With it she announced a policy to increase the uptake of cloud computing throughout Europe through the creation of common standards and regulation, together with an initial investment of Euro 10 Million from the European Commission to make it happen.

Personally I’m always a little concerned by announcements to boost the economy through greater regulation. If however the policy results in greater uptake of cloud computing by the public sector (whether through true “public” clouds or through the greater use of “private” clouds), as common standards are agreed and accepted then there is a real chance of (much-needed) cost savings, which must be welcome.

Let’s hope an agreement on standards can be reached more quickly than agreement on the debt crisis, even if it does involve putting up with unnecessary repeated references by politicians to becoming “not just Cloud friendly but Cloud active”.

Posted by Richard Nicholas, who specialises in commercial, IT and outsourcing agreements, complex projects for private and public sector clients, collaboration, distribution & agency contracts, e-commerce and consumer law.

Richard Nicholas
0121 237 3992
rnicholas@brownejacobson.com

Then in May the first instance court of the European Union took the view that in house counsel should not be able to plead proceedings before it – a judgement that was appealed in August.

Last week The Law Society published its letter to Ken Clarke, urging him to intervene in the appeal – but could an intervention really prevent the erosion of the in house lawyer’s role before the European Courts, now that Akzo Nobel has set a precedent? Should the appeal fail its likely to have profound consequences for in house lawyers.

Posted by Richard Nicholas, who specialises in commercial, IT and outsourcing agreements, complex projects for private and public sector clients, collaboration, distribution & agency contracts, e-commerce and consumer law.

Richard Nicholas
0121 237 3992
rnicholas@brownejacobson.com

The Court of Appeal upheld a (non-construction) county court decision that an oral contract for a fixed two-year term contained an express term that it could be terminated on three months’ notice, so limiting BVM’s claim for damages for wrongful termination.

There is no new law here. However, it is an important reminder of the risks of relying on oral contracts / unsigned draft agreements. Being a lawyer, you won’t be surprised to hear me say that it’s best to get your agreed terms into a signed contract – especially fundamentals such as the right to terminate. But a thought for the sceptics: both parties in this case had to spend time and money litigating all the way to the Court of Appeal, far outweighing any legal fees they’d have paid had this been resolved at the start …

Posted by Tim Claremont, who specialises in domestic and international engineering and construction, including contractual and delay claims across all forms of dispute resolution; also contract drafting and negotiation.

Tim Claremont
0115 976 6520
tclaremont@brownejacobson.com

So what will these new cyber-men and cyber-women be doing?

Looking at risks in cyberspace for one thing – from terrorists, hackers, spies and criminals making the 20,000 malicious emails a month sent to government networks, as well as sharing information on and combating those risks – but also developing common standards for cyber security and a voluntary code of practice.

For IT security professionals it would be worth noting the potential opportunity to build a wider acceptance of their technology and to legitimately work with competitors. For the rest of us the rewards lie in the result – better protection online. Let’s hope for a successful collaboration.

Posted by Richard Nicholas, who specialises in commercial, IT and outsourcing agreements, complex projects for private and public sector clients, collaboration, distribution & agency contracts, e-commerce and consumer law.

Richard Nicholas
0121 237 3992
rnicholas@brownejacobson.com

The Court confirmed that “if there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other”. In keeping with this, the Court found against the party that was unable to advance any commercial reason why its interpretation should be adopted.

The case continues the move by the Supreme Court away from a strict (and some might say, overly literal) approach to the interpretation of contracts to a position where commercial purpose is generally more important than the niceties of language. This is welcome, but does it really amount to much more than the members of the Court confirming that they want to sleep well at night?

Posted by Tim Claremont, who specialises in domestic and international engineering and construction, including contractual and delay claims across all forms of dispute resolution; also contract drafting and negotiation.

Tim Claremont
0115 976 6520
tclaremont@brownejacobson.com

Patel pled guilty on October 14 this year to requesting and receiving a bribe intending to improperly perform his functions, contrary to Section 2 of the Bribery Act. Patel was charged in relation to his employment at Redbridge Magistrates Court and was the first person charged since the Act came into force.

The imposition of a prison sentence for a relatively minor instance of bribery shows very clearly that the Act will not just be used against big corporates and sends a powerful message to individuals and smaller businesses. If businesses have not yet put in place suitable procedures to ensure compliance with the Act then this case should serve as a reminder as to why they need to so. The threat of unlimited corporate fines and prison for employees is very real.

Matthew Woodford
0121 237 3965
mwoodford@brownejacobson.com

It’s worth remembering that you can exclude or modify this principle in your contract. The extent to which it is excluded or modified just depends on the form of words you choose – as a recent case shows.

As ever, you need to be careful with your drafting. In particular, if you list the circumstances when a party’s breaches of contract will prevent it from taking an action (in this case, serving a notice of rescission), this may have the effect of meaning other breaches of the contract will not prevent it from taking that step.

One further point – the clause in question was a late handwritten amendment and the judge commented that he didn’t think the parties had thought through its effect. In other words, it really is worth spending that little bit of extra time considering the implications of last minute changes to a contract …

Posted by Tim Claremont, who specialises in domestic and international engineering and construction, including contractual and delay claims across all forms of dispute resolution; also contract drafting and negotiation.

Tim Claremont
0115 976 6520
tclaremont@brownejacobson.com

In the short term, I confess, I doubt it – for one thing there already exists a voluntary piece of sales legislation to which businesses could opt-in if they wanted. I am of course referring to the United Nations Convention on Contracts for the International Sale of Goods (CISG), to which 76 countries have already signed up (with some notable exceptions such as the UK, India and Brazil).

An advantage the new EU instrument could have over the CISG however is a single supreme court (the ECJ) to determine how it should be interpreted. Over the long term we may yet all need to learn how it works alongside national contract law. I’ll certainly be watching to see how it develops.

Posted by Richard Nicholas, who specialises in commercial, IT and outsourcing agreements, complex projects for private and public sector clients, collaboration, distribution & agency contracts, e-commerce and consumer law.

Richard Nicholas
0121 237 3992
rnicholas@brownejacobson.com

In these challenging times, it’s useful to remember the old adage that a party cannot benefit from its own breach. Recent case law upheld a prospective tenant’s argument that a developer could not terminate the agreement where it was in breach of its own reasonable endeavours obligations, despite this not being expressly set out in the drafting…so check the wording carefully (and of any exclusions) if you find yourselves unhappily on the wrong end of a termination notice. Footnote – we’ll have to see how this decision goes on appeal. We’ll keep you posted!

Posted by Sarah Parkinson, who specialises in property development and retail; heads up commercial property development practice, dealing with complex projects and commercial property transactions, including options and development agreements.

Sarah Parkinson
0115 976 6575
sparkinson@brownejacobson.com

Previously, Google has lagged behind its competitors in developing a substantial patent portfolio and, as a result, has been seen in some quarters as vulnerable to patent infringement litigation. However, following its acquisition of Motorola Mobility in August, and the recent acquisition of patents from IBM, Google has put itself in a position where it could respond to infringement threats with its own ‘cold war’-like threat of mutually assured destruction. Alternatively, Google may be plotting its own infringement claim offensive.

Patents are increasingly the weapon of choice for technology companies looking to maintain a competitive edge. A potentially beneficial result of this is that the need to avoid a competitor’s patents may sometimes promote innovation and create new patentable technologies.

In the meantime, no comfort is given to smaller companies, which may struggle to afford the costs of ensuring that their innovative ideas do not infringe the patent portfolios of the technology “super-powers”.

Posted by Ryan Harrison, who specialises in intellectual property agreements and disputes, licensing, commercial contracts, and commercial and intellectual property issues arising from M & As and disposals.

Ryan Harrison
0121 237 3950
rharrison@brownejacobson.com

The Court of Appeal gave a purchaser in this situation greater comfort by treating the advanced payment guarantee as a performance bond (a primary obligation). Interpreted this way, rather than as a guarantee (a secondary obligation), the purchaser can enforce it even where the original contract for sale has been changed – which might otherwise have rendered a guarantee void.

With so much at stake and an “all or nothing” result, there is no substitute for clear drafting to make it clear that rights are intended to survive. A few extra words in the guarantee could have avoided the dispute entirely.

Posted by Richard Nicholas, who specialises in commercial, IT and outsourcing agreements, complex projects for private and public sector clients, collaboration, distribution & agency contracts, e-commerce and consumer law.

Richard Nicholas
0121 237 3992
rnicholas@brownejacobson.com

In a recent case however where a set of terms and conditions excluded liability for negligence “other than gross negligence or wilful default”, the court held that a distinction does exist and that an (otherwise negligent) failure to exercise proper skill and care might not amount to gross negligence unless there was also (for example) an “indifference to an obvious risk”.

It’s a distinction that may well be seized upon by those drafting contracts for suppliers – being grossly negligent suggests a greater lack of care than mere negligence, and a greater hurdle to be overcome in the event of a claim. From a customer’s perspective it is a distinction worth looking out for if you want to ensure you have a remedy for mere (trivial) negligence on the part of those providing financial or other services and want to ensure you receive the highest standards of care.

Posted by Richard Nicholas, who specialises in commercial, IT and outsourcing agreements, complex projects for private and public sector clients, collaboration, distribution & agency contracts, e-commerce and consumer law.

Richard Nicholas
0121 237 3992
rnicholas@brownejacobson.com

A case on 20th April this year has confirmed the position at English law that silence (when you know an honest statement is no longer true) can amount to fraudulent misrepresentation.

It’s not the first such case to make this point (as anyone who attends our regular in house lawyers forums will be aware) but it does place the bar higher for sellers of businesses, who must balance the threat to the sale against the (very real) threat of a claim, in respect of which they will not be able to limit liability.

Posted by Richard Nicholas, who specialises in commercial, IT and outsourcing agreements, complex projects for private and public sector clients, collaboration, distribution & agency contracts, e-commerce and consumer law.

Richard Nicholas
0121 237 3992
rnicholas@brownejacobson.com

To me, the benefits of cloud computing make a switch nearly inevitable, although there are some significant and justifiable fears about both data security and availability – particularly in the light of recent events, making the choice of a private cloud the more palatable option for critical business functions.

There are practical restraints on use of cloud computing in the insurance sector but the consensus was that these could be overcome. Indeed, several of those present were actively looking at a switch to cloud computing in the near future.

With the right contractual assurances and safeguards in place it seems cloud computing is coming – even to the (traditionally risk-averse) insurance sector.

Posted by Richard Nicholas, who specialises in commercial, IT and outsourcing agreements, complex projects for private and public sector clients, collaboration, distribution & agency contracts, e-commerce and consumer law.

Richard Nicholas
0121 237 3992
rnicholas@brownejacobson.com

When that person leaves – how do you stop them from disclosing information about your product or company to other suppliers?

We looked at practical legal steps (restrictive covenants, contractual provisions) and technical/IT steps that you can use to prevent the loss of IP, data and know-how in a recent workshop and picked up some useful industry perspectives from those who attended.

If all else fails then the court will intervene, occasionally with a fairly stringent perpetual injunction, prohibiting that person from (ever!) disclosing that information, as in a recent case involving a golf trolley device .

To get such a prescriptive remedy however you’ll need to act fast, demonstrate a real threat and that other remedies will not suffice. Getting the right IP and contractual protection in place before you reach a dispute can significantly improve your chances.

Posted by Richard Nicholas, who specialises in commercial, IT and outsourcing agreements, complex projects for private and public sector clients, collaboration, distribution & agency contracts, e-commerce and consumer law.

Richard Nicholas
0121 237 3992
rnicholas@brownejacobson.com

A recent Court of Appeal decision took a similar line to the first instance ruling in BSkyB v EDS in reaching the conclusion that an entire agreement clause that said that the agreement constituted:

“the entire agreement between the parties” and would “supersede any previous promises, agreements, representations, undertakings or implications” made prior to the contract was not enough to exclude liability for misrepresentations made outside the contract terms, although it will prevent collateral warranties arising.

If you want to exclude liability for misrepresentation (as those who attend our regular in-house lawyers forums will be all too aware) you need to have either an explicit exclusion of liability for misrepresentation or, better still a statement that neither party has relied upon statements not included in the contract.

Suppliers who want to exclude comments made by salespeople in negotiations need to check their contracts. For those seeking to bring a claim for misrepresentation this judgement, like BSkyB v EDS, breaks down an important obstacle to bringing a claim.

Posted by Richard Nicholas, who specialises in commercial, IT and outsourcing agreements, complex projects for private and public sector clients, collaboration, distribution & agency contracts, e-commerce and consumer law.

Richard Nicholas
0121 237 3992
rnicholas@brownejacobson.com

It makes for interesting reading. The proposals for the sharing of IT infrastructure is one that struck a particular chord as it’s one that we recently advised on and seems a common sense approach to making ICT more efficient.

Other proposals worth picking up are the preference for open source software where possible, to make greater use of cloud computing, a presumption against large projects and an environment for SMEs in particular to be able to access contracts and to test solutions.

Inevitably, given the scope of the strategy, it is short on detail on any one area. Some areas however (cloud computing, use of open source solutions, use of many providers) will need careful management if government-held data about all of us is not to be kept securely. Data security is likely to be key to ensuring that these proposals turn out as planned.

Posted by Richard Nicholas, who specialises in commercial, IT and outsourcing agreements, complex projects for private and public sector clients, collaboration, distribution & agency contracts, e-commerce and consumer law.

Richard Nicholas
0121 237 3992
rnicholas@brownejacobson.com

According to the Court of Appeal judgment in Towergate Stafford Knight Company Limited (now Folgate London Market Limited) v Chaucer Insurance Plc any such clause would fall foul of the anti-deprivation principle and is therefore void.

The anti-deprivation principle is a common law rule that prevents parties from depriving their creditors of the benefits of their assets should they become insolvent.
This Judgment demonstrates the ongoing relevance of the anti deprivation principle and the profound effects that this can have on commercial contracts. Further guidance on the principle can be expected to come from the Supreme Court when the Judgment in Belmont is handed down.

Posted by Paul Cox, specialising in: large loss and catastrophic cases including brain and spinal injuries; fatal claims and those involving chronic pain syndrome; regularly asked to advice on policy liability/interpretation

Paul Cox
0121 237 3912
pcox@brownejacobson.com

In Mujur Bakat SDN BHD v Uni Asia General Insurance BHD the Commercial Court was asked to review the situation where proceedings had been issued in the Commercial Court and leave given to serve on the defendants in Malaysia where the companies were based. The claimants were also Malaysian companies but the parties had incorporated the ITC clauses in their contract.

The claim concerned two alleged breaches of warranty and the court needed to consider whether the English courts were the most appropriate forum for trial which meant that the court had to look at matters such as witness availability and where the parties carried on business. Clearly on these factors the natural place for the case to be heard was Malaysia.

Yet another decision demonstrating how important it is to be precise in drafting contractual terms so that they accurately reflect what the parties intended….

Posted by Nichola Evans, who specialises in professional indemnity work , directors and officers, legal expenses insurance, conditional fee agreements and after the event insurance and commercial litigation.

Nichola Evans
0207 337 1019
nevans@brownejacobson.com

A) Own it; B) Be licensing it (from a third party); or C) Be infringing (a third party’s rights)

A case in the Patents County Court last month however has looked at the question – “if you are using copyright material under licence, but fail to pay the ongoing licence fee – are you therefore infringing the owner’s rights?” The answer was no – it is not necessarily an infringement. Even though you are in breach of the licence, so may be in breach of contract, it does not necessarily follow that you are infringing copyright, or that the licensor has a right to terminate the licence.

From a pure contract law perspective, this isn’t that surprising but is a reminder that if you don’t put express wording in a contract, the courts will not imply it for you (so it is worth getting the wording in at the start).

When and how contracts can be terminated for breach is an issue we’ll be covering at the next in house lawyers forums on 16th, 29th and 31st March. Please sign up here if you’d be interested in attending.

Posted by Richard Nicholas, who specialises in commercial, IT and outsourcing agreements, complex projects for private and public sector clients, collaboration, distribution & agency contracts, e-commerce and consumer law.

Richard Nicholas
0121 237 3992
rnicholas@brownejacobson.com

In MBF Design Services Limited v HMRC the tax tribunal decided that the employer’s right to terminate Mr Fitzpatrick’s contract without notice was “characteristic of a contract for services but quite foreign to the world of employment”. Against this background, other terms of the contract which could be seen as confirming his employee status were given less weight.

This will give some comfort to contractors working on large manufacturing, IT or construction projects where contractors are required to use certain systems and procedures alongside employees, but have no true guarantee of work from week to week.

For employers seeking maximum flexibility from their independent contractors it does give an additional argument “after all…”, they can now explain to would-be contractors working for them “this clause helps you retain your independence ….”

Posted by Richard Nicholas, who specialises in commercial, IT and outsourcing agreements, complex projects for private and public sector clients, collaboration, distribution & agency contracts, e-commerce and consumer law.

Richard Nicholas
0121 237 3992
rnicholas@brownejacobson.com

Everton FC brought a claim arising out of an alleged contract for the club to appear in a tournament in South Africa. The High Court held that the parties all understood an agreement would only be concluded when a contract signed by the authorised signatories had been exchanged. The club could not rely on email exchanges or a telephone call between the parties as showing that the understanding of how the contract would be concluded had changed. Therefore Everton’s claim was dismissed.

We’re back to the basics of contract formation and making sure that the formalities are complied with. Compare this case with Richard Nicholas’ post and you can see that if the basics are not dealt with properly, then you may find yourself tied to terms you didn’t intend to agree to or in Everton’s case, finding that there is no contract at all.

Posted by Nichola Evans, who specialises in professional indemnity work , directors and officers, legal expenses insurance, conditional fee agreements and after the event insurance and commercial litigation.

Nichola Evans
0207 337 1019
nevans@brownejacobson.com

The case concerned maintenance being carried out on aircraft owned by the claimants. Before carrying out work the defendants would produce a “Work Order” incorporating the words “terms and conditions available on request” at the bottom of the page and would not start work until these terms had been signed.

It is important to note that this was an appeal where the initial order was for a strike out of the defendant’s action. It does not mean that a court would find similarly in every case where a phrase such as this is used, (you might not want to use it as your only limit on liability for instance) but it suggests that you can’t ignore throw away comments such as this, on the assumption that any terms have not been properly incorporated. It is a reminder (if any were needed) that you don’t have to have read terms and conditions to be bound by them.

Posted by Richard Nicholas, who specialises in commercial, IT and outsourcing agreements, complex projects for private and public sector clients, collaboration, distribution & agency contracts, e-commerce and consumer law.

Richard Nicholas
0121 237 3992
rnicholas@brownejacobson.com

However the problem comes though when the offer to settle is accepted, court battle averted, only for the parties to later question what its terms really meant.   Should ‘without prejudice’ communications be available to determine what the parties meant when they reached the settlement agreement?

According to the Supreme Court recently they should.

This decision could have the effect of either making parties more wary in their without prejudice negotiations, which would be a shame if it prevented settlement, but it certainly means that settlement agreements, once drafted should be checked carefully against the offers on the table.

Posted by Richard Nicholas, who specialises in commercial, IT and outsourcing agreements, complex projects for private and public sector clients, collaboration, distribution & agency contracts, e-commerce and consumer law.

Richard Nicholas
0121 237 3992
rnicholas@brownejacobson.com

The challenge for procuring bodies will be in:

• getting to grips with proposed new models of contracting;
• understanding and implementing effective tariffs;
• navigating the joint commissioning landscape;
• meeting targets for service delivery from various types of organisation;

Whilst all the time remaining compliant with procurement law.

Not all of these challenges are new. However, the wide ranging reforms to Government on the ground will throw the joint commissioning tendering model into the spot light, with emphasis on the legality of and robust arrangements needed to really deliver contracts which harness the Government’s buying power and deliver value for money without damaging service delivery.

Posted by Rachel Williams, who specialises commercial contracts, projects, competition law, procurement and state aid; clients include NHS bodies, local authorities, RDAs and national and international private sector clients.

Rachel Williams
0115 976 6538
rwilliams@brownejacobson.com

Although the capital element of a project is largely set in stone and underpinned by the rights of funders, the service elements of a PFI or PPP should be as amenable to change as any other services contract.

Good contract managers will already have been looking for efficiencies within the terms of existing contracts – cuts or no cuts – but increasing government focus on reducing PFI charges will lead to actual renegotiation. Particularly where the authority feels the contractor is under-delivering or that the project was over-specified at the outset, and the relationship between the parties (good or bad) means that the authority has the appetite to tackle their contractors.

Posted by Craig Elder, who specialises in project finance; Projects; PFI/PPP ; commercial contracts ; waste and defence sectors; long term/complex service arrangements; public sector procurements

Craig Elder
0115 976 6089
celder@brownejacobson.com

In a recent case, the High Court allowed a liquidated damages clause which, although not a genuine pre-estimate of loss, was justified on commercial grounds.

This “commercial justification test” is a flexible and pragmatic approach and few can argue with the court’s willingness to uphold a commercial agreement negotiated between equals. However, some may be surprised to read that the damages in this case (EUR 7.6 million) for late payment amounted to 20% of the total price!

Posted by Ryan Harrison, who specialises in intellectual property agreements and disputes, licensing, commercial contracts, and commercial and intellectual property issues arising from M & As and disposals.

Ryan Harrison
0121 237 3950
rharrison@brownejacobson.com

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.

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

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.

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

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.

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

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.

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

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.

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

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…

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

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.

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

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.

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