Source: https://www.cebta.org.uk/3-the-skeleton-argument/
Timestamp: 2019-04-22 12:45:16+00:00

Document:
As always, the information provided is the result of the experiences of defendants who have been in dispute. It is NOT intended to replace professional legal advice and you should always see a solicitor about any claim against you. Remember to take the skeleton argument with you to Court.
The documents in this section are to help you put together an evidence bundle for a court hearing.
The Skeleton Argument is the document where you state each legal argument you are going to use. You can refer to documents in your evidence bundle. This is a draft document which covers lots of different legal arguments so you will need to to look at your own case and amend it to fit into your circumstances.
2) The case between the Parties relates to an alleged breach of an Estate agency agreement. Copy of said agency agreement is available in the document bundle.
3) The Agency Agreement effectively requires the Claimant to advertise on the Internet ONLY whilst putting very onerous conditions on the Defendant.
4) This argument is tendered in response to the Particulars of Claim submitted by the claimant. It is intended to be read in conjunction with the defence documentation.
5) The Defendant is the owner of a small business which employs ?? people from premises in <<<<<where?>>>>. The Claimants are a large international corporation with offices in many countries, dealing on Standard Terms. The parties are not of equal bargaining power.
6) The Claimant currently employs, amongst others, several Fee Earners as Field Agents who visit businesses in order to 'provide a Free Appraisal ' for them and get the business owners signed up to a highly onerous contract.
7) It is alleged that these Fee Earners are paid on a commission basis.
8) It is clearly in the interest of the agent to sign up the client and make any verbal reassurances he thinks will entice the client to sign the contract. Once the client has signed the contract, the Claimant’s internal policy means that the original Fee Earner is no longer available to the client and the client can never speak to him again. This means that the Fee Earner will never come to personal scrutiny.
9) The Defendant has provided witness statements and other information showing that the Claimant’s regularly over-value businesses in order to induce the clients into signing these perpetual, fee earning contracts when they know that there is no hope of securing a sale at that valuation.
10) The Claimant advertises the business on only one website other than their own website which costs just pennies per month.
11) The unsuspecting business owner then either tires of waiting for a buyer and sells through a different agent at a much lower price, closes the business, or decides not to sell after all.
12) At this point the Claimant then claims their commission.
13) If the business owner decides to withdraw from the contract then the claimant may claim the commission or charge a withdrawal fee.
14) The claimant can also withdraw from the contract at any time and claim a withdrawal fee.
15) Once signed, there is no way out of the contract without paying a fee, regardless of how the Claimant performs.
16) In short, the claimant does not have to find a buyer for the business or make much/any effort to do so, in order to get paid.
18) The breach complained of is a failure to pay a sum of money, and the result is that the Defendant has to pay a sum several times greater. The only conclusion that can be drawn from this is that the amount claimed by RTA is a penalty rather than liquidated damages.
20) When the Claimant’s telesales staff originally contacted the Defendant they stated that they could make an appointment for one of their Field Agents to visit the business.
21) The Claimant’s Field Agent who visited the business did not appear to use any formal methods to arrive at a 'selling price' and did not take time to peruse the business accounts. However, he spoke with confidence and described how the Claimant would be able to achieve that price in the current marketplace because they were ‘Europe’s largest Business Transfer Agent with a high success in selling businesses for over 40 years”.
22) The confidence that the Field Sales Agent exuded, together with the representations made about the meaning of the Clauses, were the main contributing factors in the Defendant’s decision to sell his business through the Claimant.
23)The Defendant's Evidence Bundle shows a business valuation from the Defendant’s accountant/other Business Transfer Agents. The disparity is clear.
24) The Claimant’s Field Agent, in following the written instructions of his employer, either knowingly gave false statement s of fact in order to entice the Defendant into signing the contract, or he made statements of fact with reckless disregard as to the actual truth of the statements.
25) There is a high probability that the Field Agent felt comfortable saying whatever he liked, knowing that there are two clauses that state that the signatory may not rely on the spoken words of the Field Agent.
26) Such Clauses are often referred to as exclusion clauses, or non-reliance clauses. The Defendant alleges that they breach The Unfair Contract Terms Act 1977 (UCTA) which applies to all business-to-business contracts.
27) The Claimant alleges that the contract is 'business to business' but there are no words that warn of the potential that the signatories may lose their consumer rights, other than 'there is no cooling-off period'. It cannot be the case that ALL individuals who sign are non-consumers, so the wording of the contract needs changing.
28) The contract, once signed by the Defendant, permits the Claimant to apply various charges and fees, no matter whether or not the Claimant performs. A fee is charged to ‘register’ with the Claimant, if either party withdraws from the contract, if the Defendant’s business should close or fail, if he/she no longer wishes to sell the business, if he/she sells the business himself or through a different agent.
29) The Claimant does not allow a reduction in fees if the business should sell for less than the original valuation price. So, once the Defendant signed the contract, there was no way to re-negotiate the commission and fees.
30) The Defendant, if successful in showing that the Claimant’s made fraudulent misrepresentations, would like to claim rescission of contract due to the fact that it has not been performed – partially or otherwise - and damages as detailed in the Counterclaim attached.
The above Skeleton Argument represents a true statement of the facts to the Defendant's best knowledge and belief.
a) Recovery of the ‘upfront’ registration fee - £…….
b) Other damages to cover <<< detail here>>> - £….
A contractual term which provided for payment of a sales commission of £130,000 in the event of non-payment of a registration fee of £3,500 when the contract was terminated within days of inception was a penalty. The claimants reduced the claim to £5,000 in order to use the Small Claims track but it was found that limiting the sales commission claimed did not affect the analysis of whether it was a penalty or not.
Farren (D) was hired by Kemble (P) to perform as a comedian at the Theater Royal. The contract contained a liquidated damages clause providing that if either party breached the agreement they would pay 1000 pounds to the other party.
Kemble brought suit alleging that Farren breached the contract in the second season. The jury awarded Kemble 750 pounds and Kemble appealed in an attempt to recover the full 1000 pounds according to the contract.
The issue dealt with in this appeal was whether liquidated damages clauses that serve as a penalty valid?
The holding was, no. A liquidated damages clause is not valid if it is a penalty clause.
The stipulation that the clause is not a penalty clause cannot be sustained by the facts. Under the contract and from the very instance of its creation, if Kemble had neglected to make a single daily payment, or if Farren had refused to conform to any usual regulation of the theater, however minute or unimportant, the contract called for the imposition of a 1,000 pound payment. That is a penalty and despite what the parties have agreed to it cannot be enforced.
Heath, J., said: "Where articles contain covenants for the performance of several things, and then one large sum is stated at the end to be paid upon breach of performance, that must be considered as a penalty."
"some sounding in uncertain damages, others relating to certain pecuniary payments; and the agreement contained a clause, that if either of the parties should neglect or refuse to fulfil the said engagement, or any part thereof, or any stipulation therein contained, such party should pay to the other the sum of £1,000, to which sum it was thereby agreed that the damages sustained by any such omission, neglect, or refusal should amount; and which sum was thereby declared by the amid parties to be liquidated and ascertained damages, and not a penalty or penal sum, or in the nature thereof."
Notwithstanding the strong expressions used by the parties, the sum was held to be a penalty, and not liquidated damages.
This decision has been followed in England, in Edwards v. Williams, 5 Taunt 247; Crisdee v. Bolton, 3 C. & P. 240, 243; Boys v. Ancell, 5 Bing. N. C. 390, 7 Scott, 364; Street v. Rigby, 6 Ves. 815; Beck-ham v. Drake, 8 M. & W. 846,853; Horner v. Flintoff, 9 id. 678; Galsworthy v. Strutt, 1 Exch. 659; Atkyns v Kinnier, 4 Exch. 776.
If it is the court’s opinion that the valuation was a mere opinion then please be advised of the above case. The Claimant professed to provide a service and, in stating their 40 years experience in the industry, implied that they were experts in this field. An apparent expert giving their opinion can be making an implied statement of fact to the effect that “I have reasonable grounds for the opinion I am giving”.
In the case of Esso v Mardon, Mr Mardon was buying a petrol station, franchised by Esso Petroleum Co Ltd. Esso told him they had estimated that the throughput of a petrol station in Eastbank Street, Southport, would be 200,000 gallons a year. Mr Mardon bought the petrol station and business did not go well. From 1964, Mr Mardon negotiated a lower rent with Esso. He still put money in but lost a lot. Esso then brought an action for possession against Mr Mardon. He counterclaimed for damages of Esso’s breach of warranty or negligence under Hedley Byrne.
“Our forecast of throughput is 200,000 gallons. You can rely upon it as being a sound forecast of what the service station should do. The rent is calculated on that footing.
Lord Denning MR distinguished Bisset v Wilkinson because each party was ‘equally able to form an opinion.’ The damages awarded were for the loss suffered, not the loss of a bargain. He went on and said, if there had been no warranty (which there was) there would still be negligent misrepresentation liability in tort. It was argued that when a contract resulted, there was no tort liability, relying on Clark v Kirby-Smith, when Plowman J said a negligent solicitor was not liable in tort, only contract, based on Sir Wilfrid Greene MR in Groom v Crocker. But these were old and the tort duty ‘is comparable to the duty of reasonable care which is owed by a master to his servant, or vice versa’.
Ormerod and Shaw LJJ concurred.
If the claimant attempts to rely on their ‘non reliance’ clause (Clause ?? in the copy of the Agreement (document 2)), Mr Defendant would like the Judge to consider the above case.
The claimant was a franchisor who had developed a franchise model for the provision of inspection services in relation to gas and electrical appliances. The defendant had taken on the franchise in 2006 but it had failed to live up to expectations of profitability. Disputes arose between the claimant and the defendant in relation to a number of matters, including outstanding franchise fees owed by the defendant. The claimant terminated the franchise agreement, and the defendant subsequently set up a rival business within the franchise territory.
The claimant sued for damages flowing from the defendant’s alleged breaches of the franchise agreement, including alleged breach of post-termination restrictive covenants. One such covenant was a non-compete clause which prohibited the franchisee from being “engaged or interested or concerned in the supply of products and services similar to the services" provided by the franchise, within the franchise territory for a period of one year following termination of the agreement. The defendant counter-claimed for misrepresentation, alleging that, among other things, the claimant had misrepresented the average profit margin of franchisees and the failure rate of franchises.
The court found that the defendant should pay damages for the breaches which resulted in termination of the agreement. The court used the actual and projected figures of the defendant’s franchise, as supplied by the defendant, to calculate the level of the franchise fees that the claimant would have earned had the agreement continued, rejecting the claimant’s calculation based on average figures for other franchisees. On this basis, the claimant was awarded damages of £20,430.71.
The court also found that the defendant had breached the non-compete covenant, but it valued the claimant’s loss as significantly lower than the damages claimed and awarded only nominal damages of £2. This was because the court found no evidence that the breach had caused the franchisor actual damage. The court was clear: if a franchisor cannot, or will not, replace an outgoing franchisee in the territory for reasons other than the franchisee’s breach of the agreement, the franchisor’s loss will be minimal. Mere breach of a restrictive covenant following termination will not automatically give rise to damages.
Moreover, the court upheld the defendant’s counterclaim and found that the claimant had made a number of fraudulent misrepresentations which the defendant had relied upon in entering into the franchise agreement. Damages of £228,940 were awarded to the defendant (based largely on the income he lost by taking the franchise). Damages received by the defendant therefore exceeded those awarded to the claimant by £149,081.99.
A key element in the court’s findings was its view of the effect of a non-reliance clause in the franchise agreement on the defendant’s claim that he relied on the misrepresentations when entering into the agreement. The clause stated that the defendant acknowledged that he had not relied upon any oral or written representation made to him by the franchisor or his employees and that he had made his own independent investigations into all matters relevant to the franchise business.
“…the franchisee hereby acknowledges… that in giving advice to and assisting the franchisee in establishing the business the franchisor bases its advice and recommendations on experience actually obtained in practice and is not making or giving any representations guarantees or warranties with regard to such matters or generally in connection with the sales volume profitability or any other aspect of the business”.
The court considered two approaches to assessing the enforceability of non-reliance clauses. The first approach concerns the fact that the clause seeks to limit or exclude the franchisor’s liability for misrepresentation, and is therefore effective only to the extent that it is reasonable, in accordance with Section 11 of the Unfair Contract Terms Act 1977. The burden is on the party seeking to rely on the non-reliance clause to show that it is reasonable. On this approach, the court held that the non-reliance clause did not meet the requirement of reasonableness.
The franchisor believed it to be true and was induced by this belief to act upon it.
The court found that although the clause was clear and unambiguous, the fact that the defendant had signed the franchise agreement which contained the non-reliance clause was not sufficient evidence that he meant it to be acted on by the claimant. Nor was the court satisfied that the claimant believed the statement of non-reliance to be true. Instead, the court found that the claimant knew that the defendant had relied on the misrepresentations that it had made to him at various pre-contractual meetings.
The court found that it did not need to decide which of the two approaches above was correct, because they both led to the same conclusion: that the non-reliance clause did not provide any defence to the franchisor in relation to the fraudulent misrepresentations that the court found it had made to the franchisee.

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