The FSA states in the guidance that it is concerned at the number of unfair clauses it comes across in consumer contracts, such as rights to unilaterally alter or terminate a contract, rights to transfer obligations under a contract and contractual terms that are not in plain English. Whilst the FSA’s guidance is intended only for firms regulated by the FSA, it is a useful reminder to everyone involved in commerce as to what unfair terms are and how businesses can avoid imposing an unfair term on a consumer. The FSA can take action against businesses registered with it for unfair contractual terms, for example by obtaining a court injunction to prevent an unfair term being used any further by the business. The Office of Fair Trading (OFT) can also take action in the wider market place against offending practices.

The FSA sets out that, if a business can specify a valid reason within the contract itself as to why terms might be unilaterally altered, the right to unilaterally alter the contract is less likely to be considered unfair. A right of alteration is unlikely to be valid if it is, for example, in the business’s absolute discretion or to cover “unexpected” costs. In addition, stating that the contract can be altered “for any valid reason” will not be enough. If a business does alter a term that has a significant impact on the consumer’s obligations under a contract, such as varying charges payable by the consumer, the consumer should be informed of the change as soon as possible and given the chance to terminate the contract with immediate effect, without charge or other “practical” barriers put in place by the business to prevent the contract coming to an end.

Similarly, in relation to the transfer of obligations to third parties, the business should make sure that the guarantees provided to the consumer by the third party are the same as or better than those offered by the business itself – they key is stability and certainty for the consumer. The guidance states that consumers should be adequately informed of any transfer in good time for the consumer to fully understand the impact on the contractual relationship.

Simon Weinberg, a solicitor in the Commercial/IP/IT team at Matthew Arnold & Baldwin and assistant editor of Upload-Commercial/IP/IT, commented, “This guidance, whilst useful, does not necessarily tell us anything new. It is an important reminder for businesses of the requirement to have contractual terms that do not unfairly prejudice the consumer. It is not just the risk of an injunction to prevent the future use of those terms that should be taken into consideration – in addition, businesses should remember the bad press that can come with an injunction and the knock-on effect on consumer goodwill to an offending business. At a time when margins are tight and goodwill is essential to survival in the marketplace, getting contractual terms in order is an easy way to avoid the risk of an FSA or an OFT investigation, and all the reputation damage that can come with it.”

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.

India and China both have an established and successful generics based pharmaceutical industry and as tens of billions of pounds of  patent protected drugs come off patent soon (known as the “patent cliff”), they look set to benefit by releasing cheaper generic  alternatives – making themselves a small fortune in the process. Both the Wall Street Journal and BBC News have reported on the most recent victim of the patent cliff in which India-based firm Ranbaxy Laboratories Limited confirmed the release of an FDA-approved generic version of the 10 billion dollar a year drug “Lipitor” owned by the global pharmaceutical company, Pfizer. The new generic drug will be called “Atorvastatin” and with Lipitor’s patent having now expired, there is nothing Pfizer can do about it – except try to develop itself or buy in the next big thing from another research and developer.

With such a Robin Hood approach to pharmaceuticals there are mixed opinions about the impact the patent cliff is having on the pharmaceutical industry as a whole. The large pharmaceutical companies claim that the patent cliff is affecting their ability to raise funds for research and development which in turn is inhibiting advances in new and improved pharmaceuticals, to the detriment of patients. The smaller generic based companies and some consumer groups however are hailing the patent cliff as an opportunity to offer a wider-ranging and affordable selection of medicines to both the public and private sectors.

Laura Mole, from Matthew Arnold and Baldwin LLP’s Pharmaceutical and Life Sciences Sector Group Team, says, “Whilst I appreciate continued research and development in the pharmaceutical industry as a whole is vital for the production of new, more advanced drugs to combat human illness, I cannot help but see good quality, affordable alternative medicines as a good thing for the consumer and the NHS in these difficult financial times. More drugs will cost less so more patients will benefit. The important thing in the long-term, though, is that there is sufficient funding in the industry to incentivise continued research and development so that patients continue to benefit with further medical advances. More of the early-stage development is being done by start-up companies, with big pharma companies stepping in if the prospects look good.”

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.”

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

The 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.

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.”

The first dispute concerned a joint venture between the claimant and defendant to redevelop a property for commercial gain. The claimant, Mr Edmonds, had purchased the freehold of the property, pursuant to a joint venture between the two parties. The joint venture, though, was never formalised in writing. The defendant property developer’s contribution to the purchase price of the property was obtained through a bank loan (and secured by a legal charge on the property.)

The redevelopment, however, did not take place and the property was subsequently sold. However, the two parties could not agree on how the proceeds of the sale should be divided between them. Mr Edmonds alleged that it had been agreed that he would be repaid his cash contribution of £300,000 before the defendant was repaid for the bank loan. The Court rejected this allegation, although it did accept that the defendant had agreed to bear half of the cost of maintaining the property; the Court therefore deducted that sum of money (more than £50,000) from the £300,000 that Mr Edmonds owed.

The second dispute concerned the cost of the defendant renovating Mr Edmonds family home. Again, the contract was never formalised in writing. When the renovation was completed, the two parties could not agree on how much money was payable. The Court, after carrying out a quantum meruit valuation of the works, rejected Mr Edmond’s suggestion that the defendant had agreed to manage the renovation for free and without a mark-up on “all other costs, labour and materials, etc.” Instead, the Court allowed a 15 per cent mark up, plus a percentage for the defendant’s services, although deductions were made after the Court acknowledged that the defendant had not properly advised on planning, building regulations and VAT. The court awarded the defendants £683,512 (less sums already paid.)

Although this case was decided on its facts, it highlights the dangers of proceeding with joint venture projects without a formal agreement between the parties involved.

Apart from the media and general interest created by the celebrity involved, there are lessons to be learned from this case. Many developers and landowners enter into joint venture agreements, particularly when bank finance can be hard to find. These come about in a variety of ways: setting up a formal joint venture company or limited liability partnership with responsibilities and profit shares set out in shareholders’ or members’ agreements, via collaboration or joint venture agreements, or by less formal methods such as a handshake in the local pub. Joint ventures start off with high hopes, but it should always be appreciated that things can go wrong, parties fall out, or the market can fall. Proper legal advice should be taken at the outset, the correct legal structure agreed and all likely scenarios taken into account.

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.

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?

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.”

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 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 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.

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.

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.

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 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.

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

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

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 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.

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.

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.

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.

This case is an interesting example of the type of claims a borrower with PPI can attempt to raise and the court’s approach to these claims. Borrowers are notorious for making numerous claims in relation to PPI, some of which may have substance, but the majority of which are, as the court here pointed out, “unnecessary embellishments”.  

This was an application by the claimants Mr and Mrs Barnes to re-amend their Particulars of Claim.  The claim related to PPI policies sold in relation to three different loans made by the defendant Black Horse Limited (“Black Horse”) to Mr and Mrs Barnes.  The first loan was made on 31 July 2002 for £2,000 with the PPI premium of £563.  This first loan was rolled up and discharged by the second loan made on 27 October 2003 for a further £4,500 and PPI of £2,021.48.  This in turn was then rolled up and discharged by a further written agreement dated 8 June 2004 for a further PPI policy of £2,694.48. Monies were still owing in respect of the third loan. 

Mr and Mrs Barnes wished to amend their Particulars of Claim to claim:

• Breach of Fiduciary Duty;
• Duty of Care;
• Breach of Contract;
• Unenforceability; and
• Unfair Relationship. 

Breach of Fiduciary Duty

As the court noted, it is exceptional for a creditor to have any fiduciary duty to the borrower at all.  The mere giving of advice does not itself import a fiduciary relationship and only exceptionally will the line be crossed from that of mere honesty care and skill and the like to a fiduciary obligation such that the adviser is held to be acting in the other party’s interests in terms of advice, information and so on. 

In order to establish a fiduciary duty, Mr and Mrs Barnes relied on the voluntary private customer code produced by the General Insurance Standards Council (the GISC) as evidence of the fiduciary relationship.  The GISC was abolished in 2004 and was replaced by ICOB, a FSA regulated scheme. 

Judge Waksman explained that the notion that you could infer a fiduciary relationship between the lender and the customer taking out a loan with PPI simply because the lender (or the insurers for whom it acted as agent in offering the policy) was a member of the GISC was absurd.

Mr and Mrs Barnes also relied on the OFT non-status lending guidelines for lenders and brokers.  These were guidelines which were specifically said to be operable where there is secured lending to non-status customers.  Mr and Mrs Barnes were not non-status nor was it secured lending.  Although the guidelines contained guidance in relation to all aspects of their business activity, none of this was sufficient to support a fiduciary obligation. 

Mr and Mrs Barnes also placed considerable reliance on the judicial review proceedings British Bankers Association v FSA, but again that did not assist a breach of fiduciary relationship.  The Judge found as a matter of law that there was no fiduciary relationship and explained that, in any event, he would have found it surprising for there to be a fiduciary relationship as it would have meant that every time a lender sold a single product PPI policy to accompany a loan agreement then without more (assuming the insurer was a member of GISC) fiduciary obligations would arise. 

Duty of care

The whole thrust of the Barnes case was that on the first occasion Black Horse sold the PPI insurance they said that in effect that the purchase of the PPI was mandatory and that this was then implicit on the second and third occasions. However, the court found there was no factual basis for pleading a duty of care.  It was not suggested that Black Horse had assumed a responsibility here to give particular advice on the facts of the case nor was it suggested that Black Horse was either asked to or was expected to or purported to give advice of any kind and therefore there was no arguable case presently pleaded in negligence.

Breach of contract

Mr and Mrs Barnes also claimed that the code produced by the GISC was incorporated into the loan agreement.  They alleged that by reason S75 of the Consumer Credit Act 1974 (“the Act”),  the creditor would be jointly and severally liable for any breach of contract.  However, there was no incorporation of the code and therefore any claim for breach of contract based upon it fell away.

Unenforceability

Mr and Mrs Barnes alleged that when the first PPI was taken out they were told that it was “needed”. If that statement was made, it is arguable that taking the PPI policy was a condition of taking the principal loan and if so, the premiums should have comprised part of the total charge for credit.  As this was not done in the first agreement then it would be improperly executed.

As there were issues of fact and inferences this would be matters for a trial to consider. Full particulars of the factual allegation in relation to what exactly was said on the occasion of the first agreement and what was said and/or understood in relation to the second and third agreements about the necessity or otherwise of the PPI policy must be given and also as to how precisely the claim that there has been a failure to state the credit should be provided. Accordingly this claim could be made.

Unfair relationship

Under Section 140A of the Act the court can make an order in relation to the credit agreement if there is an unfair relationship between the creditor and borrower. Black Horse contended that the court had no jurisdiction to entertain a claim for unfair relationship because the relevant statutory provisions exclude the ability to make such a claim where one or both of the borrowers had the opportunity to make that claim in the context of prior proceedings.  The court found that Mr Barnes was not able to mount his own unfair relationship claim because this could have been raised by him in previous proceedings between Black Horse and Mr Barnes, but Mrs Barnes could raise this argument since she was not a party to those prior proceedings.

Black Horse also attempted to argue that the court was excluded from considering the two earlier agreements as they ceased to operate before 6 April 2007 when the relevant statutory provisions came into force.  The Judge disagreed with Black Horse and said that the court was entitled to take into account two earlier completed, but related agreements and therefore the Particulars of Claim could be amended to refer to the first and second agreements.

The court also looked at the factual matters raised to support the claim of unfair relationship. Their complaint was that:

a.  They were sold benefits when they already had such benefit;

b.  The policies were very expensive;

c.  Black Horse did not advise them to shop around for PPI policies;

d.  They were told the policies were compulsory when they were not;

e.  Black Horse did not establish that the policies were in their interests; and

f.  Black Horse failed to follow the terms of certain documents.

The court pointed out that the unfair relationship jurisdiction is very wide and although there may be matters which were not sufficient to found a fiduciary relationship, they may be sufficient for an unfair relationship.  Accordingly the court was not prepared to rule out the claim in respect of point a. above.  The Barnes claimed that the policies were very expensive.  However, they never produced an appendix which they had indicated they would do and so no permission was granted at this stage to include this factual matter although permission may be granted in the future.

The Judge was prepared to allow the amendment in relation to the claim under point d.. As to points c. and f. the Judge stated that that these were not particularly strong allegations, but he allowed these claim to be made because the unfair relationship jurisdiction is quite wide. He also allowed the claim to be made in relation to the documents.

 Conclusion

Despite Mr and Mrs Barnes’ attempts to raise numerous claims, the court concluded that the only viable claim was for an unfair relationship alongside the narrow unenforceability claim.  All the rest were “unnecessary embellishments”.  Even in respect of the claims that has been allowed to go forward, the court pointed out that this should not give the Barnes any particular encouragement in terms of their prospects of success.

Comment

This is a useful decision as it demonstrates that the “kitchen sink” approach of alleging numerous claims in an attempt to attack PPI cannot be sustained.  Where, however, an allegation is made that the borrowers were told that PPI was compulsory, the court will need to look at all the evidence and the circumstances of the case in order to evaluate this allegation.  It is clear that the scope of unfair relationship claims under section 140A of the Act can be wide although as the Judge hinted in this decision, this will not necessarily mean that the borrowers will ultimately succeed.

Shelley Barnes and Darren Barnes v Black Horse Limited [2011] EWHC 1416

I have reproduced the article in full below, with permission from The Financial Times.

Hard to set up exclusion zone

Q. My brother and I run an independent letting agency based in South London. We are looking to recruit, so are preparing an employment contract. We intend to include a clause to restrict employees from soliciting clients and other employees, but wondered if it would also be possible to add a clause to restrict them from setting up a business within a five-mile radius of ours?

A. Employers often wish to protect their business interests from unfair competition by employees and former employees who are employed in senior positions – and who are privy to sensitive confidential information or have developed strong client connections.

When drafting such covenants, the employer will have to demonstrate that it has not fallen foul of the restraint of trade doctrine.

Any contractual term that purports to restrict an individual’s freedom to work for others or carry out his business is void and unenforceable unless the employer can demonstrate that it has a legitimate proprietary interest that requires protection. Furthermore, any protection should be no more than is reasonable having regard to the circumstances.

The employer should almost certainly include a term within the contract of employment restricting employees from soliciting clients with whom they have had contact during the period of their employment for a period following the termination of that employment. The period of restriction should be no more than is reasonable in the circumstances and will in practice be between six to 12 months.

A clause that prevents a former employee from setting up a competing business within a radius of five miles will be difficult to enforce in an urban area given the size and nature of the population. A geographical restriction of five miles is only likely to be justifiable if the office is based in a rural location where business opportunities are more limited and the employer can establish a substantial personal connection between the employee and its relevant clients.

Michael Delaney is a partner and head of employment at Mathew Arnold & Baldwin, a law firm.

If you would like further advice on this issue, please contact me at michael.delaney@mablaw.com.

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.

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

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

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

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

Mr Binney asserted that:

• The alleged agreement was a term of the agreement or a condition subsequent.  Mere production of a written agreement does not render inadmissible evidence of other terms not included expressly or by reference in the document.
• The agreement was a collateral warranty so that if a person gives a promise and the other party relies on that promise, it is binding.
• The Bank was estopped from enforcing its strict rights under the guarantee.

The Bank in turn submitted that:

• Where the Court is satisfied that the terms of the parties’ agreement are wholly contained in a written document then oral evidence adding or qualifying to that document is not admissible.
• The Court should be satisfied that the agreement was wholly contained in the written document.  The alleged agreement should not be permitted to override the clear terms of the guarantee.
• Any alleged warranty is unenforceable where it contradicts or is inconsistent with the terms of a written guarantee.
• Estoppel by representation only arises where there is a representation of existing fact.

The Court examined the central issue, which was what was said or represented at the meeting on 17 November 2006 so as to give rise to a binding agreement, collateral warranty or representation as alleged by Mr Binney. The Court decided that there was no agreement, warranty or representation giving rise to any estoppel as Mr Binney alleged.

Accordingly it was unnecessary to consider the legal arguments.  It took into account:

• The burden of proof was on Mr Binney to establish any such agreement. 
• Although the relationship manager, Mr Thomson could not recall what was said in the meeting, the Judge was prepared to accept  that the overwhelming likelihood is that any specific request would have been so unusual that Mr Thomson would have remembered it and it would have necessitated both a review of the Bank’s lending and some authority higher to authorise the review if it had happened.
• Mr Binney was a highly articulate business man.  He had trained as an accountant and qualified as an economist.  A person of Mr Binney’s considerable financial experience would have made sure that he notified the Bank and confirmed what he now says was the position with regard to the guarantee. 
• Mr Binney had a propensity to lie or was willing to deceive or to mislead.  Although a witness may lie or give unsatisfactory evidence in regard to certain matters, this does not mean that their evidence is untruthful with regard to other matters.  However, these were matters that the court was entitled to take into account.
• The events both at the time and subsequent did not support Mr Binney’s assertions.

Accordingly the Bank was able to recover the sum of £100,000 from Mr Binney.

This case serves as a useful reminder of the legal issues involved, but ultimately the case came down to whether the Court believed Mr Binney’s assertions.  Even where a manager cannot recall what happened at a particular meeting, this is not fatal to a claim and the Court can look at a variety of circumstances in determining whether the oral agreement was made. Here, the court considered the burden of proof, whether what was said was unusual, the type of person making the assertion, whether the witness was truthful and the events surrounding the alleged statement.

National Westminster Bank plc v Binney [2011] EWHC 694