could be passed by directors’ unanimous written resolution); and (2) the directors also resolving to approve a person (normally another director or the company secretary) to deal with the mechanics of recording the transfer in the company’s statutory records, and to issue new share certificates. Furthermore, if a transferee only wishes to transfer the beneficial and not the legal title, then he or she should enter into an appropriate trust instrument, for example, a Declaration of Trust over the shares, clearly setting out who the beneficiaries are and the exact details of the shares which are the subject the trust. Otherwise, as this case highlights, going forward there could be be serious question marks over the validity of the share transfer as well as the the validity of any purported transfer of the legal and/or beneficial title to the shares.

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.

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 case in question concerned a guarantee that was so fundamentally flawed and unsuitable for the relevant transaction, that the Court did not have the power to step in and rectify the drafting mistakes. A Court only has the  remedial tools of construing a contract and rectifying obvious errors, in order to give the contract business purpose. However, where there is a genuine dispute over the existence of a guarantee or as to the terms of the guarantee itself, a Court cannot piece together the intention of the parties and create a document for them. That is simply beyond the powers available to the Court.

So, what can we learn from this latest decision? Well, in simple terms, that a party seeking to rely upon a guarantee must ensure it is accurately drafted and contains all the required terms.  Do not leave anything to chance, otherwise there is no guarantee of your guarantee standing up to scrutiny before a Court.

Well, essentially, the BIS report says the following:

1. Broadly speaking, the report identifies that there has been a better than expected awareness of the key changes in the Act and a higher than anticipated take up of certain measures. 85% of those companies interviewed were aware of the changes under the Act.

2. Whilst there was an acknowledgement that there were costs savings and benefits from simplifying procedures for private companies on resolutions and meetings, over a third of companies interviewed disagreed that company law had been simplified. This is a rather telling statistic in itself given that simplification was one of the main objectives of the Act when the White Paper was issued a number of years back.

3. The report highlights that there is already a need to improve certain areas of the Act – in particular those provisions dealing with directors’ duties and the duty to promote the success of the company, business review and enfranchising indirect investors.

So what can directors glean from this report? Not a great deal really, and it can be argued that at a time of continuing economic uncertainty, the Government should be spending more time and resources on guiding and assisting directors through the maze of this complex piece of legislation, with a view to helping them run their companies more efficiently. No doubt directors will be thinking they would like a helping hand from the Government on the key provisions in the Act rather than have to face the prospect of having to implement further changes in the future. Is this really simplification? Probably not, but we live in an age of over reporting and no doubt there will be more reports to follow. Whatever happens, directors can be certain of one thing – Whitehall will be introducing changes to the Act – you have have been forewarned !

Under a 2001 European Union Regulation called the Brussels I Regulation (which can be found here), a consumer can only be sued by a business supplier that ‘directs its activities in that consumer’s state’ in the consumer’s own domicile, but the consumer can choose whether to sue such a business in their own domicile or that of the business. The ECJ said that, for a business to be considered to be ‘directing its activities’ to one or more other ‘Member States’ (i.e. other countries within the EU), a number of factors should be considered by national courts. The factors include:

• the nature of the business (tourism would be an obvious pointer);
• use of phone numbers with international dialing codes displayed;
• use of ‘top level’ domain names such as .com or .eu or a top level domain name that is different to where the business is established;
• the currencies, languages and translations used on the site;
• referring to a country by name;
• money spent online to facilitate the placing of the business’s site in a way that is targeted to another country; and
• the mention of customers who live in other states.

For the full text of the ruling, click here.

As this case shows, anyone trading online with consumers may need to be prepared to fight legal battles in the courts of other countries. If they want to avoid that, they should seek appropriate legal advice.

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.

At a time when tuition fees are set for a huge increase, the question has to be asked: is this fair for students to lose out on owning potentially valuable intellectual property rights in this way?

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.

The European Commission is considering a new Directive on Consumer Rights. The Government asked businesses and consumers whether they agreed with an extension of laws concerning unfair contract terms to cover other elements of a particular transaction that may not be its core focus, such as holiday surcharges and luggage frees. The question posed by the Government was whether such charges needed to be justified as not being ‘unfair’ to the consumer.

It was not surprising that business responded negatively, arguing that market forces and competition already kept prices fair, and that additional regulation was not needed. Consumers argued that such ‘side-show’ charges were not necessarily paid attention to be consumers, and therefore they required protection in this area as well as the core charges.

The Government anticipates having the discretion to implement such regulations domestically if it chooses, rather than the issue being dealt with at EU level.

Under the contract, Ericsson was restricted during the wind-down phase from varying contracts and terms of employment, or recruiting or removing employees in relation to the project. It therefore claimed that the terms were damaging to its interests, and that those terms should apply only in the final 12 months of the contract. Hutchison, meanwhile, argued that the measures were needed to ensure the smooth transition of the project back in-house.

In deciding that the provisions should apply only within the final 12 months of the contract, Mr Justice Akenhead said that any outcome of the trial would not hinder either party to any great extent. On that basis, it sounds like this was a fall-out because of entrenched positions, and it could have been resolved…over a phone call?

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.

The High Court ruled that S had been in breach of contract and KDP had been right to terminate. The Court of Appeal has now upheld that decision. The agreement had required a full and accurate report every six months, including details of who the end users were, the contracts with them, the pricing and costs deductions. Those reports had not been provided. KDP had acted properly in provide notice of the breach, the required cure and the intention to terminate if not properly cured. KDP then properly terminated when there had not been an adequate correction after that first letter.

Mark Weston, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: ‘This case shows the importance of getting the process right when a party is aggrieved about the other party’s failure to perform its obligations under the contract. Too often, businesses either terminate too early without proper warning, or don’t terminate when they should, or don’t set up their exercise of their right to terminate properly. If they get that process wrong, they could face a claim for their own breach of contract. That’s what S sought to argue here. However, because KDP had involved its lawyer at the earliest stage and followed their advice, it got the result it wanted.’

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 Commission is also on a drive to boost cross-border trade. It announced another consultation recently, following research that showed that just 8% of consumers buy online from a retailer based in another European Union Member State and that 61% of sellers refuse to deal with a consumer based in another country. The Commission claims that this is due to regulatory and legal concerns or uncertainty. For more on that story, please click here: http://www.mablaw.com/2010/07/european-commission-consults-on-new-eu-wide-contract-law/.

The latest consultation is open to comment until 15 October and can be found here: http://ec.europa.eu/internal_market/consultations/2010/e-commerce_en.htm.

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/.’

On a preliminary hearing on these points (rather than a ruling as to whether the system was actually faulty), the Court of Appeal agreed with the High Court in that a series of minor errors could amount to a fundamental breach. Also, all of the following types of loss did not fall within any of the excluded categories:

• Compensation payments to customers.
• Increased gas distribution charges.
• Employing more staff to deal with doing the things that the IT should have done, and also to deal with customer issues.
• Writing off millions of pounds of unbilled or late bills caused by the IT system not working.
• Paying to investigate and get the IT problem resolved.

In addition, the Court of Appeal said that it was not necessary for the customer to state in their warranty correction notice the nature of the alleged material errors or the serious adverse effect.

The Court of Appeal added that the warranty correction clause was construed as requiring the serious adverse effect of the Fundamental Defect to have been suffered by the customer before the end of the warranty period for the supplier to have to remedy. The idea of a limited warranty period was to draw a line in the sand and not create an indefinite warranty obligation, so even if it was known that a future serious adverse effect would take place, the warranty remedy obligation only applied if the serious adverse effects kicked in before the warranty period expired.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: ‘This case is interesting for all commercial contracts but especially IT projects (where a number of small errors frequently occurs), particularly for the following two reasons: (1) it shows that breaches which individually are minor can cumulatively mount up to be something entitling the purchaser to more serious remedies; (2) it highlights non-lawyers’ frequent misconception as to what indirect or consequential losses involve, when the reality is that many losses that non-lawyers consider to be ‘indirect’ are really understood at law to be ‘direct’.’

The High Court ruled that the retention of title clause was ineffective. A retention of title clause needs to be interpreted in the context of a commercial bargain as a whole. Here, the clause was part of a contract for the sale of stock designed for resale rather than the sale of goods designed for use by a business. The clause was ineffective because it was inconsistent with the parties’ intention for stock to be sold on to customers. The Court added that the termination clause did not help the clause to be enforceable. The Court was particularly influenced by the way the contract had been performed as Sandhu had at no stage sought delivery up of the stock but sought instead to recover monies for the value of the stock sold from the administrators. A retention of title clause is not a right to priority over sales actually made (which would act as a charge) but a right to recover possession of goods.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: ‘Our insolvency lawyers often see cases where clients wish to rely on retention of title clauses when their customers have suffered an insolvency type event. Often, those clauses do not give adequate protection. However, we also see clauses which have been inadequately drafted and try to go further than is allowed and this can render the entire clause ineffective.

‘Given the current fragile state of the economy, retention of title clauses are being closely examined at the moment due to the risks of customers defaulting on payment. They should be closely reviewed and updated by suppliers as necessary in light of the ever-changing case law in this area. It should also be realised that those clauses have limitations to their use and should be seen as one tool in a supplier’s armoury that may include short (or no) credit periods, parent guarantees and risk insurance.’

In 2007, the engineering company applied to register a trade mark for OMEGA in the UK in classes 9 and 14 on the trade marks register. Class 14 of the register covered several things including watches. It was the application in that class that the watch company officially opposed with the trade marks registry. Whilst the parties were battling it out on that front, the manufacturing company applied to the High Court for summary judgment against the watch company’s breach of contract for opposing the trade mark application.

The High Court agreed with the manufacturing company. The court said that the words in the original agreement were sufficiently clear and it did not matter which classes on the register the use or application were in – classes on the register were purely for the registry’s administration purposes. It was the specification for which the goods to be used that mattered. The High Court added that someone who had consented to another’s use of the trade mark in a particular way could not later oppose that use or registration, unless they agreed something different.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: ‘This case shows that courts will enforce trade mark co-existence agreements between businesses that have overlapping brands. Parties should also ensure that the agreements are not specific to any particular class of goods or services but are described in terms of the goods or services themselves. They should also seek to ensure the agreements are future proofed, where possible, because co-existence agreements entered into a long time ago can have an impact many years down the line, as the watch company found out to its cost here.’

R tendered alone for a possible contract, and C clubbed together with another supplier. C went into liquidation and its rights were taken by J. R won the tender. J claimed that R had breached the prohibitions in its agreement with C and that if it had been unable to do what it did, then it would have had to bid with C (now J) and they could have won the bid together. R claimed that the prohibition was an unenforceable restraint of trade and breached Article 101 of the Treaty on the Functioning of the European Union (formerly Article 81 of the EC Treaty).

The High Court ruled that the restriction was unenforceable under EU competition law and granted R summary judgment on the issue. The wide scope of the restrictions and the people affected as well as what was covered by C’s ‘confidential information’ meant that if R had information relating to C or its business practices, finances, dealings and clients received from C, it would breach the contract if any group company made contact with C’s existing or prospective clients. It was very wide in time and unlimited in geography. It went further than could reasonably be required to protect C’s confidential information. This breached Article 101, as it amounted to an agreement that had the object or effect of distorting competition and which could affect trade between Member States of the EU. Since the parties were not operating at a different level of supply – as C was not purchasing or supplying to R but merely assisting clients with obtaining supplies – a possible block exemption for vertical agreements under Article 101(3) did not apply to exempt the arrangement.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: ‘This case should act as a warning to commercial entities that want to agree non-compete provisions. If they are too wide in scope, they could infringe EU competition law. That in turn could entail large fines, unenforceable agreements and third parties suing for damages.’

The High Court agreed that the contract was in restraint of trade and it was therefore void. It had been entered into when the footballer was just 17 years old. He had no commercial experience and was unsophisticated in financial and contractual matters. The terms of the agreement had been dictated by P and there had been no negotiation as to the terms. The contract was for a long period of time and did not provide for different commission rates according to revenue levels. Rooney and S had not taken independent legal advice as to the terms of the agreement. In those circumstances, the contract was unreasonable and unenforceable. However, P was entitled to receive payment on a restitutionary basis for services provided for which it had not yet received commission.