Source: http://www.trglaw.com/Archive.html
Timestamp: 2019-06-15 21:12:06
Document Index: 278606150

Matched Legal Cases: ['art 1', 'art 2', 'art 1', 'art 1', 'art 2', 'art 1', 'art 1', 'art 2', 'art 1']

Archive of case reports, events and news
June 2019 ‘Relational’ contracts and duties of good faith
English law has traditionally resisted implying an obligation on the parties to act in 'good faith' into commercial contracts. However, over the last few years the English Courts have, in isolated cases, been prepared to imply such a duty into so called 'relational’ contracts. The latest of these cases provides further guidance on the circumstances in which a contract may be classified as a 'relational’ contract ...more
April 2019 Brexit and frustration of a contract
In the context of the ongoing Brexit negotiations, issues were always going to arise as to the effect of Brexit on ongoing commercial contracts. This was the first case of its kind where the EMA tried to claim that its long lease in respect of offices at Canary Wharf had been frustrated by Brexit ...more
April 2019 Implied terms
Another case focussing on the rules governing when terms will be implied into a commercial contract. This case had an interesting twist as the court had to consider the relevance of words that had been deleted in previous drafts of the agreement during the negotiation process ...more
April 2019 Heads of Agreement
Heads of Agreement (under whatever title or guise) are a commonly used mechanism to enable work to commence whilst more formal and comprehensive legal documentation catches up. However, there are dangers to such an approach as CRS and McLaren discovered to their ...more
April 2019 Liquidated damages and termination
Liquidated damages provisions are quite common as a way of compensating a customer for delay and providing some incentive to perform on time. This case featured the interaction between a liquidated damages provision and the termination of the Agreement ...more
January 2019 Agreements to agree
‘Reasonable’ is perhaps the contract drafter’s favourite word. It is often used as a form of compromise. However, as this case demonstrates it does have its limitations ...more
January 2019 Liquidated damages, force majeure and ‘guarantees’
This case involved a number of topical issues including whether a ‘guarantee’ clause was, in reality, an indemnity and therefore subject to different legal principles ...more
January 2019 Entire Agreement clauses - enforceability
Entire Agreement clauses are under attack from two different directions. The Al-Hasawi case focussed on the drafting but even if you get the drafting right there is still a risk that the clause will be held to be unreasonable and therefore unenforceable. This was the focus of this second case ...more
January 2019 Entire Agreement clauses – scope and effect
‘Entire Agreement’ clauses are routinely inserted into contracts with little or no thought. Their aim is to ensure that the written contract is the sole record of the parties’ rights and obligations. In recent years, time and again the courts have, however, found ways of circumventing the drafting where it was considered appropriate and this is yet another example ...more
November 2018 Contract formation and limitations of liability
We previously reported on this case back in December 2016 (see http://www.trglaw.com/news217.html) when the High Court decided that because of the way in which the contract between the parties had been formed no limitation of liability had been effectively incorporated into the contract. The Court of Appeal has now reconsidered the case ...more
November 2018 Vicarious liability for data security breaches
The Court of Appeal has upheld a decision that could make employers vicariously liable for their employees’ actions even if they have taken every conceivable preventative step and bear no criminal responsibility. The court upheld a High Court ruling that supermarket chain Morrisons was liable for the actions of former employee Andrew Skelton. Morrisons said it will appeal to the Supreme Court ...more
November 2018 Penalty clauses
This case demonstrates how careful drafting can avoid the operation of the rule against penalties ...more
November 2018 Force majeure and reasonable endeavours
Force majeure (literally ‘superior force’) is a well-known legal phrase that is often bandied about in connection with commercial contracts but it is not particularly well understood. It is comparatively rare for it to be the subject of a reported case ...more
November 2018 Copyright ownership and software
Sprint Electric v Buyer’s Dream (High Court) [2018]
The first owner of copyright in a new computer program will, typically, be the creator irrespective of whether the creator has been paid by somebody else to develop it. The one exception to this is the relationship of employer and employee where the employer automatically owns copyright in works created by an employee in the course of employment ...more
November 2018 Meaning of ‘shall’
PM Law v Motorplus (Court of Appeal) [2018]
According to a well-known dictionary ‘shall’ means (amongst other things) “expressing an instruction, command, or obligation”. This case revolved around the meaning of the term when used in a contract ...more
November 2018 ‘Concurrent delays’
North Midland v Cyden (Court of Appeal) [2018]
It will often be the case that delays are not caused just by one reason. This case concerned an example of so called ‘concurrent delays’ i.e. delay caused by two or more reasons acting at the same time ...more
November 2018 Software as goods
Computer Associates v The Software Incubator (Court of Appeal) [2018]
The Commercial Agents Regulations 1993 (the Regulations) give certain rights to commercial agents particularly on termination of the appointment. The Regulations only apply to agents who sell goods on behalf of a principal. They do not apply to the sale of services. The Regulations do not, however, provide a definition of ‘goods’. What constitutes ‘goods’ is important for a variety of reasons, not least, whether certain implied conditions under Sale of Goods legislation might apply...more
October 2018 Express good faith clause and competing businesses
Health & Care Management v Physiotherapy Network [2018]
Express ‘good faith’ clauses are becoming much more common in commercial contracts governed by English law. Some like the principle they reflect whilst others feel that they introduce an element of uncertainty. Here is an example of a good faith clause coming to the rescue in circumstances where contract drafting on a particular topic was otherwise deficient...more
October 2018 Excluding liability for loss of profit
Motortrak v FCA Australia [2018]
Commercial contracts routinely exclude liability for ‘loss of profit’. This case demonstrates some potential dangers for a contracting party where a mutual exclusion for loss of profits has been included in a contract. The case is also notable for observations on when delays in terminating will amount to an affirmation of a contract (thus precluding termination on the basis of a repudiatory breach) and also when invoices become (a) due and (b) payable...more
October 2018 Withholding approval
Redbourn v Fairgate [2018]
This case illustrates that express contractual rights of termination will rarely be exhaustive and sheds some light as to the basis upon which a contracting party can legitimately withhold approval in circumstances where the contract counterparty is specifically obliged to obtain approval ...more
October 2018 Oral variations
Rock Advertising v MWB Business Exchanges (SC) [2018]
We reported on the Court of Appeal decision back in our September 2016 Update. The Court of Appeal had overturned the original decision of the County Court. Now the Supreme Court has in turn overruled the Court of Appeal, effectively giving legal effect to contractual clauses which prohibit oral variations to a commercial contract having effect ...more
June 2018 Vicarious liability
Frederick v Positive Solutions (CA) [2018]
This case involved the law concerning when a business will be vicariously (strictly) liable for the acts of an agent. Most cases involving vicarious liability concern employees so in this respect the case was unusual. The decision in this case is particularly interesting given the previous judgement in the Morrison’s data protection case which we featured back in January [link]. Here the Court of Appeal took a more traditional approach to the scope of vicarious liability ...more
June 2018 Interpretation of a long term ‘relational’ contract
Amey v Birmingham City Council
Another case which touches upon whether ‘relational contracts’ (whatever they may be) are truly in a category of their own when it comes to contractual interpretation...more
June 2018 Joint ventures and an implied duty of good faith
Cases where arguments founded on an implied obligation of good faith rarely succeed but this is an example where such an argument was successful on the facts...more
June 2018 Consent not to be unreasonably withheld
Crowther v Arbuthnot
Commercial contracts routinely require a contracting party to obtain the consent of their counterparty to a particular act. Again, typically, such provisions expressly state that consent cannot be unreasonably withheld. This case looked at what this means...more
March 2018 EVENT: HOT TOPICS IN COMMERCIAL CONTRACT LAW
We organised our annual seminar in conjunction with the IACCM (International Association for Contract and Commercial Management) on 15th March 2018. The event covered issues such as liability caps and indemnity provisions, the General Data Protection Regulation (GDPR) and implied contractual duties with an open forum Q&A.
January 2018 Interpretation of liability clause reconsidered
ROYAL DEVON AND EXETER NHS FOUNDATION TRUST v ATOS (CA)
The Court of Appeal reconsidered the interpretation of a clause seeking to limit liability and reversed the original Court’s decision. It found that a contractor's liability clause imposed two separate caps on liability rather than a single limit...more
January 2018 When are remedies for breach of contract exclusive?
HARCAP v F K GENERATORS
Contracting parties are unlikely to intend to cut down the remedies which the law provides for breach of important contractual obligations and so make them exclusive remedies, without using very clear words having that effect. This was the Court’s conclusion in a case where a fee was payable for breach of contract and so this did not mean the injured party had no other remedies...more
January 2018 Opportunity to remedy breach before termination
INTERSERVE v HITACHI
The Court granted a declaration that a contractor ought to have been given the opportunity to remedy its breach of contract before its engagement was ended...more
January 2018 Employer liable for employee’s data breach
This was a group action which concerned the issue of whether an employer was liable, directly or vicariously, for the actions of a rogue employee who had disclosed personal information of co-employees on a website. Could the employer be liable under the Data Protection Act 1998, for an action for misuse of private information and/or for breach of confidence?...more
December 2017 Exercising discretion rationally
BHL v LEUMI
This is a useful example of how contractual parties should exercise discretion in contracts. The Court found that a lender had not behaved rationally when exercising its contractual discretion to charge certain fees so it had to refund the fees charged which were considered to be excessive...more
December 2017 Fitness for purpose
MT HØJGAARD v E.ON CLIMATE (SC)
The Supreme Court upheld a customer’s appeal and found that a contractor was liable to comply with a fitness for purpose type obligation which took priority over a duty to comply with an international standard. This may have significant consequences for the interpretation of complex project contracts, which often incorporate technical schedules and other specification documents...more
December 2017 Contractual right or discretion needed?
This case looked at when a party can exercise an absolute contractual right or whether it has to use its discretion in a fair way in applying a contractual right...more
December 2017 Identifying third parties who can enforce contract terms
The Court set out its approach to identifying third parties who can enforce contract terms where they are not named in the contract. Before the Contracts (Rights of Third Parties) Act 1999, only the parties to a contract could enforce its terms (the so-called ‘privity of contract’ rule). The 1999 Act changed all that although it is relatively rare for cases to look at how the 1999 Act operates...more
November 2017 Unclear liability clause enforceable
ROYAL DEVON AND EXETER NHS FOUNDATION TRUST v ATOS
The Court considered whether an unclear limitation of liability clause was enforceable and also whether a claim for wasted expenditure amounted to a claim for loss of profit or revenue which was excluded under the contract...more
November 2017 Granting or withholding consent
WATSON v WATCHFINDER
This case looked at whether there was an implied duty on directors not to act unreasonably, capriciously or arbitrarily in deciding whether to give their consent to the exercise of a provision in an option agreement or whether the company’s board had an absolute veto over the exercise of the option...more
November 2017 Implied ‘duty to speak’
TED BAKER v AXA INSURANCE (CA)
The Court of Appeal found that an insurer had an implied ‘duty to speak’ to tell its customer that certain material it had requested for the purpose of investigating claims from the customer was outstanding. In the circumstances, the customer was entitled to expect that, if the insurer regarded the material as still to be provided, then, acting honestly and responsibly, it should have said so and not to do so was misleading...more
November 2017 Implied ‘duty to co-operate’
TAKEDA PHARMACEUTICAL COMPANY v FOUGERA
The Court considered whether the seller was subject to an express or implied obligation under the terms of an SPA to provide certain information to the buyer. This case suggested that if a contracting party wants co-operation from another party, it needs to draft an express provision into the agreement...more
September 2017 Implied duties not to prevent performance and to co-operate
WILD DUCK v SMITH
It was confirmed that generally terms will be implied into a contract that neither party will prevent or delay the other from carrying out its obligations under it and that the parties will co-operate to make the contract work, although the extent of that duty should not be exaggerated...more
September 2017 The importance of giving notice of assignment
GENERAL NUTRITION INVESTMENT v HOLLAND AND BARRETT
Some notices of termination served by the party to whom a trade mark licence was assigned were found to be invalid because no notice of the assignment had been given to the licensee before they were issued...more
September 2017 Reasonable endeavours
MINERVA v GREENLAND
This case showed that where the parties have handled negotiations competently and appropriately having regard to the time available, the Court is likely to find that they have met an obligation to use ‘reasonable endeavours’ to achieve a particular outcome...more
September 2017 Passing on responsibility for criminal offences
GEDDES v JOHNSON
This Scottish decision suggests that there are certain limits to a well-established principle of English law which prohibits criminal penalties being passed to another, insurance being taken out against the risk of such penalties or seeking an indemnity against having to pay penalties. It was decided that in some circumstances a third party could find itself liable for another’s criminal penalty...more
July 2017 Exclusion clauses and the contra proferentem rule
PERSIMMON HOMES v OVE ARUP (CA)
Courts have traditionally been hostile to clauses limiting or excluding liability and have used a range of methods to defeat what might at first sight seem to be wide-ranging exclusions. The old principle of contra proferentem (where a clause is interpreted restrictively against the party who introduced the wording in question or who was seeking to place reliance upon it) is one of the favoured tools. However, the Courts appear to be more prepared to give effect to the words used by the parties and to apply the contra proferentem rule less...more
July 2017 Implied variation/term of good faith
IRKERLER OTOMOTIV v PERKINS ENGINES (CA)
A claim that a variation to one part of a contract had amended another part was dismissed by the Court of Appeal which also refused to imply a term of good faith when one party was terminating a contract without cause...more
July 2017 Interpretation of performance mechanism
SUTTON HOUSING PARTNERSHIP v RYDON MAINTENANCE (CA)
Many services contracts include mechanisms to measure performance and worked examples of how such mechanisms are intended to operate are often set out. In this case, the Court of Appeal found that ‘example’ figures given in a contract in relation to a performance mechanism were intended to be binding and of general application rather than being merely illustrative...more
July 2017 Service of contractual notices
HOE v ANDERSEN
The Courts have always traditionally been very strict on insisting that in order to be valid, contractual notices must be served precisely in accordance with the provisions of any notice clause. This Scottish case represents the first time a senior Court has taken a more pragmatic approach and begins to offer some hope for those who do not precisely follow the requirements of a notice clause...more
June 2017 Exclusion of all liability for negligence
One of the first things that lawyers are taught is that under English law it is not possible in a contract to exclude liability for death or personal injury caused by negligence. For that reason the vast majority of exclusion clauses make clear that they do not impact such liability. The question is, what happens when the clause does not make that clear?...more
June 2017 Scope of costs covered by an indemnity
EURO ASIAN OIL v CREDIT SUISSE
The scope of an indemnity is entirely dependent upon its precise wording as this case amply demonstrates...more
June 2017 Interpretation of an indemnity clause
WOOD v CAPITA INSURANCE (SC)
This is another case concerned with the scope of an indemnity. In 2015, the Court of Appeal found that on the proper interpretation of an indemnity in a share purchase agreement, no liability arose because the trigger event had not occurred. The decision was the subject of a further appeal to the Supreme Court...more
June 2017 Deciding new contract terms by arbitration
ASSOCIATED BRITISH PORTS v TATA
It is well known that ‘agreements to agree’ are unenforceable. This case sought to avoid such a vacuum by referring a failure to agree terms to an arbitrator to decide how certain contract provisions were to be varied and apply throughout the remainder of the agreement. The question was whether such a mechanism was effective...more
May 2017 The impact of the General Data Protection Regulation - update
To mark one year until the GDPR is implemented, on 25th May 2017 the ICO published some further updates setting out what guidance organisations can expect to help them prepare for compliance with the GDPR's requirements before May 2018, and in particular to assist them with planning what areas to address over the coming months...more
May 2017 Correction of a mistake
MILTON KEYNES BOROUGH COUNCIL v VIRIDOR
Contracts are often negotiated and rushed through to completion in a great hurry to meet an urgent deadline. There is always a fear, particularly where multiple drafts are involved, that the parties will use the wrong document when the time for signature comes. This case should provide some comfort that if such a mistake is made, the Courts will correct the position in appropriate circumstances...more
May 2017 Meaning of ‘all’ and ‘any’
As contract drafters will be all too well aware, the ‘devil is in the detail’ and none more so than here where the Court had to decide what some ambiguous wording meant...more
May 2017 Subject to contract
GLOBAL ASSET v AABAR (CA)
The heading ‘subject to contract’ is often used on documents to try to show that the parties do not intend to be legally bound because they are still in the process of negotiation and have not yet finalised their agreement, or that the agreement they have reached is not to be binding until it is signed. Here the Court of Appeal had to decide what the impact of subsequent telephone conversations had been which followed a ‘subject to contract’ offer letter...more
May 2017 Implied terms and express provisions
IRISH BANK RESOLUTION CORPORATION v CAMDEN (CA)
The Court of Appeal was asked to consider the basis for implying terms into a contract in circumstances where the term sought potentially conflicted with or restricted an express term of an agreement...more
April 2017 Consent to use data under the GDPR
The Information Commissioner’s Office issued some draft guidance on consent to use data under the General Data Protection Regulation in March 2017. It is designed to help organisations decide when to rely on consent for processing and when to look at alternatives. It explains what counts as valid consent and how to obtain and manage consent in a way that complies with the GDPR...more
April 2017 Financial claims falling within a liability cap
McGEE v GALLIFORD TRY BUILDING
All of a contractor’s financial claims for delay caused by a sub-contractor were found to be capped at 10% of the value of the sub-contract...more
April 2017 ‘All reasonable endeavours’
ASTOR MANAGEMENT v ATALAYA MINING
The effect of an express obligation to use ‘all reasonable endeavours’ was considered and it was concluded that where an express term exists, there was no need or scope to imply a lesser term requiring the party to act in good faith...more
April 2017 An unenforceable ‘agreement to agree’
TEEKAY TANKERS v STX OFFSHORE AND SHIPBUILDING
An agreement by which an option was granted to purchase ships was held to be unenforceable. The agreement provided that the delivery date for the ships was to “be mutually agreed”. This was considered to be an ‘agreement to agree’ and the express wording meant that it was not possible to imply a term to give the agreement sufficient certainty to make it enforceable...more
April 2017 Express obligations of ‘mutual trust and co-operation’
This case featured the NEC form of model construction contract and contained an express obligation that both parties had to act in a spirit of ‘mutual trust and co-operation’. The decision for the Court was what impact this obligation had on other specific contractual provisions...more
April 2017 Extent of meaning of ‘consequential loss’
JAY JALA v DDG CONSTRUCTION (US District Court of Pennsylvania)
The meaning of ‘consequential loss’ has different meanings to different lawyers and it has sometimes been given a much broader interpretation in the US, as this case illustrates. It demonstrates why a supplier would certainly want to contract under US law and a customer would want to contract under English law...more
April 2017 The impact of the General Data Protection Regulation - update
The ICO published an update setting out what guidance organisations can expect to help them prepare for compliance with the GDPR's requirements before May 2018, and in particular to assist them with planning what areas to address over the coming months...more
March 2017 Potential impact of Brexit on commercial contracts - update
It is unclear what will happen when the UK leaves the EU. However, we have put together some thoughts on the impact the Brexit decision might have on commercial contracts which we hope might be useful...more
January 2017 Wide meaning given to exclusion of ‘consequential or special losses’
STAR POLARIS v HHIC-PHIL
The Court gave a much wider meaning to an exclusion of liability for “any consequential or special losses” than is usually the case. It decided that the parties had exhaustively agreed the categories of loss which were to be recoverable and that liability was therefore excluded for all other losses...more
December 2016 Contract/no contract - case with a sting in its tail
ARCADIS CONSULTING v AMEC
This decision was described as a relatively straightforward 'contract/no contract' case with ‘something of a sting in its tail’. The Court found that despite various terms and conditions being exchanged between the parties as part of discussions in relation to work which was then carried out, only a simple contract existed between the parties under which the consultant’s liability was uncapped...more
December 2016 Interpretation of exclusion clause
IMPACT FUNDING v AIG (SC)
The Supreme Court confirmed some established principles in relation to the interpretation of contracts. This case related to a restriction in the scope of a firm of solicitors’ professional indemnity insurance policy and provides some useful reminders of the principles applicable to the interpretation of contracts generally...more
December 2016 Meaning of ‘fitness for purpose’
FLUOR v SHANGHAI ZHENHUA
The Technology and Construction Court held that a supplier was in breach of a warranty to supply goods which were fit for purpose...more
December 2016 Common law right to terminate and failure to pay
GRAND CHINA v SPAR SHIPPING (CA)
Whilst this case featured a shipping contract between a ship owner and some traders for the hire of some ships, some interesting points were made in relation to the rights of termination that apply to commercial contracts generally in the context of repeated late payment...more
September 2016 Case update
The cases featured are useful reminders of the principles established in earlier decisions. They cover subjects such as the importance of serving notices strictly in accordance with the terms of the agreement; the difficulties of claiming that a breach of warranty is also a misrepresentation; whether termination clauses must be invoked in good faith; restrictions on the right of an innocent party to affirm a contract and continue claiming liquidated damages and the effectiveness of an oral variation…more
September 2016 FCA guidance for outsourcing to the ‘cloud’
The Financial Conduct Authority published some guidance in July 2016 to clarify the requirements for regulated businesses when outsourcing to the ‘cloud’ and other third party IT services. The FCA guidance is not legally binding. However, regulated businesses are expected to take note of it and, where appropriate, use it to inform their systems and controls on outsourcing…more
September 2016 New EU framework for electronic signatures
Electronic signatures are a way to sign ‘virtual’ documents, much like a pen is used to sign a hard-copy document. The traditional practice of signing a hard-copy document in ink, scanning it and sending it by email is being overtaken by the use of e-signatures as these become increasingly common in a range of commercial transactions. Some new Regulations which establish a new EU-wide framework for e-signatures came into force on 22nd July 2016. Previously all countries in the EU had their own individual e-signature laws but now standards across the EU will be the same…more
September 2016 EU-US Privacy Shield - update
The so-called EU-US ‘Privacy Shield’ is an alternative means of authorising data transfers to the US and entered into force on 1st August 2016. It allows for transfers from a data controller or data processor in the EU to self-certified US companies following the declaration in October 2015 that the old 'Safe Harbor' framework did not provide adequate protection for transfers of individuals' data to the US…more
July 2016 Effectiveness of requirement for written variations of contract
GLOBE MOTORS v LUCAS VARITY (CA)
Including a clause that any variation of the contract should be in writing may not prevent subsequent variation of the contract orally or by conduct as illustrated in this decision...more
July 2016 Definition of consequential loss included wasted ‘spread costs’
TRANSOCEAN DRILLING UK v PROVIDENCE RESOURCES (CA)
Some mutual indemnities applicable to both parties were upheld, with the result that a contractor succeeded in excluding liability for certain wasted costs under consequential loss as defined in the contract. The Court of Appeal relied on the plain meaning of the wording and did not apply restrictive principles of interpretation, commonly used to cut down the effect of limitation clauses...more
July 2016 Obligation to allow an opportunity to remedy before terminating
VINERGY INTERNATIONAL v RICHMOND MERCANTILE
The High Court considered whether a requirement that a party wishing to terminate for contractual breach must give an opportunity to remedy the breach applied when the party was terminating not based on the contractual provision but under separate ‘common law’ rights for repudiatory breach...more
July 2016 Liability under a warranty and for misrepresentation
WEMYSS v KARIM (CA)
There are different measures for calculating damages depending on, for example, whether the claim is for a breach of warranty in contract or for misrepresentation (a false statement made before a contract on which a party relies when entering into a contract). Where both claims are available, a party is free to choose whichever measure achieves the better result. In this case, the Court of Appeal considered and gave some helpful guidance in relation to these different measures...more
May 2016 Whether industry standard terms were ‘standard terms of business’ under UCTA
AFRICAN EXPORT-IMPORT BANK v SHEBAH EXPLORATION
The Court considered whether some industry standard terms used by a bank were its ‘written standard terms of business’ for the purposes of the Unfair Contract Terms Act 1977...more
May 2016 'Term Sheet' found legally binding
NEW MEDIA HOLDING COMPANY v KUZNETSOV
A Term Sheet, which set out some terms in relation to the control of a company, was found to be legally binding...more
May 2016 Relevance of words deleted from a draft contract
NARANDAS v BRADSTOCK (CA)
The question for the Court of Appeal here was whether wording deleted from a contract during the course of the drafting and negotiation process could be taken into account to interpret the final form of the agreement in order to resolve an ambiguity in the words which remained...more
May 2016 Scope of 'reasaonble endeavours' obligation
BRISTOL ROVERS FOOTBALL CLUB v SAINSBURY’S (CA)
The Court of Appeal considered the scope of an express duty of good faith in the context of the parties’ respective obligations under a contract to sell a football stadium and the extent of a reasonable endeavours obligation to obtain planning permission acceptable to the purchaser...more
March 2016 Standard terms, time limits and UCTA
COMMERCIAL MANAGEMENT v MITCHELL DESIGN
The Court decided that a term proposed in a sub-contractor's standard terms and conditions, which introduced a time limit for claims, had not been included in the final sub-contract. It also concluded that if it had been incorporated, it would not have satisfied the reasonableness test under UCTA and so would have been unenforceable...more
March 2016 Termination of outsourcing contract upheld
BT CORNWALL v CORNWALL COUNCIL
A Council’s action to terminate a long-term outsourcing contract with its supplier after only two years due to to the supplier’s failure to meet key performance indicators was upheld. The supplier’s attempt to get an injunction to prevent termination was unsuccessful…more
March 2016 Beware ‘collateral contract’ varying agreement terms
HUGHES v PENDRAGON (CA)/C&S v ENTERPRISE INSURANCE
The Hughes case involved a collateral contract which sidestepped a provision in the seller's terms and conditions which said that no amendment to the sale contract was effective unless signed by the seller. Although there were no details agreed regarding the exact price, specification or delivery date, a contract was still found to exist…more
March 2016 Liability for data security breaches
SILVERPOP SYSTEMS v LEADING MARKET TECHNOLOGIES
This is a US case in which a provider of digital marketing services was found not to be liable for an alleged breach of a service contract’s confidentiality provision when it suffered a data breach exposing a customer’s e-mail list. This decision has enormous potential ramifications unless it is overturned on further appeal…more
January 2016 General Data Protection Regulation - Apportioning Security Risk
This article (which is featured by the Society of Computers and Law here) discusses the appropriateness of uncapped liabilities and indemnities for data security breaches and how the implementation of the new General Data Protection Regulation might make that debate even more important…more
January 2016 Revised guidance on when terms will be implied into contracts
MARKS AND SPENCER v BNP PARIBAS (SC)
The Supreme Court has ruled that a term can only be implied if it is so obvious as ‘to go without saying’ or if without it the contract would lack ‘commercial or practical coherence’. Also if the agreement is very detailed and has been negotiated by lawyers, the Courts are less likely to imply a term…more
January 2016 Limitation and exclusion clauses in a professional appointment
A limitation and exclusion clause in a professional appointment has been interpreted as protecting the consultant from liability relating to asbestos at a development site, even though the consultant was aware of the presence of asbestos from an early stage. Although this was a construction case, the Technology and Construction Court’s comments on the interpretation of the liability and exclusion clause have wider application to other types of commercial contracts…more
January 2016 Applying ‘business sense’ to interpretation of an indemnity
WOOD v SURETERM & CAPITA (CA)
In this decision the Court of Appeal has confirmed that the wording of an indemnity should be interpreted in accordance with its plain meaning, even if this makes the clause particularly uncommercial for one party…more
January 2016 How liability in both contract and tort is assessed
WELLESLEY PARTNERS v WITHERS (CA)
The Court of Appeal decided that where there is potential liability in both contract and in tort, the narrower contractual principle of ‘remoteness of loss’ will be applied. A firm of solicitors was sued for professional negligence after wrongly drafting a partnership agreement which potentially caused its client significant losses…more
December 2015 Test for 'penalty' clauses reviewed
CAVENDISH SQUARE HOLDING v EL MAKDESSI and PARKINGEYE v BEAVIS (SC)
The Supreme Court has decided that the clauses challenged in the combined appeals of these two cases, which involved very different facts and financial sums, were not penalties and were consequently enforceable. In doing so, it questioned the ‘genuine pre-estimate of loss’ test previously used to determine whether a contractual provision is a penalty…more
December 2015 Interpretation of ‘exclusive remedy’ and exclusion clause
SCOTTISH POWER UK v BP EXPLORATION
This case involved the remedies available to a customer following a failure to supply gas. The Court had to interpret a compensation mechanism which was stated to be an ‘exclusive remedy’ for breach of the supply provision as well as the types of liability excluded in the exclusion clause…more
December 2015 Incorporation of terms from framework agreement
NORTHROP GRUMMAN v BAE SYSTEMS (CA)
In this decision the Court of Appeal found that a buyer was entitled to end a software licence without reason due to a termination clause in a framework agreement whose terms were incorporated into the licence…more
December 2015 Misrepresentation and loss of remedies
SALT v STRATSTONE SPECIALIST (CA)
The Court of Appeal has clarified that a Court can only award compensation for an ‘innocent misrepresentation’ (under the Misrepresentation Act 1967) as an alternative remedy to having the contract set aside where the right to have the contract set aside has not been lost…more
October 2015 Interpretation of clause disastrous for one party
ARNOLD v BRITTON (SC)
This was a dispute over the interpretation of a service charge provision. The main issue was whether the language used in the contract reflected what the parties intended to say. The Courts will not override clear wording when determining the parties’ intentions, even though applying that principle here was disastrous for the tenants…more
October 2015 ‘Double’ or ‘qualified’ contractual obligations – which?
MT HØJGAARD v E.ON CLIMATE AND ROBIN RIGG (CA)
Typically contracts contain a multitude of contractual warranties and obligations. Often these are included by the purchaser/customer on the ‘kitchen sink’ principle but, as this case demonstrated, that may not always have the effect that was intended. A dispute arose over the standards of performance required and the nature of warranties contained within several documents which together formed a construction contract…more
October 2015 Duty to act with ‘honesty and integrity’ implied
D&G CARS v ESSEX POLICE AUTHORITY
There have been a number of decisions in 2015 where the Courts were asked to decide whether a general duty of good faith should be implied into a contract. The Courts have also been asked to consider the impact of various express contractual provisions along similar lines. Here,it was confirmed that a general duty to act with ‘honesty and integrity’ should be implied but other cases which we have also reviewed have resulted in a different outcome: Portsmouth City Council v Ensign Highways, Myers v Kestrel and Greenclose v National Westminster Bank…more
October 2015 Importance of formalities for signing contracts with overseas companies
INTEGRAL PETROLEUM v SCU-FINANZ (CA)
The Court of Appeal ruled that a contract between two Swiss companies and governed by English law was not binding as it was not signed by two authorised representatives on behalf of one of the companies, as required under the laws of Switzerland…more
October 2015 European Court ruling that 'Safe Harbor' is invalid
The European Court declared on 6th October 2015 that the 'Safe Harbor' scheme that governs the transfer of European data to the US is invalid, effective immediately. This decision will affect businesses who transfer EU data to US companies which are certified under the Safe Harbor scheme, including companies that outsource data processing of EU data to the States, who may now need to revisit their data security measures…more
July 2015 Liability provisions found unreasonable under UCTA
SAINT GOBAIN BUILDING DISTRIBUTION (T/A INTERNATIONAL DECORATIVE SURFACES) v HILLMEAD
Certain liability provisions in a supplier’s standard terms and conditions have been found to be unreasonable under UCTA. This was the case even though the buyer had a remedy of a replacement of the defective goods or could claim financial compensation up to the invoice value of the goods…more
July 2015 Neither party won ‘battle of the forms’
This case involved the so-called ‘battle of the forms’ in relation to which terms applied to some contracts. A dispute arose following a long course of dealing: one party said that its terms were applicable because they were printed on the back of its purchase orders; the other party submitted that its terms applied as they were referred to on its acknowledgements of order and that any liability for breach of contract on its part was limited or excluded by those terms and conditions…more
July 2015 Liquidated damages cannot be claimed indefinitely
MSC MEDITERRANEAN SHIPPING v COTTONEX ANSTALT
This decision considered how long a party could claim liquidated damages following a serious breach of contract rather than choosing to end the contract and claim its actual loss as damages…more
July 2015 Sales 'recommendation' affected licence terms
AFD SOFTWARE v DCML
A software licensing dispute highlighted the dangers of representations made by staff during the sales process and their effect on the licence terms which were subsequently accepted by the customer…more
March 2015 Exchange of emails created binding settlement
BIEBER v TEATHERS
An exchange of emails between the parties' lawyers was held to constitute a binding settlement without any further detailed agreement being required…more
March 2015 Liquidated damages clause held to be unenforceable penalty
UNAOIL v LEIGHTON OFFSHORE
The Court held that a liquidated damages clause requiring a contractor to pay its sub-contractor US$40 million in the context of a sub-contract worth US$55 million was an unenforceable penalty…more
March 2015 ‘Friendly discussions’ requirement in dispute clause enforceable
This case involved a dispute resolution clause which required the parties to seek to initially resolve a dispute by ‘friendly discussions’. The Court had to decide how this clause should be interpreted, whether the provision was enforceable and if so, whether the clause been complied with…more
March 2015 Interpretation of time limit for warranty claim
THE HUT GROUP v COOKSON
Here the interpretation of a clause imposing a time limit for serving notice of a breach of a warranty claim was critical to whether the buyer had an actionable claim. The question was whether time starts to run when the party becomes aware of factual grounds that may amount to a claim, or only at the point at which the buyer knows there is a proper basis for bringing a claim…more
January 2015 Loss of profit - direct or indirect loss
POLYPEARL v E.ON ENERGY SOLUTIONS
In this case it was confirmed that loss of profits can be a direct loss. The Court assumed that a direct loss of profits was not intended to fall within an exclusion of ‘indirect and consequential loss’...more
January 2015 Termination for convenience clause limited claim for loss of profit
COMAU UK v LOTUS LIGHTWEIGHT STRUCTURES
The Court considered whether there had been a correct termination when a breach occurred and also whether a party’s claim for loss of profit following a termination for default could be affected by a termination for convenience provision...more
January 2015 Duty of good faith not implied in agency agreement
ACER INVESTMENT MANAGEMENT v MANSION GROUP
This case involved the question of whether a duty of good faith should be implied into a non-exclusive agency agreement. On the face of it an agency type agreement ought to be a prime candidate for a duty of good faith but in this particular case the Court said the answer was ‘no’...more
September 2014 Liability where beneficiary under an indemnity is itself at fault
GREENWICH MILLENNIUM v ESSEX SERVICES GROUP (CA)
A sub-contractor was held liable under an indemnity agreed with its immediate superior contractor in respect of claims by parties higher up the contractual chain even though the immediate superior contractor had failed to detect the defective workmanship which resulted in the claims...more
September 2014 Conditions for claiming under an indemnity
HERITAGE OIL v TULLOW (CA)
This case looked at whether a buyer's strict compliance with a contractual notice provision had to be met in order for the buyer to be able to exercise its right to an indemnity from the seller under the terms of the agreement...more
September 2014 Duty of good faith implied in ‘relational’ contract
BRISTOL GROUNDSCHOOL v INTELLIGENT DATA CAPTURE
The Court ruled on a claim concerning a contractual relationship involving the supply and ongoing updating of online training materials under which one of the parties alleged there had been a breach of an implied duty of good faith...more
September 2014 Implication of terms into a contract
MARKS AND SPENCER v BNP PARIBAS (CA)
The Court of Appeal decided that if a party wishes to claim that there is an implied term in a contract, that party must show that: (a) the term is part of the agreement (even though not expressly written); and (b) it is necessary to achieve the parties’ common objective in entering into the agreement. It is not sufficient simply to show that the term could or should be part of the agreement...more
June 2014 Excluding liability and fiduciary/good faith duties
FUJITSU SERVICES v IBM UNITED KINGDOM
In a dispute over a partnering sub-contract, it was considered whether liability for loss of profit was effectively excluded and whether a fiduciary duty as well as a duty of good faith existed in an IT services sub-contract...more
June 2014 Termination notice deemed invalid
FRIENDS LIFE v SIEMENS HEARING INSTRUMENTS (CA)
A termination notice was deemed invalid because it was not given strictly in accordance with the exact terms specified in the agreement. This decision shows it is necessary to adhere very precisely to all the requirements of a termination clause to avoid or minimise the risk of a termination notice being held ineffective...more
June 2014 Importance of terminating with care
VIVERGO FUELS v REDHALL ENGINEERING SOLUTIONS
This case demonstrated the importance of terminating a contract with care. If a party does not have, or no longer has, the right to terminate or if it does not exercise its rights properly then this can mean that an ‘innocent’ party is itself in breach which then gives the party originally in breach a right to terminate instead. Here, the Technology and Construction Court decided that a customer was in breach when it wrongfully tried to terminate an agreement because the alleged breach of contract no longer existed at the time the termination notice was sent...more
June 2014 Abuse of a dominant position via licence terms
The UK Office of Fair Trading has been investigating alleged anti-competitive behaviour by a software supplier in relation to restrictive contractual provisions imposed within its software licences...more
April 2014 Liability for misrepresentations made to a third party
CRAMASO v OGILVIE-GRANT, EARL OF SEAFIELD & OTHERS (SC)
The highest Court in the United Kingdom, the Supreme Court, considered whether a party could be liable for a negligent misrepresentation made before a contract was entered into where the party to which the representation was originally made was not the ultimate contracting party...more
April 2014 Injunction granted to stop wrongful termination where limitation renders damages an inadequate remedy
AB v CD (CA)
This case looked at the situation where one party sought an urgent interim injunction to stop the other from wrongfully terminating a contract in circumstances where an exclusion clause would seemingly have prevented the recovery of substantial damages arising from the termination. It is established law that such an injunction will not be granted if damages would be an adequate remedy for the wrongful termination. But how does that apply in cases of an alleged breach of contract where there is a provision limiting the recoverable damages to a level below what might be suffered and which, but for the limitation might be claimable?...more
April 2014 Liability arising out of ‘one event’
AIOI NISSAY v HERALDGLEN
This decision looked at the issue of whether the attack on the Twin Towers of the World Trade Center amounted to two ‘events’ or one for the purpose of applying the liability limits in various insurance policies...more
April 2014 Claim for unpaid deposit on termination
FIRODI SHIPPING v GRIFFON SHIPPING (CA)
The question of whether a seller’s claim for non-payment of a ‘deposit’ by a buyer was limited to compensation for its actual losses or whether it was entitled to claim the deposit agreed in full was the focus of this case. It was highlighted that the main purpose of a deposit is to encourage a buyer to perform and it was confirmed that a right to a deposit which had accrued before termination of the agreement was not lost due to the termination...more
January 2014 Contract formed through exchange of emails
This case does not make new law but it is a reminder that contracts can be formed in ways other than the execution of a formal written contract. The Court considered whether a binding contract had been concluded between the parties, based on a review of their negotiations which was largely through an exchange of emails. It found that there was a binding agreement as, even though not all of the terms had been finalised, the parties had agreed on all of the essential terms...more
January 2014 No copyright in functionality of computer program confirmed
SAS INSTITUTE v WORLD PROGRAMMING (CA)
The Court of Appeal has confirmed that copyright in a computer program does not protect its programming language or its functionality from being reproduced. This decision reiterates that it will be difficult to establish copyright infringement in software programs without evidence of copying of the underlying source code. The key issues in question were (1) the extent to which the developer of a computer program may lawfully replicate the functions of an existing computer program; and (2) the materials that he may lawfully use for that purpose...more
January 2014 Early termination payment not a penalty
BERG v BLACKBURN ROVERS FC
The High Court has confirmed that the law on penalties only applies where the trigger for payment is a breach of contract and not where an agreed sum was payable as compensation on the exercise of an early termination right in a fixed term contract...more
January 2014 Duty to act reasonably in mitigating losses not onerous
MANTON HIRE v ASH MANOR CHEESE (CA)
Here, the Court of Appeal considered whether a customer under a hire agreement for a fork lift truck had failed to mitigate its losses, by refusing to accept an unclear proposal made by the supplier to remedy a fundamental problem with the original truck supplied. All contracting parties are under an implied obligation to take reasonable steps to mitigate their loss where they are the victims of a breach of contract. In commercial B2B contracts this will often take the form of accepting a reasonable offer from the party in default offering to take steps to rectify the breach...more
November 2013 Exclusion clause and cap on liability deemed reasonable under UCTA
ELVANITE v AMEC
An exclusion clause and a limit on liability were found to be reasonable under UCTA (the Unfair Contract Terms Act) and a clause allowing a party only one year to make a claim was held to be effective...more
November 2013 Term of implied licence to use software
NOEMALIFE v INFINITT
The Court was asked to consider whether an implied royalty-free licence granted in relation to software which was used for the purposes of a services agreement, automatically continued after the agreement's initial period when it was extended...more
November 2013 Will an overall cap on liability always work?
SABIC UK PETROCHEMICALS v PUNJ (Part 1)
The Technology and Construction Court has made a perhaps unexpected decision in interpreting a broad and relatively standard ‘catch all’ limit of liability clause that sought to protect a supplier. The Court said the aggregate liability clause only applied to claims for breaches of contract or so called tortious liabilities such as negligence. This case could perhaps provide a clue to answer the question of whether contractual indemnities take precedence over general limitation clauses...more
November 2013 Do payments under performance bonds/guarantees count against caps on liability?
SABIC UK PETROCHEMICALS v PUNJ (Part 2)
In addition to the issues set out in Part 1 of the SABIC case, the Court had to consider whether payments made under a performance bond and a guarantee would count against a supplier’s limit on liability...more
November 2013 Agreement to agree can be enforceable
MRI v ERDENET (CA)
In this case an ‘agreement to agree’ in respect of certain charges and a delivery schedule in a contract for the sale of copper concentrates was found to be enforceable even though traditionally such an arrangement would be thought to be unenforceable for lack of certainty...more
November 2013 The dangers of retention of title clauses
CATERPILLAR (WILSON) v HOLT (CA)
The Court of Appeal had to consider a retention of title clause which was used as part of an agreement to supply finished goods for immediate resale. The case showed that the use of such a clause can have a major drawback because it was said that the operation of the clause was inherently inconsistent with the nature of the trading relationship between the parties, a situation which has previously caused the Courts problems...more
September 2013 Was a breach serious enough to justify termination?
TELFORD HOMES v AMUPURIUS NU HOMES (CA)
A delay of several months in delivering a commercial development due to funding difficulties did not amount to a breach serious enough to justify termination of the contract in the context of the project as a whole...more
September 2013 Express duty of good faith does not extend to termination
The Court was asked whether a contractual right to terminate for convenience had to be exercised in good faith and whether there was an implied term to this effect. The answer to both of these was ‘no’. It seems the Courts are likely to interpret express contractual obligations of good faith narrowly and will hesitate before implying such obligations...more
September 2013 Acting diligently and all reasonable endeavours
MORRIS HOMES v KEAYS
Obligations to ‘act diligently’ in carrying out works and to use ‘reasonable endeavours’ to complete are quite common in commercial agreements. In this case the Court considered whether there was an overlap between these two contractual requirements...more
September 2013 Did a 'priority of documents' clause apply?
RWE v BENTLEY
The Court held that it did not need to look at a ‘priority of documents’ clause because it only applied where there was an ambiguity or discrepancy that remained once the Court had interpreted the contract in the usual way...more
May 2013 Reasonably foreseeable loss
JOHN GRIMES v GUBBINS (CA)
The Court of Appeal was asked to review the law governing the damages which can be recovered for breach of contract and when damages will be regarded as being ‘too remote’ to be recoverable. As a general rule, once damages of a particular kind are held to be ‘reasonably foreseeable’ in the sense of being ‘not unlikely to result from a breach’, then they can be claimed irrespective of the extent of the damage suffered...more
May 2013 Is there an implied duty of 'good faith'?
An overriding contractual duty of ‘good faith’ is a concept imposed by law in many continental European jurisdictions but not one which is generally implied under English law (at least not in those terms). In this decision the Court implied two specific obligations into a distribution agreement, portraying them as aspects of good faith...more
May 2013 Express obligation of 'good faith'
MID ESSEX HOSPITAL NHS TRUST v COMPASS GROUP (T/A MEDIREST) (CA)
This decision looked at an express obligation to act in 'good faith' set out in the written contract. The Court of Appeal overturned the High Court’s earlier ruling by giving a much narrower interpretation to the words that the parties had signed up to...more
May 2013 No implied term unless all reasonable people agree
DEAR v JACKSON (CA)
The Court of Appeal overturned the High Court’s decision and looked at the different approaches that have previously been taken in relation to the test for implying terms into a contract. The Court of Appeal seemed to take a more restrictive approach to the implication of terms...more
February 2013 Documents required to be disclosed under audit clause
TRANSPORT FOR GREATER MANCHESTER v THALES
The Court considered the extent to which a supplier must disclose information pursuant to an audit clause under a contract for the supply of goods and services...more
February 2013 Exclusion clause interpreted narrowly
KUDOS v MANCHESTER CENTRAL CONVENTION COMPLEX (CA)
A clause which expressly excluded a customer’s liability for loss of profits did not apply where the customer had prematurely terminated and refused to allow continued performance of the contract. The Court of Appeal applied what it saw as ‘business common sense’ notwithstanding an apparently clear exclusion clause...more
February 2013 Warranties v Representations
In this case, the Court considered whether express warranties in a share purchase agreement could also amount to representations (statements made before a contract on which a party relies when entering into a contract). This issue arose as a much larger sum was available in damages if there had been a misrepresentation as opposed to a simple breach of contract and so the purchaser claimed that the warranty given was also a representation...more
February 2013 Standard of reasonableness required for withholding consent
The Court applied an objective standard of reasonableness in deciding whether consent to the early termination of certain finance transactions had been reasonably withheld by one of the contracting parties...more
February 2013 Term Sheet could not be used to imply terms into signed contract
SNCB v UBS
This decision involved the interpretation of certain finance contracts and, in particular, the relevance of a ‘Term Sheet’ which was previously agreed between the parties to document the agreed outline commercial terms. The case also looked at the basis upon which terms can be implied into a written contract...more
February 2013 Implied terms and exercising discretion to act in ‘good faith’
YILPORT v BUXCLIFF
The Court was asked to look at implied terms and the restrictions on the exercise of contractual discretion specifically in relation to the contract charges. In some ways this is an interesting contrast to the decision in the SNCB v UBS case which dealt with similar issues...more
December 2012 Meaning of an assignment of intellectual property rights
WILKINSON v LONDON STRATEGIC HEALTH AUTHORITY
Contracts for the development or customisation of software, for the production of training materials or the creation of a consultancy report often have to attempt to resolve the typical struggle regarding the ownership of the resulting intellectual property rights between the customer and the supplier or consultant. Problems arise because, as the saying goes, very little, if anything, is completely original and this case addressed what was covered by an assignment of IPRs...more
December 2012 Enforceability of 'take or pay' commitments
E-NIK v DEPARTMENT FOR LOCAL GOVERNMENT
As in this case, commercial contracts often contain a commitment by the customer to purchase on a ‘take or pay’ basis ie to buy a minimum quantity of goods and/or services within a defined period. When those commitments are not complied with, questions then arise as to what the supplier’s entitlement is and the extent to which the supplier is under an obligation to mitigate its loss...more
December 2012 All inclusive 'full and final' settlement
POINT WEST v MIRVAN
A 'full and final' settlement was held to include issues not identified or formulated at the time the parties agreed the settlement so when reaching and documenting a settlement regarding a contractual dispute, it is necessary to be extremely careful to document exactly what is meant to be covered. It needs to be clear whether it is intended to be truly all encompassing or should purely relate to those defects, breaches or liabilities known of at the time the settlement is agreed...more
December 2012 Exclusion of set-off rights
WILSON v HOLT
In this case the Court had to decide whether the exclusion of a right of set-off in a contract satisfied the UCTA reasonableness test and whether it had been properly incorporated into the contract...more
October 2012 Letters of Intent and limits of liability
AMPLEFORTH v TURNER & TOWNSEND
This case has interesting implications for contracting parties and their advisors and covers issues such as the appropriate use of Letters of Intent where projects have to be started early before formal contracts have been concluded and the enforceability of limitations of liability...more
October 2012 Does an indemnity cover future losses?
K/S PRESTON STREET v SANTANDER
The scope of an indemnity was the issue in this case and, in particular, whether it extended to cover future losses. Indemnities have traditionally been most common in relation to the risk of third party intellectual property infringement claims where the supplier agrees to indemnify the customer against any damage it may suffer from using a particular deliverable should it infringe. However, indemnities in respect of other risks/losses are becoming more common...more
October 2012 Extent and enforceability of ‘limited warranty'
CHRISTIE’S v AVRORA
This decision concerned an attempt by the well-known auction house to ensure that any remedies of the buyer of a painting were limited to claims for breach of contract under an express ‘Limited Warranty’...more
October 2012 Incorporation of standard terms
Businesses should be reminded that they should be consistent in the way in which they incorporate their standard terms, such as making sure that they are printed on the back of, or referred to in all, proposals. One of the key issues considered in this case was whether a limitation of liability clause had been effectively incorporated as part of the supplier’s standard terms...more
September 2012 Resale of downloaded software permitted in EU in certain circumstances
The European Court of Justice ruled that perpetual software licences granted for a single up-front payment are treated as ‘sales’. This means licensees can now transfer the right to use the software to a third party despite any express contractual provisions to the contrary. There are several important ramifications for software owners whilst it possibly opens up opportunities for licensees...more
September 2012 Using reasonable endeavours and due diligence
AMPURIUS NU HOMES v TELFORD HOMES
This case looked at the meaning of a commitment to carry out contractual obligations with ‘reasonable endeavours’ and ‘due diligence’, terms often used in many contracts. The Court gave some useful guidance on how these commitments are interpreted and whether the financial resources of the party giving the obligation should be considered...more
September 2012 Cookies - getting the recipe right
Given that virtually every website and many marketing e-mails use cookies, it is important for all organisations to note that the law has changed regarding the use of cookies - it is no longer enough simply to tell website users/recipients about cookies and allow them to opt out. There is now a requirement to obtain consent to the use of cookies and similar technologies on websites and as part of marketing activities...more
May 2012 Endeavours clauses remain inherently uncertain
BLACKPOOL AIRPORT v JET2.COM (CA)
The Court of Appeal has confirmed the High Court’s earlier ruling in this case on the meaning of ‘all reasonable endeavours’, rejecting the Airport’s argument that such an obligation did not require it to act against its own commercial interests. The CA also looked at the enforceability of an ‘endeavours’ provision. However, the decision leaves a tremendous amount of uncertainty and is, in many respects, very unsatisfactory...more
May 2012 No copyright in functionality or programming language of computer program
This case came before the High Court in 2010 and revisited the issue of whether producing the same functionality of another’s software by using independently developed code would amount to copyright infringement as opposed to recreating that functionality by directly copying the source code of that software without consent. The European Court of Justice has now confirmed that there is no copyright in the functionality, programming language or format of data files of a computer program...more
May 2012 Side letter confirmed as non-binding agreement to agree
MOUNTWEST 838 v BACKMUIR TRADING
Some useful help was provided in this decision on when a breach of contract is considered material, whether that breach is capable of remedy and what is required for a notice to terminate a contract to be effective...more
May 2012 Termination for material breach
BARBUDEV v EUROCOM CABLE MANAGEMENT BULGARIA (CA)
This is an appeal of an earlier decision and the Court of Appeal confirmed that a side letter was a non-binding agreement to agree but, contrary to the High Court Judge, found that the letter did show an intention to create legal relations, which is one of the necessary elements for a contract to be formed...more
April 2012 Cancellation vs termination for serious breach
JONES v TATE (CA)
The distinction was discussed between the right: (1) to have a contract set aside from the outset so that the parties are put back into the position they were in before the contract was made; and (2) to terminate a contract for serious breach, which simply brings the contract to an end in terms of future obligations...more
April 2012 Right to cancel a contract in practice
ERLSON PRECISION HOLDINGS v HAMPSON
Here the Court decided on the right to cancel (or rescind) a contract from the outset, in which it was demonstrated that this right can apply where a change in circumstances has been dishonestly concealed, which was important in the context of the contract in question. It showed the dangers of deliberately withholding information and how a company can be found liable for its employees’ acts and omissions...more
April 2012 Duty of good faith in long-term contracts
COMPASS GROUP (T/A MEDIREST) v MID ESSEX HOSPITAL NHS TRUST
This case shed light on how important a contractual obligation to co-operate in ‘good faith’ can be. A duty of ‘good faith’ is a concept imposed in many continental European jurisdictions but which is poorly defined in English law and has been comparatively rare in commercial contracts...more
February 2012 Approach to the interpretation of clauses with two possible meanings – common sense prevails
RAINY SKY v KOOKMIN BANK (SC)
The Supreme Court has confirmed that the Court will look to adopt a commercial approach when there are ambiguities in commercial contracts...more
February 2012 Correcting contracts for mistake
DAVENTRY DISTRICT COUNCIL v DAVENTRY & DISTRICT HOUSING (CA)
The Court of Appeal ordered an outsourcing contract to be corrected where one party took advantage of the other’s failure to appreciate the meaning of one of the terms, even though the meaning from the drafting appears to have been pretty clear...more
February 2012 What exactly does ‘consent not to be unreasonably withheld’ mean?
PORTON CAPITAL v 3M
This case revealed some interesting comments from the High Court when determining whether a party to a contract has withheld consent reasonably or not...more
December 2011 Claim under indemnity challenged
RUST CONSULTING v PB
This case demonstrates that just because you have the benefit of an indemnity from a third party, you cannot act without considering the interests of the indemnifying party…more
December 2011 Not following termination procedure put innocent party in breach
GESNER v BOMBARDIER (CA)
A buyer who terminated for late performance without following the correct contractual termination procedure to the letter was itself found to be in breach…more
December 2011 Liquidated damages – a penalty or not?
AZIMUT-BENETTI v HEALEY
The test for determining when a liquidated damages provision constitutes a ‘penalty’ and hence when it is unenforceable was considered in this case. The Court adopted a ‘commercial justification test’ and viewed the clause in question as seeking to strike a balance between the commercial interests of the parties…more
December 2011 Meaning of ‘during this agreement'
INTERACTIVE INVESTOR v CITY INDEX (CA)
The term of a contract needs to be one of the most straight-forward provisions in an agreement. However, this decision shows there can be major problems if the provisions and terminology used regarding the overall duration of an agreement, the termination notice period and any exit assistance period are not thought through properly and drafted clearly and consistently…more
September 2011 All reasonable endeavours – obligations not limited by commercial interests
JET2.COM v BLACKPOOL AIRPORT
The High Court was asked to consider whether an obligation to use ‘all reasonable endeavours’ required a party to act against its own commercial interests. In this case, the answer was ‘yes’…more
September 2011 Right of first refusal or simply opportunity to negotiate?
ASTRAZENECA UK v ALBEMARLE INTERNATIONAL (Part 1)
This decision looked at when an exclusion clause applies to a deliberate breach of contract and demonstrates that great care is required when drafting and agreeing a ‘right of first refusal’…more
September 2011 Application of loss of profit exclusion
ASTRAZENECA UK v ALBEMARLE INTERNATIONAL (Part 2)
In addition to the issues set out in Part 1 of the Albemarle case, the High Court had to consider whether the effect of an exclusion of liability for loss of profit would be to deprive one party of any substantial remedy for its real loss…more
September 2011 Side letter not legally binding despite need for good faith
Side letters are often signed in commercial transactions, sometimes when circumstances do not permit all the terms agreed to be incorporated into the formal contract. This case has highlighted that care must be taken to ensure that if a side letter is made with the intention to create a legally binding agreement, its terms must be sufficiently certain so that it is not treated as an unenforceable ‘agreement to agree’...more
July 2011 Gross negligence – an English concept?
The meaning of ‘gross negligence’ was considered and whether it is a recognised concept in English law separate from simple negligence. The distinction is important since some civil law systems, such as in continental Europe, do not allow a party to exclude or limit its liability for gross negligence, whereas in England this is possible...more
July 2011 Delay, extensions of time and the prevention principle
This was a construction case in which the issue was whether a party could cancel certain shipbuilding contracts and reclaim sums it had already paid where there had been a delay in completing the ships. Amongst other things, the Court addressed in what circumstances the shipbuilder was entitled to an extension of time where the customer had requested changes to the design, particularly given the fact that there was a contractually agreed mechanism for the shipbuilder to request an extension...more
July 2011 Outright prohibition on selling via the internet deemed anti-competitive
On 3 March 2011, the Advocate General, legal advisor to the European Court of Justice, delivered an opinion in a case concerning Pierre Fabre, a French company which had absolutely prohibited its selected distributors from making sales over the internet. The case followed the introduction of the revised Vertical Agreements Block Exemption Regulation in 2010 which prohibit such outright bans...more
May 2011 Sale of Goods Act and implied terms not applicable to software supply contract
LONDON BOROUGH OF SOUTHWARK v IBM UK
LBS was unsuccessful in its claim that I had breached a contract to supply third party software because the software was, allegedly, of unsatisfactory quality and/or was unfit for purpose. The decision looks at several specific issues: the construction of an express warranty as to satisfactory quality in the light of other contractual terms, whether the Sale of Goods Act 1979 applied to a software licence and whether the Unfair Contract Terms Act 1977 applied to the exclusion of implied terms...more
May 2011 Entire agreement clauses under spotlight again
AXA SUN LIFE SERVICES v CAMPBELL MARTIN & OTHERS (CA) Part 1
This dispute related to whether an entire agreement clause was effective to exclude claims for misrepresentation, breach of collateral warranties (effectively ‘side promises’) and/or implied terms and the application of the Unfair Contract Terms Act 1977 to the entire agreement clause. Similar cases have been before the High Court recently but seemingly this was the first time these issues had come before the more authoritative Court of Appeal...more
May 2011 One-sided set-off and conclusive evidence clauses
AXA SUN LIFE SERVICES v CAMPBELL MARTIN & OTHERS (CA) Part 2
As well as issues relating to entire agreement clauses (see Axa v Campbell Part 1), this case also demonstrated that care is required when drafting unilateral set-off clauses and so called ‘conclusive evidence’ clauses in agreements containing standard terms as both may be subject to the reasonableness test under the Unfair Contract Terms Act 1977...more
May 2011 Enforceability of unilateral clause to increase fees
AMBERLEY v WEST SUSSEX COUNTY COUNCIL (CA)
This case illustrated that where a party is seeking to rely on a unilateral right to increase its fees, very clear and precise drafting will be required to achieve that. A right to ‘review’ does not amount to a right to unilaterally increase!...more
May 2011 English and Scottish law to diverge?
The law of contract in Scotland has long been independent from the law in England albeit that the differences are somewhat limited. However, the differences may be about to increase. The Scottish Law Commission has issued a discussion paper as part of its review of the law of contract. This paper focuses on how contracts are interpreted by the Courts and what evidence they take into account. It has been prompted by the developments taking place in the European Union, where proposals are currently being considered regarding various options which might be pursued with the objective of harmonising contract law throughout Europe...more
March 2011 Refusing to perform may repudiate the contract
Those involved in contracts for IT services will be interested in this case because it deals with some of the key issues relating to the scope and management of IT contracts and termination. It illustrates how a complex software development contract can go wrong and how the supplier was held liable for damages for breach of the agreement by suspending work...more
March 2011 Losses held not indirect
McCAIN FOODS v ECO-TEC
Many suppliers have a false conception regarding the extent to which they are covered by an exclusion of ’indirect or consequential loss’ which seeks to limit their exposure if there are problems with performing a contract. This decision illustrates some of the pitfalls of such wording, which did not reduce the damages at all because the losses claimed were held to be ‘direct’...more
March 2011 Industry-standard exclusions reasonable under UCTA
RÖHLIG (UK) v ROCK UNIQUE (CA)
Certain standard trading terms excluding various rights have been held reasonable under the Unfair Contract Terms Act 1977 (UCTA) and were therefore enforceable by a supplier...more
March 2011 When is there a contract?
IMMINGHAM STORAGE v CLARE (CA)
In this case, it was decided that a contract had been made between the parties when a signed quotation was accepted and that the wording “a formal contract will follow” did not make the agreement subject to contract...more
December 2010 Contractor ‘benefits’ from mistake in sub-contractor’s tender at its cost
TRADITIONAL STRUCTURES v HW CONSTRUCTION
This case concerned a sub-contractor who made a critical mistake when submitting a tender. In this era of modern technology where bid documents are often copied from previous documents, mistakes can easily be made. When that happens the courts will sometimes have to consider the position of the two contracting parties...more
December 2010 How long should you wait before terminating?
FORCE INDIA v ETIHAD AIRWAYS (CA)
A contracting party faced with serious breaches by the other side faces a difficult choice. Act prematurely and you risk purporting to terminate when you do not have the right to do so. You then lay yourself open to a claim for breach of contract and damages, not to mention ruining any possibility of a negotiated settlement and potentially allowing the party initially in breach to escape from its ongoing contractual commitments. Act too slowly and you risk having waived your rights even if the contract has the traditional waiver clause (whereby neither party waives the right to exercise its rights under the contract due to delay). This case looked at what a party must do in such circumstances...more
November 2010 Is copying software functionality an infringement?
In short, the answer is no. Or at least it seems to be under English law. This case revisited the issue of whether producing the same functionality of another’s software by using ‘independently’ developed code would amount to copyright infringement as opposed to recreating that functionality by directly copying the source code of that software without consent...more
November 2010 Unlimited liability if battle of the forms is lost?
GHSP v AB ELECTRONIC
This is another decision on the battle of the forms which highlights once again the dangers of starting work without fully agreeing terms. Here, the supplier failed to ensure the buyer had agreed to its terms and conditions and now faces unlimited liability against claims for its defective products...more
November 2010 Rectifying mistake possible despite entire agreement clause
SURGICRAFT v PARADIGM BIODEVICES
Generally, contracting parties cannot extricate themselves from a poorly drafted contract because they later have second thoughts. However, the Courts can assist where there is a genuine mistake in the agreement and to give effect to the intentions of the parties...more
November 2010 Retention of title clauses – how effective is yours?
ISHER FASHIONS UK v JET STAR RETAIL
This case suggested that a retention of title clause (often known as a ‘ROT’ clause) may not be effective if its operation is inconsistent with the overall trading relationship between the parties, such as where it appears in a contract for the supply of finished goods intended for immediate resale...more
November 2010 Care needed when amending definitions
ERICSSON v HUTCHISON 3G UK
Here is just a brief note on a recent case which emphasises the care required when amending definitions whilst varying a contract...more
September 2010 What types of damages are considered direct or indirect?
GB GAS HOLDINGS (CENTRICA) v ACCENTURE (CA)
This decision was an appeal against the High Court’s ruling that certain types of losses suffered by C were direct, including ex-gratia payments to customers, and were therefore not excluded by the liability clause set out in the contract. The question for the Court of Appeal was whether the range of direct losses claimed were indirect instead; if so, they would not therefore be recoverable...more
September 2010 Meaning of ‘all reasonable but commercially prudent’ endeavours
CPC v QATARI REAL ESTATE
The meaning of an ‘endeavours’ obligation in this case was examined as it involved a very untypical phrase obliging a party to use “all reasonable but commercially prudent” endeavours. It provided the Court with an opportunity to review and summarise the conclusions from other recent cases on this topic...more
September 2010 Economic climate excuse for contractual breach or termination?
3G GOLD GROUP v BDW and TANDRIN v AERO TOY STORE
Perhaps not surprisingly, the Courts have seen a number of cases in which contracting parties have sought to invoke the current economic difficulties as constituting force majeure and therefore excusing contractual breaches or even ‘frustrating’ a contract...more
September 2010 Self-help remedy of ‘set-off’ clarified
GELDOF METAALCONSTRUCTIE v CARVES (CA)
There has always been some doubt as to the extent to which claims under different contracts can be offset against one another. The Court of Appeal has sought to clarify the issue and has potentially extended the scope of the self-help remedy of equitable set-off...more
August 2010 Do not rely on terms being implied
DURHAM TEES VALLEY AIRPORT v BMI (CA)
This case emphasised the need for drafting to be explicit if a particular commitment is important rather than simply relying upon terms to be implied. Courts will not impose an obligation on a contracting party to ‘act reasonably’ when performing a contract...more
August 2010 Take care when terminating for non-payment
DOMINION v DEBENHAMS
Following the Shell case, it is clear that taking care when purporting to terminate for breach is very important. This was a case involving termination for non-payment and again underlines the risk of being too hasty...more
August 2010 Incorporation of contract terms
ROONEY v CSE BOURNEMOUTH (CA)
An aircraft maintenance company appealed against a decision that its standard conditions of trading were not incorporated into a work order form...more
August 2010 How far does the duty to mitigate go?
LOMBARD NORTH CENTRAL v AUTOMOBILE WORLD (CA)
An innocent party is generally under an obligation to take action to mitigate its loss in circumstances where the other contracting party is in breach of contract. This case provides some guidance on the extent of that duty...more
June 2010 Supplier's liability clause held unreasonable
KINGSWAY HALL HOTEL v RED SKY IT
A software supplier was held not to be able to rely on its limitation of liability clause and other clauses of its contract because of the way in which it had sold its products. Given that what the supplier did is not untypical, this decision may be very significant...more
June 2010 How not to terminate a contract
SHELL EGYPT WEST v DANA OIL EGYPT
This decision highlighted the importance of selecting and making clear in communications the right termination option when seeking to end a contract and provides a useful reminder of the choices to be made when thinking about terminating...more
June 2010 Replacing a sub-contractor in public contracts
WALL v CITY OF FRANKFURT
The European Court of Justice held that a change of sub-contractor (even if there is contractual provision for such a change) may, in exceptional cases, amount to a material amendment to the contract where the use of a particular sub-contractor was a critical factor in awarding the contract. In those circumstances, all necessary measures must be taken to restore the transparency of the procedure (possibly by way of a new award procedure)...more
June 2010 How to determine standard terms of business under UCTA
YUANDA (UK) CO v WW GEAR CONSTRUCTION
The Yuanda judgment set out some useful guidance on the Unfair Contract Terms Act 1977 (UCTA) and when the parties are to be regarded as having contracted on one party's standard written terms of business...more
April 2010 Need to revisit exclusion clauses
Liability clauses and the exclusions they contain are usually the most contentious terms in any commercial contract yet the parties are often still uncertain as to where liability will actually fall if there is a breach. This decision emphasises once again the need to be careful how exclusions are set out and to be crystal clear about which direct and indirect losses are excluded. But you thought your contract did that...more
April 2010 Contract or no contract?
RTS FLEXIBLE SYSTEMS v MÜLLER (SC)
Anyone negotiating commercial contracts will recognise the scenario where, because of the urgent need to get on with the project, work is allowed to start without there being a fully concluded agreement on all of the terms of the contract. In the absence of a signed agreement in this case, a contract was initially found to exist, then on appeal the court said there was no contract and now the Supreme Court has held a contract was indeed in place after all...more
April 2010 Contractual indemnity and duty to mitigate
CODEMASTERS v AUTOMOBILE CLUB DE L’OUEST
The Court was asked to interpret an indemnity in a licence agreement between a computer-game publisher and the organisers of the Le Mans race. Indemnities are worded in a variety of ways. They can range from wide-open coverage eg "all costs, losses, damages, expenses..." to more specific reference to the key areas of risk or to specific third party claims. Unless the contract provides otherwise, an indemnified party need not mitigate its loss...more
April 2010 Rewriting the rules on remoteness?
SYLVIA SHIPPING CO v PROGRESS BULK CARRIERS
This case looks at the potentially differing rules on assessing remoteness of damages that can be claimed for breach of contract. An appeal from an arbitration award was dismissed and damages associated with the delay in readiness of a vessel, which resulted in the cancellation of a sub-charter, were held to be foreseeable and hence could be claimed...more
February 2010 IT supplier found liable for fraud
The much awaited judgment in this high profile case has finally been delivered in favour of B with a possible award of at least £200m in damages. The High Court found an individual employee of E (now part of HP) had made a fraudulent misrepresentation...more
February 2010 Damages based on breaching party’s gain
PELL FRISCHMANN ENGINEERING v BOW VALLEY (PC)
This case was an appeal to the Privy Council (PC) from the Jersey Court of Appeal so it carries a significant degree of authority. It concerned the level of damages which might be awarded in exceptional cases where little or no direct financial loss has been suffered...more
February 2010 Letters of intent
WHITTLE MOVERS v HOLLYWOOD EXPRESS (CA)
Traditionally Courts bend over backwards to find a contract exists where the parties had begun performance whilst negotiations continued. However, in recent years the Court of Appeal has indicated a firm departure from that approach and this is once again reflected in this case...more
December 2009 Subject to contract’ may not always be effective
JIREHOUSE v BELLER
The significance of the words ‘subject to contract’, which are frequently used in correspondence and often stamped on drafts as a matter of course pending an agreed contract, was the main issue in this judgment. The words are meant to indicate the parties do not intend to be legally bound until an agreement is finally concluded, at which point these words are removed...more
December 2009 Application of English law to a US form contract
SEADRILL v GAZPROM
The High Court ruled that, despite a contract being derived from documentation originating from the US and using US terminology, the contract must be construed in accordance with English principles of contract law construction where the governing law of the contract is stated to be English law...more
November 2009 Broad liability exclusions and the dangers of terminating wrongly
LOBSTER PRESS v HEIDELBERG
This case highlighted several points of potential interest concerning the enforceability of contractual exclusions from, and limitations, upon liability. In particular, the decision featured warranty obligations limited to ‘repair or replacement’ and illustrated the danger of limitation and exclusion clauses that for different reasons could leave the other contracting party with little or no remedy...more
November 2009 Exclusion of set-off rights
KAUPTHING v MILL and PETROPLUS v SHELL
The High Court confirmed that parties can exclude all rights of set-off. ‘Set-off’ arises where a debtor has a form of counterclaim against a creditor, which is used to reduce or extinguish the creditor's claim...more
November 2009 Termination rights and refunding sums paid
GDYNIA v GEARBULK (CA)
The right to terminate a contract for breach is often one of the most valuable protections for any contracting party. It is therefore extremely important to be clear about the rights of termination - whether you are seeking to terminate or being faced with the threat of termination. Equally as key is understanding the consequences of termination...more
November 2009 When do changes to public contracts bring about new contract awards?
A difficult question for public authorities is whether a contract initially tendered under the Public Contracts Regulations 2006 needs to be re-advertised where there are post-contract amendments reflecting changes in circumstances...more
September 2009 Negotiations and drafts inadmissible as evidence?
CHARTBROOK v PERSIMMON HOMES (HL)
This House of Lords case provided an important reminder of the need to ensure clear drafting of commercial contracts and of the primacy of the words used in the written contract. The so called ‘exclusionary rule’ that pre-contractual negotiations and drafts are inadmissible when interpreting a contract was confirmed...more
September 2009 Not notifying change of key personnel amounts to misrepresentation
FITZROY v ANGLO SWISS
The Technology and Construction Court held that failing to inform a customer of the forthcoming departure of a key team member amounted to fraudulent misrepresentation. It was also a possible breach of the duty to cooperate, which is implied into many, if not all, professional services contracts...more
September 2009 Drafting definitions and recitals requires care
OXONICA ENERGY v NEUFTEC (CA)
This decision concerned the interpretation of the definitions clause in a patent licence was at issue. The case has interesting implications for the drafting of commercial agreements and for the interpretation of the vast majority of existing commercial contracts...more
September 2009 Implied condition of satisfactory quality
BOMINFLOT v PETROPLUS
In relation to international sales contracts, the High Court clarified when the ‘term’ that goods will be of satisfactory quality implied by the Sale of Goods Act 1979 (SAGA) will apply in a free on board (FOB) contract and what that term means...more
July 2009 Excluding liability for deliberate breaches
INTERNET BROADCASTING CORPORATION (t/a NetTV) v MAR LLC
In this case, it was held that there is a presumption that a clause excluding liability for loss of profit should not cover liability arising from a deliberate decision to breach a contract (in this case a purported termination of a contract mid way through its term without cause) unless there was very clear and specific wording to show this was the parties’ intention...more