Archive for the ‘Commercial contracts’ Category

Premature erection doesn’t stand up in court

Thursday, August 12th, 2010

What does ‘on completion of this agreement’ mean?

That’s the question that the high court had to decide, faced with a broadband business who had erected electronic communications equipment on the rooftops of certain council properties, including the Council’s own City Hall building.

The business was relying on a provision of a binding memorandum of understanding that allowed it access to council rooftops for this purpose for a period of 15 years, such access to be granted…’on completion of this agreement’. Was the licence enforcable?

Not according to Mr Justice Roth in City of Westminster v Urban Wimax who took into account the fact that a pilot scheme was clearly anticipated under the agreement and that the implicit intention was that the licence only be effective if this pilot scheme had proved sucessful. Urban Wimax were seeking to take advantage of the poor drafting of the memorandum of understanding to suggest that the licence took effect from execution of the agreement.

The council were perhaps lucky here not to have been lumbered with a licence that took effect too early and by the common sense approach of the court, but it is a warning where a pilot scheme is planned for a project (which often include the scantest legal wording), to check the wording of any licences granted, so as not to be embarrassed in court.

Richard Nicholas

Posted by Richard Nicholas
0121 237 3992
rnicholas@brownejacobson.com

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Consent under a Co-existence Agreement is a Bar to Opposition

Thursday, June 10th, 2010

The High Court has upheld a decision that consent given under a co-existence agreement to the registration of a trade mark for certain goods was a bar to opposition on relative grounds, citing section 5(5) of the Trade Marks Act.

Omega Engineering argued that Omega SA had no right to oppose its application to register OMEGA in respect of certain goods since it had expressly agreed not to do so under a co-existence agreement between the two parties. Omega SA argued, amongst other things, that the co-existence agreement was irrelevant to an objection made on relative grounds. Mr Justice Arnold disagreed stating that it would be unjust if a party who had consented to the registration of a trade mark could successfully oppose the application to register it.

This has to be the right decision otherwise the usefulness of co-existence agreements would be severely threatened.

Sara McNeill

Posted by Sara McNeill
0121 237 3930
smcneill@brownejacobson.com

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Tory Technology Treaty

Friday, March 19th, 2010

The campaigning has started by all the major parties, and anything said at this stage before an election is to be taken with a pinch of salt, but there are likely to be a fair few people whose attention might have been caught by the Conservative Technology Manifesto not least, anyone involved in public sector IT projects (as supplier or customer) any vendors of open source software, makers of smart meters and/or with an interest in data protection.

The document is a short one and, as with any pre-election material, has some positive suggestions in generic terms – an end to wasteful IT projects, a “right to data” policy and greater openness in most areas of public sector life, including publishing online all spending over £500 by local governments.

What might surprise some IT companies that contract with the public sector at the moment however, whatever their political persuasion, is the suggestion that contracts with local authorities that exceed certain thresholds (£500 for local authorities, £25,000 for central government and Quangos) will also be published “in full” – including in particular all performance indicators, break clauses and penalty measures. It’s a brave step and one that might highlight contracts that are overly favourable to suppliers and where the public sector is being unfairly penalised.

On the other hand – from the supplier’s perspective this raises issues of its own – “if you (large IT supplier) can provide those services and meet those service levels for that cost for the public sector, then why not for me, your prospective private sector customer?” There is a risk that too much transparency could mean public sector customers no longer get a better deal than the market.

And what about contracts provided by named “Key personnel” – will these individuals earn a celebrity of their own through contracts published online, or will data protection concerns override requirements in future legislation? Certainly the 35,000 most senior civil servants whose salaries are also required to be published online may have something to say if they can be identified from this information.

However this manifesto plays out, if, as currently predicted the conservatives are likely to be the next government, there are likely to be a few lively debates with the Office of the Information Commissioner before this manifesto becomes law.

Richard Nicholas

Posted by Richard Nicholas
0121 237 3992
rnicholas@brownejacobson.com

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This software's faulty – what can I get from the seller?

Thursday, March 11th, 2010

It’s a query often raised by clients. A recent case has highlighted that it might well be more than previously thought.

Traditionally a party suing for breach of contract can expect to recover losses that result directly from a breach, but not losses that are “indirect” – as these are considered too remote or unforseeable. Typically a supplier will exclude indirect losses and will also exclude losses such as loss of profits, loss of revenue and similar losses. In a recent case however there was an interesting decision as to what a supplier could claim, even where indirect losses and loss of revenue is excluded. This included:

  • Increased payments to suppliers, as a result of using the faulty software
  • Additional costs of borrowing, made necessary by the increased payments to suppliers;
  • The cost of chasing debts that were not due (but which the faulty software suggested were due);
  • The cost of ex-gratia payments made to customers to compensate for poor service – (i.e. payments that the customer was not obliged to, but chose to pay to protect its reputation); and
  • Even the cost of stationery used to write to its customers to explain the problems caused by the faulty software

None were excluded by the typical “loss of profits” exclusion, nor by excluding indirect losses. For software suppliers it’s a potential wake up call that errors and delays in projects can lead to eye-watering amounts of damages – something that it is worth taking the time to protect against when working through the small print of their agreements.

Richard Nicholas

Posted by Richard Nicholas
0121 237 3992
rnicholas@brownejacobson.com

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If you’ve infringed your own copyright – should you sue?

Friday, February 26th, 2010

Here’s an idea for a game:  Move a marble-like ball around a computer screen by continually placing train tracks in front of it 

Here’s another one:  Having developed the above programme, move the rights in it from you to your company and then seek to move it back again using the courts and the law of copyright infringement. 

The first idea might seem a decent one.  The second idea is a truly terrible and expensive one and one that developers should avoid at all costs as this case shows.

A freelance developer developed his game concept (called either Tracktrix, or later Train Trax) before he joined Circle Studios as a games developer.  Without telling others in the company that he had developed this concept himself he passed on this concept and encouraged Circle Studios to exploit it. 

Sadly this did not lead to commercial success and Circle Studios went into administration.  Afterwards the developer sought to take back the concept and to do this he claimed, amongst other things – copyright infringement, alleging that Circle Studios had copied the game from him as a freelance developer.  After all he should know…he (as an employee of Circle) had copied it! 

Unsurprisingly perhaps the games developer was unsuccessful.  As the developer had not disclosed where the idea came from, there was no reason for the employer to believe that the concept was not created in the course of his employment.   Any infringement was caused by the developer.  The copyright claim failed, as did a related breach of confidence claim, with the judge lamenting that the action reached the court in the first place.  

The lesson – be clear where ideas come from as an employee and if you developed something yourself that you later want to use in your employment, discuss assignment or a licence with your employer.  If it’s too late to do this, avoid litigation if you can, as taking that track without advice is likely to mean losing your claim, as well as your marbles.

Richard Nicholas

Posted by Richard Nicholas
0121 237 3992
rnicholas@brownejacobson.com

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Be careful where you doodle

Friday, February 19th, 2010

Of the habits I’ve learned over the years advising on commercial contracts, one of the most irritating is perhaps that I do not now feel prepared to read anything at all (documents, contracts, covering emails) without a pen in my hand ready to underline important bits of it or write next to it. I know that I’m not alone in this.

In the relatively measured world of contract negotiation, where an apparently wildly aggressive spew of words annotating text along the lines of “How much?” “when?” “Why would we agree this?” or simply “No!” – much of which allows me to pick up the phone and have a much more measured conversation with the client & or will lead me to making similar points to the other side as part of a negotiation.

In the context of a dispute however these sorts of annotations could be much more problematic as it is less clear when they will be priviledged (i.e. prevented from being disclosed to the other side or as evidence). A recent case however suggests that these sorts of annotations will not always be privileged, unless they clearly give a clue as to the advice being offered by a lawyer to his/her client. It might well be acceptable therefore for a court to allow a document such as a contract which is partly underlined as evidence in the event of a dispute, even though it might highlight the areas that the other side consider significant and those that it does not.

Comments made by non-lawyers (“Oooops – shouldn’t have done that!” – “we’re stuffed!” etc) are not generally privileged, so can be disclosed and may well be of interest to the other side. The conclusion seems to be obvious – when dealing with a dispute, keep the originals clean, keep the legal advice separate and make sure that this advice remains privileged.

If you must annotate, annotate copies, be aware of the danger you might have to disclose that copy – oh and do leave annotations at work. Newspapers and novels are probably best left unannotated – particularly if they need to go back to the library…

Richard Nicholas

Posted by Richard Nicholas
0121 237 3992
rnicholas@brownejacobson.com

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'We can deliver!' – Can these words expose you to unlimited liability?

Friday, January 29th, 2010

If they’re made dishonestly they might…

In particular, if you’re a provider of outsourcing services and make a statement that you:

  • can deliver a project within certain prescribed timescales and    
  • are making this statement having carried out a proper analysis of the work involved

Then, if your customer believes you, you may well find that your contractual limits on liability will not protect you, as one supplier found to their cost in the long awaited decision between BSkyB and EDS this month.

 It was held by the Judge that the statements made by the supplier were not only incorrect but were also dishonest, since the person making them knew them to be wrong.  

This allowed the customer to claim for Fraudulent Misrepresentation (under the Misrepresentation Act 1967).  Since liability for Fraudulent Misrepresentation cannot be limited, when the project went over-budget and missed the deadline, the supplier’s £30 Million cap on liability was ineffective. 

Liability has yet to be decided (and the case may be appealed) but the misleading statements made by the supplier may well mean that it now faces liability of £200 Million or more. 

The lesson for suppliers – if you’re bidding on a project be careful what claims you make about your ability to deliver and never claim to have assessed the risk unless you truly have.  Given the recent history of IT projects delivered late and over budget in the public sector  I suspect there will be a number of customers scanning emails in the light of this case to see what optimistic IT providers might have promised.

Richard Nicholas

Posted by Richard Nicholas
0121 237 3992
rnicholas@brownejacobson.com

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Was the recession a force majeure event?

Wednesday, January 27th, 2010

The UK has just this week reportedly emerged from recession but the pain is still being felt by suppliers and customers throughout the UK.

It has been the cause of many breached contracts, failed deliveries and missed payments over the last few months, a fact that’s unlikely to change as a result of the economic growth figures.

But what if you can no longer perform your part of a bargain because the funding you thought you had in place is no longer available? Should you be able to escape your obligations?

What about if you were aware of a clause in your contract allowing you to escape liability for “force majeure events”?

Sadly for the purchaser of an executive jet aircraft whose case was heard this month, such a clause, by itself, may not help.

It seems only right that force majeure should not include economic downturns, particularly where it is possible for the parties to deal with a lack of funding another way – by using a “hardship” clause or to make the deal dependent upon the purchaser first obtaining funding.

For those suppliers facing unwilling purchasers (or would-be purchasers waiting for deliveries) this case is likely to be welcomed. The recession (and its consequences) wasn’t a force majeure event, nor should it be treated as one, but rather a challenge that buyers and sellers must face together on their own terms.

Richard Nicholas

Posted by Richard Nicholas
0121 237 3992
rnicholas@brownejacobson.com

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