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• Lease Review
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Importance of Checking or Reviewing Commercial Contracts

Whether you are a one man band or  a large business checking or reviewing contracts is an important part of any business. English law is clear that if you sign something you are responsible for it, but it is also clear that if you start work under a set of Terms and Conditions sent to you then the Ts & Cs sent prevail; “Oh but I never signed anything” is not a legal Tenet recognised under English law.

Commercial contracts are the cement that binds business together. Having an agreement in writing is not just important, it is crucial, but remember an email saying confirmation of acceptance is also a binding contract.. The primary purpose of written terms is to provide a clear framework as to how a commercial relationship will work.

Agreements that form a legally binding contract but poorly drafted with vague conditions, may lead to uncertainty and require dispute resolution, even the potential of a costly legal action.

A well-constructed commercial contract will seek to balance the risks from the relationship and clarify the obligations and deliverables on each party and well drafted contracts that include specific clauses and ways of working will preclude disputes. Everybody should seek to understand their liabilities  in a commercial agreement, but it is sensible to recognise that in contract law, the other party may be doing the same thing!

Even under ideal circumstances, minor breaches of law can occur, especially if the contract spans many years. Most of these can be remedied with a quick discussion between the parties.

Having your contracts reviewed by is an important step to ensure that your interests are protected.

Herer are the types of breach which can occur.

Minor, Material, Fundamental and Anticipatory breach

A minor breach of a commercial contract has little or no impact on the outcome of the agreement. For example, when you order online groceries, the driver will often have a list of substitutes because certain products you requested were not available. Technically, this is a breach of contract, but there is no loss as the alternatives are the same product but a different brand.

A material breach will have a detrimental effect on a project’s outcome and the injured party would not have entered into the agreement if they had known such a breach would occur. The remedy for a material breach is normally damages.

A fundamental breach goes right to the heart of the agreement and presents a clear break in terms of the agreement. The injured party can seek to terminate the contract under the law.

An anticipatory breach refer to situations where one party tells the other they cannot perform all or part of commercial contracts. The non-performing party can be liable for damages.

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Posted on linked In 28/06/2024

Terms and Conditions: Getting it Right

Apart from football few things ignite more passion and energy in people than running their own businesses. For many, it’s the dream to be one’s own boss and it allows people to conduct an enterprise that allows them to deliver the kind of customer service and quality of work they feel they do not see elsewhere.

Apart from the idea itself and the drive required, one thing that will contribute to any success is having a robust set of Terms and Conditions (T&Cs).

Posted on Linked in 23/10/2024

Letter Before Action (LBA)

After you have finished chasing up using the telephone then the first step in the debt recovery process is to send a Letter before Action to the debtor. An LBA is a formal written notice outlining the debt owed and demanding payment within a specified period (usually 14 or 30 days). It should include the following information:

1. The total amount of debt owed
2. A clear breakdown of the debt, including any interest or charges
3. Details of the agreement under which the debt was incurred
4. The deadline for payment and consequences of non-payment
5. Reference to the possibility of legal action if the debt remains unpaid

If the debtor does not respond to the LBA or refuses to pay, the creditor can proceed with legal action.

Understanding the Letter Before Action in the UK for Debt Recovery

A Letter Before Action (LBA) is a crucial step in the debt recovery process in the UK. It is a formal, written notice sent by the creditor to the debtor, outlining the outstanding debt and demanding payment within a specified timeframe. The LBA serves as a final warning to the debtor before legal action is initiated, and it is a requirement under the pre-action protocols for debt claims, as outlined in the Civil Procedure Rules (CPR).

An LBA must adhere to specific legal requirements to be considered valid. These requirements ensure that the debtor is provided with sufficient information to understand the claim and the consequences of non-payment. A legally compliant LBA must include:

1. The creditor's name and contact information
2. A clear statement that the letter is a formal Letter Before Action
3. A detailed breakdown of the debt, including the principal amount, any interest accrued, and any additional charges or fees
4. The basis on which the debt was incurred, such as a contract, agreement, or invoice
5. The timeframe for the debtor to respond and make the payment set out ion days.
6. The consequences of non-payment, including the possibility of legal action and the potential for additional costs
7. A reference to any relevant pre-action protocols, such as the Pre-Action Protocol for Debt Claims under the CPR
8. Legislation and Protocol References

The LBA process is governed by various legislative and regulatory frameworks, including:

1. Civil Procedure Rules (CPR) - The LBA is a requirement under the pre-action protocols for debt claims, as stipulated in the CPR. The protocols outline the steps and procedures that parties must follow before initiating court proceedings, and they encourage the resolution of disputes without the need for litigation.
2. Pre-Action Protocol for Debt Claims - This specific protocol, which is part of the CPR, provides detailed guidance on the information that must be included in an LBA and the steps creditors must follow when attempting to recover a debt from an individual or a sole trader.
3. Late Payment of Commercial Debts (Interest) Act 1998 - This Act allows creditors to charge interest and recover debt recovery costs for late payments in commercial transactions. When the LBA is being sent for a commercial debt, it should reference this Act and provide a breakdown of the interest and costs being claimed under it.

A Letter Before Action is a critical component of the debt recovery process in the UK. Creditors must ensure that their LBA meets the legal requirements and references the relevant legislation and protocols. If the debtor fails to respond or disputes the debt, the creditor can proceed with legal action in compliance with the Civil Procedure Rules.

Visit our website www.avcdebtrecovery.com

Posted on linked In 28/06/2024

Terms and Conditions: Getting it Right

Apart from football few things ignite more passion and energy in people than running their own businesses. For many, it’s the dream to be one’s own boss and it allows people to conduct an enterprise that allows them to deliver the kind of customer service and quality of work they feel they do not see elsewhere.

Apart from the idea itself and the drive required, one thing that will contribute to any success is having a robust set of Terms and Conditions (T&Cs).

Award for AVC Debt Recovery

2 awards come our way.

Best Debt Recovery Business 2024 - Southern England

UK Legal Awards 2024 Commendation of Excellence: Client Service Innovation

Considering the economic power of the south of England we are very proud to receive this award.

We are always looking at innovation to help deliver your monies into your account.

If you are owed monies visit us on

www.avcdebtrecovery.com

Terms and Conditions: Getting it Right

Apart from football few things ignite more passion and energy in people than running their own businesses. For many, it’s the dream to be one’s own boss and it allows people to conduct an enterprise that allows them to deliver the kind of customer service and quality of work they feel they do not see elsewhere.

Apart from the idea itself and the drive required, one thing that will contribute to any success is having a robust set of Terms and Conditions (T&Cs).

What are Terms and Conditions?

T&Cs set out how you trade, a contract between you and your customers./clients  regulating how you do business. They set out what is agreed and they are how you intend to trade. They are your Ts & Cs.

Are Terms and Conditions legally binding?

Yes, they will either be part of a signed contract or they could be referenced which is what Amazon do. To ensure you’re covered should a dispute arise, make sure you have sent an email saying please find attached a set out our Terms and Conditions or make sure that the last thing anyone has to do is tick the box agreeing your Ts & Cs. Best practise is to direct all customers to your T & Cs and have them sign a document to say they have read them and signature accepts them. We are not fans of signature on Ts & Cs.

Are Terms and Conditions a contract?

As long as you can show that you sent them before or when they purchased goods and/or services, then yes, your business’s Ts & Cs will be legally binding.

What should Terms and Conditions include?

Certain elements of your T & Cs will be unique to your business; however, most will contain information on:

a.       The way you sell or deliver goods and /or services.

b.       Pricing and payment structures and processes.

c.       How and when a customer/client must pay for their product or service

d.       Any legal issues surrounding consumer law.

e.       Delivery details and provisions regarding risks and insurance

f.        Limitations on your liability.

g.       Any cancellation and/or renewal policies

h.       Data protection policies and procedures

i.        Consumer indemnities.

j.        Intellectual property and confidentiality clauses

k.       Dispute resolution

Website Terms and Conditions?

There is a difference between website usage terms and conditions and terms and conditions of business. Unless you are doing online purchasing then we do not recommend the placing of terms and conditions on a website.

However, if a sale requires a sign-up form from new customers, acceptance of your Ts & Cs  should be mandatory and definitive acceptance of them sought, e.g. “click this box  / click this button to accept our Terms and Conditions”.  

Can Business Terms and Conditions be Changed?

Yes/ Most T & Cs include a provision that allows the business to change the Terms and Conditions. If you have regular customers/clients, always inform every customer/client  if there are changes to your T & Cs of business.

Are Terms and Conditions necessary?

There is no legal requirement for a business to have Ts & Cs; however, not setting out your terms on how you do business can expose you to disputes under the law. Well drafted concise Terms and Conditions show a high level of professionalism.

Can I copy another company's Terms and Conditions?

Loads of people do it. Copying someone else’s Terms and Conditions is something we tell everyone to desist from even if you are in the same business. You don’t know who drafted them and whether they contain errors. Your business is yours alone and the way you want to do business is just that and the way you seek to deal with customers/clients is how you do it. It is also false economy as bespoke Ts & Cs start from £240.00 at CW Contract Law and Legal. Getting yours checked is also important.

Protecting your Business

Getting your T&Cs right provides certainty for you and your customers/ clients.

Put the date of the Ts & Cs and any revision date in the footer so everybody know which ones were issued and when.

Good Ts & Cs are the most-simple and  cost effective piece of law any business can adopt.

As we say, if its good enough for Amazon to operate with Ts & Cs then it good enough for everybody.

Commercial contract reviews can save time, money and stress

Uncertainty is the enemy of any business. Having your commercial contracts drafted and checked by an experienced legal practitioner will assure that the legal advice provides clarity around your obligations and liabilities within contract law. This can apply to your obligations under an existing contract (have you committed a breach, what kind of breach is it, what are your remedies or does force majeure apply). It can also apply to contracts which are being drafted for the future, so as to minimise risks from breach and disruptive events like COVID-19.

Whether with your suppliers, customers, partners or shareholders, there are huge range of commercial contracts including but not limited to:

Supply and purchase of goods and services

Export and import of goods and services

Agency and distribution agreement

Commercial property lease

Limited liability partnership

Confidentiality agreement

Software and IT contracts

Contractor and outsourcing contracts

Licenses and development agreement

Website terms and conditions

Privacy and data protection

Copyright and other intellectual property rights (IPR)

Franchise agreements

Joint venture

Shareholder and investment agreements

Legal issues in contracts post COVID

Contract reviews will be important to help you minimise your risk / reward structure in contracts. You may either want to be in a position to minimise performance or legitimately get out of the contract and the resultant liability for breach in the future, or you may want to be in a position where you can enforce the contract against someone else who is trying to avoid it.

If you are seeking ways to minimise liability in case you are not comfortable with performing against the contract, then ways in which this can be achieved include:

1. Having a clear force majeure clause covering issues such as COVID
2. Having a cap on liability for you if you are in breach
3. Putting a fiscal cop on liability if you are in breach
4. In construction be clear about liquidated damages flow downs.
5. Excluding performance guarantees from you, e.g. sales targets
6. Back-ending any payments due from you, so that if something goes wrong you have not deployed all the cash required by the contract
7. Make sure there is clear simple dispute resolution in place.
8. Making sure choice of law and jurisdiction clauses suit you (so that if there is a dispute it is brought in a country where the legal system suits you)

To many companies, for a one man band to large companies  overlook the basic premise of checking a contract. When it is not an expensive exercise, but the cost of not checking can be catastrophic.

Partnership Agreement

A Partnership Agreement is a vital legal document that outlines the terms and conditions governing the relationship between partners in a business venture. In the UK, drafting a Partnership Agreement is crucial for small businesses to establish clarity protect interests, and minimise disputes between the partners.

What is a Partnership Agreement?

A Partnership Agreement is a legally binding document that establishes the rights, obligations and responsibilities of partners in a partnership business. It outlines crucial aspects such as profit sharing, decision-making authority, dispute resolution and partner withdrawal or retirement procedures. It provides clarity and guidance for the partnership, minimising potential conflicts and ensuring smooth business operations.

What happens if you don't have a Partnership Agreement?

Not having a Partnership Agreement in place can lead to various complications and risks for your business. In the absence of a written agreement, your partnership will be subject to default provisions set out in UK law. However, these default provisions may not align with your specific intentions or adequately protect your interests.

Without a Partnership Agreement, disputes over profit distribution, decision-making authority, or partnership dissolution can often arise, potentially leading to costly litigation and strained relationships. Additionally, default provisions don’t address important aspects such as the admission of new partners, withdrawal of partners, or the allocation of assets upon dissolution. To safeguard your business and the interests of all partners, it's crucial to have a written Partnership Agreement in place from the very start.

Do Partnership Agreements need to be in writing?

While oral Partnership Agreements are valid in the UK, it’s highly recommended and often necessary from a practical perspective to have a written Partnership Agreement in place. A written agreement provides clarity, and evidence of the partners' intentions and can be enforceable in court. Some provisions, such as the limitation of partners' liability, may require written agreements in order to be valid.

How to draft a Partnership Agreement

This what is required for a Partnership Agreement for your business:

1. Define the partnership structure – determine whether you’re establishing a general partnership or a limited liability partnership (LLP). Clearly define the roles, responsibilities, percentage ownership and authority of each partner.

2. Outline capital contributions and profit and loss sharing of each partner – specify the initial capital contributions made by each partner and establish procedures for additional contributions. To avoid conflict and fair distribution, you will also need to outline the allocation of profits and losses for each partner.

3. Address decision-making processes – establish clear mechanisms for business decisions within the partnership. You’ll need to specify how the partners will make major decisions, whether through unanimous consent, majority vote or specific partner roles.

4. Establish partner withdrawal and dissolution procedures – outline the procedures for partner withdrawal, retirement, or the dissolution of the partnership. Address the distribution of assets and liabilities in the event of dissolution. These arrangements will need to be thought through carefully to ensure they are workable in practice.

5. Include dispute resolution mechanisms – include provisions for resolving disputes, such as mediation or arbitration, to minimise the need for costly litigation.

6. Consider non-compete and confidentiality clauses – protect the partnership's interests by including clauses that restrict partners from competing with the business or disclosing sensitive information. Without this, a partner leaving the business could lead to serious damage if they were to for example, poach clients or set up in direct competition.

7. Address taxation and accounting – clarify the partnership's tax obligations and accounting practices. You’ll need to outline the allocation of tax liabilities among the partners and establish the necessary procedures. It’s likely that you will also wish to liaise with your accountants on these aspects.

8. Include intellectual property rights – address the ownership and use of intellectual property within the partnership. Determine whether the partnership will jointly own or assign individual ownership to specific partners for any existing or future intellectual property developed during the partnership.

9. Include governing law and jurisdiction – establish that the Partnership Agreement falls under the laws of England and Wales (or Scotland or Northern Ireland, if applicable). Always best to include the seat of any dispute resolution, so if you choose the laws of England and Wales, it would be usual to also choose the English and Welsh courts for jurisdiction and so on.

10. Get your document checked – while you can draft a Partnership Agreement on your own, it's highly advisable to seek legal advice to ensure compliance with the relevant law and regulations.

How to structure a Partnership Agreement

To ensure clarity and coherence in your UK business Partnership Agreement it is best practise to use a structured approach:

1.         Title and introduction

2.         Partnership details

3.         Partnership scope and objectives

4.         Partner details

5.         Terms and provisions

6.         Execution and signatures

7.         Title and introduction

1.         Begin with a clear title indicating that the document is a "Partnership Agreement." Provide a brief introduction, identifying the names of the partners and the purpose of the agreement.

2.         Partnership details: Include the full legal names, addresses, and trading office of the partnership. Specify the date of its formation and the duration, if applicable.

3.         Partnership scope and objectives: Clearly define the nature of the partnership's business activities and the objectives it aims to achieve.

4.         Partner details: Provide comprehensive information about each partner, including their full names, addresses, and roles within the partnership.

5.         Terms and provisions: set out all areas that cover the partnership including but not limited to capital contributions, profit sharing, decision-making processes, dispute resolution, partner withdrawal and dissolution procedures, accounting and taxation. Match the terms and provisions to the specific needs of your business. Add a section on ways of working and the way the partners agree to work with each other as this may well change over time and if the partnership thrives.

6.         Execution and signatures : Conclude the Partnership Agreement with a section for all partners to sign and date the document, indicating their agreement and acceptance of its terms.

 Is a Partnership Agreement Legally binding?

Yes, a properly executed Partnership Agreement is legally binding. It serves as a contract between the partners, outlining their rights, obligations and responsibilities. To ensure validity, all partners must willingly and knowingly enter into the agreement, provide their consent and sign it.

Having a written and signed partnership agreement provides stronger legal protection and clarity for all parties involved.

My Lease is Ending – What are my options?

A lease can come to an end in a number of different ways, but despite the how and the why it's ending you should prepare for the end of your lease term in advance and consider the following before you vacate the property:

1. Rent Deposit

If you provided a rent deposit (RDD) to your landlord, this should be repaid following the expiry of the lease. Check the terms of the rent deposit for details of timescales and any deductions the landlord is permitted to make before returning the balance to you.

2. Dilapidations

Your lease will require you to return the property to the landlord in the state and condition required by the lease. This would have bene set out in the original lease. This is the case even if the property was in disrepair at the time you took the lease, although if your repairing obligations is limited to a schedule of conditions, your liability will be limited to returning the property in the condition shown in the schedule. If your repairing covenant is not limited to a schedule of conditions, you will likely need to leave the property in the state of repair and condition anticipated by the repairing, decorating, reinstatement and yielding up provisions set out in the lease. This will probably require you to carry out works to the property before returning it.

Your lease may also include specific obligations to comply with at the end of the lease term, such as decorating and flooring. It also depend if you made any alterations during the lease term, so you may also be required to remove/re-instate any alterations made during the term and make good reinstatement of the removal of the alterations. You should check the terms of your lease and any licences carefully for these obligations.

It is also common for a landlord to inspect the property before or shortly after the end of the term to assess whether it has been left in the condition required by the lease. If the landlord considers that it is not, it will serve a schedule of dilapidations setting out the breaches found on inspection and the likely losses suffered. In most leases the costs of a surveyor to enact this are included, so you will probably be responsible for your landlord’s costs associated with preparing and serving the schedule of dilapidations. Whether a landlord can ultimately bring a claim for dilapidations is not guaranteed and there may be arguments that you can raise which help you to reduce any claim brought against you or to nullify it completely.

3. Alterations

As mentioned above, you may have an obligation of the original reinstatement of alterations you enacted to the property prior to the end of the term. You will need to check the wording carefully to ascertain whether the default position requires you to reinstate or not. Generally, the lease will either:

•           Require you to reinstate the alterations unless the landlord tells you otherwise

•           Not require you to reinstate the alterations unless the landlord asks you to

4. Vacate

You will need to vacate the premises and take all your belongings with you, although the lease may include provisions requiring the landlord to return any items you have forgotten or permit the landlord to sell any items that you have left behind. Check if there are cut off dates where they can dispose of anything not collected. You should also return the keys/entry codes to the landlord or their agent and take any meter readings.

CW Contract Law and Legal check leases for fixed fees for commercial properties of all sizes. Whether you are a commercial property landlord or tenant, if you would like us to review or check existing contracts, mediate or draw up a new agreement, call us or visit our website.

Why Do You need to Review Contracts?

Have you ever signed a document for your business without reading what you’re signing? Most people have - not to mention the number of policies we just click through and opt into without reading them.

When someone asks you to sign a contract, they are really asking you to legally bind yourself or your business to the provisions outlined in the document. Contract review is a vital part of any contracting process since it typically reduces overall risk, increases the chances that all parties to the contract will benefit, and provides both sides with the opportunity to fully understand what they are agreeing to before they sign anything.

A comprehensive contract review can:

uncover unclear, ambiguous, onerous  or outdated provisions

prevent misunderstandings

highlight areas for improvement, and

expose pitfalls that might cause issues or disputes between the parties.

If the contract review process is incomplete or avoided, one or both parties risk potential issues or agreeing to matters that cannot be fulfilled, which may result in a dispute that costs both time and money.

Who should review contracts?

The contract review process often includes several people, depending on the stakeholders involved in the contract itself.

It might begin with the sales representative, who drafts the initial contract and decides the key points they wish to have inserted. This person should review the entire agreement carefully for the accuracy of what has bene agreed covering cost and delivery times etc. They should then forward it to someone who is legally trained or at least legally cognisant.

At this point it should be reviewed  to look at the  risk, legal and commercial implications of the agreement. Everybody should consider it best practice for a contract specialist to review a contract before it is signed by the parties.

Contract review represents the parties’ last chance to identify and request changes before signature. After it’s signed, it’s a question of obligation management, with parties looking to anticipate specific contracting events such as re-negotiation or opt-out  clauses and precluding costly errors by not investing in the contract review process.

How a contract is reviewed depends on each reviewer’s role, but the simplest way is for the initial agreement to be set down in laymen’s terms that are clear and concise  and where there is a disagreement the parties seek to agree the specific wording that matches the aspirations and requirements of the parties. There are lots of contract templates on the internet or contract review companies that offer services from as low at £90.00.  Contracts do not fail because the legal wording is not correct they fail because the parties have not clearly set out the ways in which the agreement is going to be carried or the head of accounts has copied another document from the internet. It is only when they are tested that the issues arise so always best practise to apply the basics and agreement before signature.

Many companies when sending a contract over trot out the old hackneyed phrase; ‘that’s a standard clause’, when the exact opposite is true. Remember anything can be in a  contract as long as it is not illegal or immoral and the best contracts work because both parties have agreed what they are agreed then have them checked. We always encourage parties to draft a document in word then send back comments to each other then when both parties are satisfied pay for a simple contract review.

Director guarantees/personal guarantees

When you supply a limited company, do you ask one or all of the directors to sign a personal guarantee? Is this in your terms and conditions? Whilst it is easy to insert this in your terms and conditions you must remember that whilst a contract does not need signature to make its terms valid under English law and enforceable through custom you must get signature for a personal guarantee.

If you have a signed Personal Guarantee, then you can pursue the director personally if the Ltd company renege upon their payment obligations. Of course, this will only really get you your money back if the director themselves have cash or assets so it is best practise to perhaps enact some due diligence by looking up the director on Companies House to see if they have dissolved companies or even paying to check if the named directors have CCJs against them. Many serial offenders rely upon people being so busy and keen to make the sale that they omit to do simple free checks or low cost one’s.

Doing due diligence via something that is free is always best practise. Our motto is : always do your due diligence and familiarise yourself with the financial status of any director you wish to engage in this way.

The threat of a County Court Judgment (CCJ) on a director’s credit history may be enough to prompt payment but a personal guarantee is worth considering when taking on a limited company as a customer.

What is  a Contract?

Here at CW Contract Law and Legal we operate a low cost contract review and checking service starting at £90.00.

Some company executives spend more time checking the specials on the restaurant menu (pre lockdown of course) than they do checking their contracts, which can lead to losses and claims.

A contract is an agreement between two or more parties. A legally binding contract is a voluntary agreement reached between the parties that is enforceable in law. Contracts are a huge part of everyday life for most people, for instance:

1. When an individual goes to the supermarket to buy their groceries, they enter into a contract with the supermarket i.e., payment of money in exchange for food and drink.
2. When you go to the coffee shop, you contract to exchange money for a beverage or food.
3. Employees enter into a contract to perform their work in exchange for a monthly or weekly salary.
4. When someone buys a theatre ticket, there is a contract between the theatre-goer and the ticket supplier or theatre.
5. A business enters into commercial contracts with their suppliers for goods in exchange for money to enable them to fulfil customer orders.

A contract does not have to be signed for it to be valid although certain terms and conditions should have signature stating acceptance. In this case we always use Amazon and an example as if it is good enough for one of the richest men in the world then it should be good enough for everybody. The last thing you have to do before Jeff Bezos will allow you to make him richer is accept his contractual terms and conditions.

Contract law is the body of law that applies to the rights and obligations of the contractual parties under a contract. It governs the relationship, validity and interpretation of an agreement between two or more persons (individuals, companies or other organisations) regarding the sale of goods, the provision of services or exchange of interests or ownership.

How is a contract made?

The formation of a contract begins with an ‘offer’. This may be, for instance, an offer of money in exchange for goods, or an offer of services in exchange for other services, or even the promise of a future payment of money or something else in exchange for a service. It is an expression of a willingness to agree terms between the parties. An offer allows the other party to accept the offer, providing the basis of the formal agreement; or the other party can refuse the offer and make a ‘counter offer’.

Such an offer must be communicated to the other party. Someone will not be treated in law as having accepted an offer if they have not had actual or constructive knowledge of it.

What is required for a legally binding contract?

A valid contract requires the presence of three elements:

• an agreement;
• an intention to create legal relations: this is an intention to form a legally binding relationship, and;
• consideration: i.e., Payment lathouigh consideration does not have to ential payment).

Contracts do not have to be in writing to be legally enforceable, with one important exception: a contract for the sale (or other disposition) of land or property must be in writing and contain all the terms agreed, otherwise it is not enforceable.

When does a contract become effective?

Typically, a contract comes into existence when it is made – that is, when there has been acceptance of an offer, and consideration (payment) has passed from one party to the other. In the case of a conditional contract, the contract becomes enforceable when the condition is met (or when otherwise agreed).

The acceptance of an offer can be made by words or by conduct. Acceptance occurs when the offeree’s words or conduct objectively infer that the offeree agrees to the offeror’s terms.

Certainty of terms

An enforceable contract requires certainty as to its terms. It must be clearly apparent to the parties what the terms of the contract are. If a fundamental term is not settled between the parties then the agreement may not amount to a contract in law.

If the terms require further agreement between the parties because they are uncertain, then the contract may be deemed unenforceable.

If there is no consensus ad idem (agreement on identical terms) between the parties then there is no contract as such for the court to interpret. It is not the role of the court to create the terms of the contract and thus impose a contract upon the parties.

In some circumstances, the courts will imply or infer a term into a contract, particularly in circumstances where the parties have actively relied on the agreement by performance of obligations under its terms. However, the approach of the courts is to only infer a term into the contract where, for instance, it is necessary for business efficacy. It will not re-write a bad bargain – even where the contract is disastrous for one of the parties.

Illegal and voidable contracts

Anything can be in a contract as long as it is not illegal or immoral (and whilst one might consider footballer’s contract immoral they are valid).When a contract is illegal it cannot be enforced by a court or tribunal. A contract that exists for an illegal purpose is void and will not be enforced by the courts. So, a contract to launder money, to supply illegal drugs or to achieve a civil (or criminal) wrong will be illegal and unenforceable. Assets transferred under an illegal contract cannot normally be recovered.

However, the courts will differentiate between situations where the actual purpose of the contract is illegal, and circumstances where the law has been inadvertently infringed during performance of the contract by one of the parties. The innocent party may have a legal remedy in such cases.

Mistakes and misrepresentations may make a contract ‘voidable’. There is a difference between a ‘void’ contract and a ‘voidable’ contract. A contract is void where it cannot be enforced by law because it is, for instance, illegal or because one of the parties was drunk at the time it was entered into.

Voidable contracts are contracts that can be legally terminated. For instance, a minor can enter into a contract but can ‘avoid’ the contract before turning 18, and the other party cannot enforce the terms against him or her. Other scenarios that could make a contract voidable include fraud or undue influence, or a failure to disclose a material fact.

Nobody should sign or agree any contract without having it checked, notwithstanding that many of us have contracts with our football clubs that are unconditional fanaticism one way and biased yet we still never seek to terminate their provisions.

Dispute Resolution Clause

Now that the UK has left the European Union with a trade deal, the first thing it threw up was a dispute with goods and vaccines to Norther Ireland. Could it be that the negotiators did not include a waterfall Disputes Resolution Clause (DRC)  whereby communication is the first port of call.? Based upon that we set out a few pointers herein.
 

Whoever  you are dealing with it always pays to set out a simple DRC because whatever law you are dealing with the principle that communication solves problems is universal, but needs setting out set out within any contract.
 

This is become more important as English law differs from EU law, but the basic premise that people must communicate to solve problems remains as it was. You don’t want to leave it to the lawyers do you as they often struggle to talk to each other using phrases that solve problems. Misunderstandings and confusion about rights, risks and responsibilities often generate contract disputes and can lead to court action. Our stock in trade phrase is:  only a fool seeks to sit in front of a judge.
 

What is a DRC and why is it important?

A Dispute Resolution Clause is an agreement between you and the other party detailing how a dispute or a breach should be resolved. 
 

The DRC will become part of the contract and set out the steps to be taken to resolve a dispute. This does not mean that a DRC has to be confined to a commercial contract dispute, it can cover other issues such as interpretations on specifications etc.
 

Often a DRC is viewed as a template and  is created without much thought. The worst are those that set out that disputes must go to arbitration without any thought of the time and money cost of this. The best contracts are those that recognise what a simple drafted DRC adds to a contract, should a contractual dispute occur.
 

Should a dispute arise (and they often do – ever met  a man who says he never argues with his wife?) a clear DRC can mitigate the emotion and  stress associated with trying to resolve a disagreement using an ad-hoc approach, relying on court processes or legal systems in unfamiliar jurisdictions. .
 

The following should be considered when drafting and negotiating a robust DRC.
 

Laws and Jurisdiction

With contracts that encompass two or more countries, it is vital to set out which country's laws apply to resolve disputes ('choice of law'), and also which Courts have authority to make decisions on such disputes (often referred to as 'jurisdiction'). 
 

For example, say your organisation has a joint venture agreement to develop a new app with a German company. If you fall out with your customer, which laws will govern the ensuing dispute - those of Germany or those of England & Wales? And where will any legal action related to a dispute be heard - in the Courts of England & Wales or the Courts in Germany? Always choose  your jurisdiction if you can, but check the ramification of the DRC in the contract if you cannot.
 

Method to resolve disputes

We say split it into 3

1. The parties seek to solve it between themselves or their representatives
2. If not mediation agreed between the parties non-binding
3. The lowest cost arbitration put forward by either party.

When there is a DRC set out nearly all disputes are resolved at stage 1 because all conflict is eventually resolved by people talking so why not invoke that early.

If you get to 3 then perhaps there is something wrong, but when there is a DRC communication happens routinely as both parties have signed up for it.

Conclusion:
 

1. Always look at adding a DRC to a contract
2. If you haven’t got one its never to late to add one.;
3. Make it a waterfall procedure with communication written in to every sub clause.
4. Ensure there is clear (and beneficial) choice of law clause. This choice of which country's laws will apply may be relevant not just to the Courts but also to any Arbitration.
5. Consider also which Courts ultimately have jurisdiction on any disputes (regardless of whether ADR processes are tried first)
6. Consider whether any arbitration process requires a need  to appoint sector experts to help resolve any potential commercial dispute.
7. Remember, any DRC is about the 3 Cs Clarity, Common sense and Communication.
8. For everything else call CW Contract law and Legal to check your contract and draft you.

WHY SHAREHOLDER AGREEMENTS ARE IMPORTANT

Setting up a company and the type (partnership or Ltd Company) way people set up a company is for many reasons and with different people whether it is colleagues, family or friends. When the agreement is around a Ltd company it is important that the relationship is legally formalised. 

Therefore, having a robust shareholder agreement in place will help protect everybody. No matter what your business and how strong your ties with your fellow shareholders, most businesses experience tough times and disagreements can  occur when different paths are sought. A shareholders agreement enables clarity within the relationship and will preclude legal issues.

Having a shareholders agreement is a facilitator for communication which is 90% of all issues that enable a well-run business. In addition, it adds value to your business if you are ever looking for investment or to sell.  A well drafted shareholder agreement with ways of working and clearly defined terms of reference is worth the investment. 
 

WHAT IS A SHAREHOLDER AGREEMENT?

A shareholder agreement is a private contract between some or all of the shareholders of the company.  All companies have rules based on company law and we reference the Companies Act 2006. There is a requirement for articles of association. A shareholders agreement sits alongside your articles and can set out a framework between the shareholders who sign up to it for dealing with all matters relating to owning shares in the company, the rights of shareholders (whether they are minority or majority shareholders), how the company will be run, and outlines the way voting is enacted and what to do if there is a deadlock or a dispute.  While these matters can be set out in the articles a shareholders agreement allows bespoke arrangements between the shareholders. A shareholders agreement can also provide the framework for other contractual documentation that the shareholders may wish to put in place such as service agreements or arrangements in relation to intellectual property ownership and provide for any arrangements personal to particular shareholders.
 

Shareholder agreements will commonly:
state the shareholders' rights and responsibilities

1. regulate how shares can be bought and sold
2. set out the principles for how the company will be run
3. provide protection for defined  shareholders and set out matters that can’t take place without their consent
4. set out dilution rights
5. state a policy for dividends
6. provide for intellectual property assignment
7. state a dispute resolution process

Deadlock situation

If the shares in your company are held in equal proportions 50/50, it is possible that a disagreement leads to deadlock. This prevents the organisation moving forward and can lead to litigation. 

By including a deadlock resolution clause in your shareholders' agreement, damaging deadlocks can be avoided.
 

WHAT IF A SHAREHOLDER DIES OR BECOMES INCAPACITATED?

Complications can quickly arise in the event of death or mental incapacity of a shareholder and having the procedures to apply in such situations clearly documented can avoid unnecessary stress and confusion.   Without clear provisions set out you could end up with a shareholder that was never envisaged by the original shareholders.  A shareholders agreement can allow surviving shareholders the option of purchasing the deceased or incapacitated shareholder’s shares allowing the continued smooth operation of the company. 

Our top 5 tips

A shareholders agreement can include any provisions that the parties agree but the following 5 things should not be overlooked:
 

1. Relationship between the shareholders and directors – if the shareholders want to have approval over certain matters in the day to day running of the company it should be set out in the shareholders agreement.  The shareholders can also have the right to appoint (and dismiss) individuals as directors.
2. The key issues for the shareholders and voting rights in relation to these.  For example, there may be certain things that are so important to the shareholders they don’t want them to happen without unanimous consent.
3. Dividends – in what way are the profits of the company to be distributed.  There may be shareholder debt which is a priority or the shareholders may want to specify an amount for reinvestment annually.
4. Leaving the company – what if a shareholder wants to sell their shares or in what circumstances will they be required to sell their shares, at what price and who to? These provisions are often described as good leaver and bad leaver provisions and are best agreed before any need to transfer shares arises.
5. Deadlock – while no-one wants to imagine disagreements between the shareholders when they are starting business it can happen.  A clear procedure to deal with this can protect the company, allow the shareholders to keep working together and maintain personal relationships.

Final words

Although you may have many administrative matters to attend to when starting your company, where more than one shareholder is involved it is important to add a shareholder agreement into the mix. Not only will it protect your business and relationships, it will show future investors that your company is well organised and takes its success seriously.

10 Contract Review Questions Every Business Needs to Ask Themselves

All businesses need to ask themselves the following questions and ask whether what they have protects them sufficiently. If you answer No to at least 4 of the 10 below then perhaps you need to look at your process and process control. Contact us on CW Contract Law and Legal or AVC Debt Recovery.

1. Do you have a signed contract for all arrangements where you are to be paid for your product(s) or service(s)?
2. Bottom of FormTop of FormDo all your contracts contain a designated  period of time within which payments to you must be made?
3. Do all your contracts contain a late payment clause entitling you to a specified rate of interest if payment is late (including B2C contract?
4. Do all your contracts contain a clause entitling you to suspend the contract or terminate the contract in the event of late payment?
5. Do all contracts contain a robust dispute resolution clause  that enables problem solving in the way real people actually deal with problems – actually talking first then a waterfall disputes procedure to follow that seeks to solve issues rather than recourse to the Courts?
6. Do you regularly take out credit references or trade references or get reports from credit agencies on all your customers?
7. Do you inspect registers such as Companies House, the Register of Judgments or Insolvency Registers before you start trading with new customers?
8. Do you have a KISS credit control then debt collection process in place if payment is not made?
9. Do you have insurance such as credit risk insurance to mitigate the risk of late payment?
10. Do you use any processes such as invoice factoring or invoice discounting to speed up payments to you?

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Importance of Reviewing Business and Commercial Contracts

We always ask people this question when they query the need for terms and conditions and contractual terms and even a contract review of contract check prior to signature or acceptance (signature is not necessarily required for acceptance under English Law) . What is the last thing you must do before Jeff Bezos will allow you to make him richer?

Not payment. YOU MUST agree to Amazon’s terms and conditions. So, our retort is if its good enough for the richest man in the world who can afford to send Captain James T Kirk into space then it really should be good enough for the rest of us.

Commercial contracts are the glue that binds business together. Having a written commercial agreement is not just important, it is crucial. The primary purpose of written terms is to provide a clear framework as to how a commercial relationship will work.

Agreements that form a legally binding contract but drafted with vague conditions, may lead to uncertainty (or our favourite word; ambiguity) and require costly time and money in solving disputes, even the potential of a costly legal action.

A well-constructed commercial contract will seek to balance the risks from the relationship and clarify the duties on each party – drafted to avoid legal uncertainty by including specific clauses that will avoid disputes. There is no harm seeking to minimise your exposure in a commercial agreement, but it is sensible to recognise that in contract law, the other party may be doing the same thing!

Even under ideal circumstances, minor breaches will occur, especially if the contract spans many years which is why we insist upon dispute resolution to be included as standard. Most of these can be remedied with a quick discussion between the parties, but always best to write down what you wish to say and how you wish to resolve disputes in a simple waterfall procedure.

However, an international incident of force majeure such as the Coronavirus pandemic can result in breaches of contract law that are at times unavoidable. Having your contracts reviewed by a reputable company is an important step to ensure that your companies interests are protected.

Many small businesses state that we are too small to bother or the oft stated adage: “ we have never had any problems”. Covid 19 came from nowhere and has affected every aspect of business and contracts across the globe.

Having a contract review is a crucial part of your business toolbox and can start for as little as £90.00.

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Director Disputes

When you decide to launch a company and you incorporate it along with your co-directors, the idea of a dispute developing seems absurd. The excitement and passion for your new idea, product or service propel gives you wings and the nitty gritty gets put to one side. Over time, the company starts to generate revenue, and roles may develop around different teams and requirements.

During any start-up phase, the odd disagreement is inevitable as directors try different ideas and see alternative paths to the company’s progression. But nobody expects or plans for a full blown dispute, which could surely never happen.

Fast forward a few years and the company is turning a profit and has grown Funding has been secured and there may even be several more shareholders. This is the point at which a director dispute can occur. There are many triggers for a dispute developing; the most common being:

1. Concern over financial matters.
2. The employment of family members.
3. Power struggles.
4. The level of dividends paid out.
5. Different ideas regarding strategy and growing the business.
6. One director not doing enough work.
7. The price of shares if a shareholder wants to exit.
8. A change in the personal circumstances of one director.

Boardroom disputes are one of the biggest threats to the success of SMEs so her are 3 points on avoidance

One - Have a dispute resolution procedure in your Articles of Association and put a Shareholders’ Agreement in place.

Many SMEs are started by family members and/or friends who may feel uncomfortable suggesting a dispute resolution process (DRP) is included in the company’s Articles. However, as illustrated above, there are many reasons for directors’ disputes to develop and although in the early days of hustling the idea of certain matters becoming contentious seems ludicrous, the situation can rapidly change as your company grows and becomes more complex.

When it comes to director disputes, the old adage ‘prevention is better than the cure’ may sound trite but it is completely true. Going to court to resolve a director’s dispute is extremely expensive, stressful, and time-consuming.  Having a DRP included in your Articles and a Shareholders’ Agreement drawn up at the beginning of your venture provides a clear process for managing disputes. For example, the DRP could state that if the dispute cannot be resolved at the Board level, a Mediator will be appointed to encourage a win-win solution. 

Furthermore, your Shareholders Agreement can be drafted to cover matters that commonly cause disputes, such as succession planning, voting rights, each director’s responsibilities and simple Schedules covering ways of working and remuneration..  Having policies and procedures in place to deal with such matters will mitigate the risk of a directors’ dispute developing in the first place.

Two - Understand how to remove a director

If mediation and other alternative dispute resolution methods such as negotiation fail to resolve the dispute you may have no choice but to remove a director.  Examine the company’s Articles to see if it provides any guidance as to the circumstances in which a director can be removed and the removal method.

If nothing is provided in the Articles, you and any fellow directors can try and persuade the director to resign in exchange for a severance package.

Should the director refuse to resign, the shareholders of the company can remove them by sending a Special Notice under section 168 of the Companies Act 2006 to the company at least 28 days before the meeting to table the resolution to remove the director takes place.  The company must send a copy of the Special Notice to the director concerned and a board meeting called to convene a general meeting of the shareholders.

At least 14 days before the general meeting, the company must give notice to the shareholders of the resolution to remove the director. The director can make written representations to the company and speak at the meeting.

If a director is removed by way of Special Notice they are still entitled to any compensation referenced in their contract. They may also be able to claim for unfair dismissal in the Employment Tribunal.  It is therefore imperative to take legal advice before attempting to remove a director via Special Notice.

Three - Make sure you protect the best interests of the company in cases of fraud, money laundering or bribery and corruption

Unfortunately, sometimes a director goes rogue and engages in bribery and corruption, money laundering, or fraudulent activity. It is easy for fellow directors to become liable for the actions of a rogue director. Under the Bribery Act 2010, directors can be guilty of an offence if they are implicated, either actively or passively, in a failure to prevent bribery. Turning a blind eye to fraud could also result in personal liability in the criminal and civil courts.

Disputes relating to suspected criminal acts are often extremely volatile and carry significant risk for the company’s reputation and customer retention.  Therefore, it is wise to seek legal advice as soon as you and your fellow directors become suspicious of another board member’s actions.

Director disputes do not have to destroy the company you have worked so hard to build. By putting in place DRP in the Articles and drafting a Shareholders Agreement, most disputes can be resolved quickly whilst maintaining personal relationships.  

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What is a Contract Review?

Basic common sense tells you that you wouldn’t sign a contract without reading it first, although the fact that may people do is pretty shocking. It is established law that if you sign something you are responsible for it  so any signed contract, agreement or terms and conditions  can have significant implications for the future of your business. As such all documents should be checked carefully so that you aren't exposed to substantial risk. This is where all businesses should turn to contract reviews.

A contract review is a contractual process used to identify and analyse the key provisions within any agreement. Our process with a contract review is to read it thoroughly to understand the terms and conditions, and we highlight and risk, liabilities and set out the relevant points of concern (or benefits).

Some companies present contracts or agreement expecting them to be signed without question. For example big companies and employment contracts or they trot out the hackneyed adage :it’s a standard document. Firstly, there is no such thing as a standard contract and there is no excuse for not checking what you are given before signature. Reviewing a contract thoroughly before it is signed clarifies each party's obligations, protects their interests and ensures that all parties are being treated fairly.

It may well be that you seek some changes then the other side seeks to reqord their clauses, which may lead to further negotiations and compromise before a final contract is agreed. But the aim is to agree a framework for a long-lasting and mutually beneficial working relationship.

Unlike other companies who use contract review software  we enact contract reviews manually working through a contract line by line to analyse the implications of every provision. 

Why Are Contract Reviews Important?

Any contract is a legally binding agreement. Without a thorough review, there's a risk that the parties could be committed to something they can't deliver. They could also be lumbered with unfavourable terms that lead to costly, and entirely avoidable, legal disputes.

Therefore the contract review process is important as it reduces the legal and financial risk involved in any agreement. It provides both parties with a chance to fully understand the terms and conditions they are agreeing to before anything is signed,

We are not  great fans of post-signature contract review, but it does  allows you to check clauses and provisions to ensure they still cover the needs of the business and the regulations of the relevant country.

A contract review ensures that all terms are fair, enforceable, and properly documented; making it clear what happens if either party were to break the conditions laid out in the contract.

For the average business owner, the language and level of detail in a contract can be what we describe as legal gobbledygook which leaves you at a disadvantage in many contract negotiations. Our unique approach means that we can translate the gobbledygook into plain English something automatic software does not as they often overlook the word ‘cobblers’.

Who Can Review a Contract?

As anything can be in a contract as long as it is not immoral or illegal then anybody can check a contract, so we use a diligent and experienced paralegal team under rout £1m PI insurance and set out a  contract review, summarising the key points of liability and potential liability. We also always seek to insist that a waterfall dispute procedure is included in neatly all agreements as this is the way people work. A basic premise often overlooked by lawyers and contract checking software is that contract never fail on the legal wording they fail in the way real people work with each other in real situations.. It is no good having all the legal wording in the world if the parties cannot agree on what they will do when an unforeseen event happens.

In a smaller organisation, we see contracts drafted by people whose recourse to contract law is reading other similar documents on the internet  or a senior executive who plays golf with his lawyer friend and got a tip in the 19th. We always say if it works for you then fine, but the same chief executive who takes a lawyer tip in the 19tyh will not take advice on his swing. He goes sand see the golf professional. Making an error on a par 5 may cost a shot. Making an error in a contract can cost may thousands of pounds.

For many businesses, the accessible and more cost-effective solution is to use a contract checking service that starts for as low as £90.00 at CW Contract Law and Legal who deliver a process that is fast, accurate and insightful.

What Are the Key Steps in a Contract Review?

Contract reviews can be broken down into many areas, but we always look to our old regiment and seek to Adopt the 6Ps as well as looking at what the contract is designed to achieve for the business and what risks they are likely to face, a careful review of the payment terms and triggers, commercial terms and duration periods.

An example is days eom on payment. 30 days eom = 44 days average payment

60day eom = 84 days average payment.

You would be surprised how many people miss the words eom. Even more than miss the £800.00 fine sign in London bus lanes.

Contract Review Checklist

Contracts can vary significantly depending on the type of agreement. But there are some common elements that every contract should include.

Here's a quick rundown of some of the key points to include in your contract review checklist:

a.         Does the contract accurately describe the negotiated agreement?

b.         Are the parties involved properly identified?

c.         Is the duration of the contract clear, including any expiration dates, fixed renewals that precludes termination and break clauses?

d.         What are the payment terms and triggers? What are the payment dates and are they accurate?

e.         Are there any terms that could be open to interpretation?

f.          Are both parties' obligations accurately described?

g.         Are there terms in place for the termination and renewal of the contract?

h.         Is there a proper disputes resolution procedure included?

This list is far from exhaustive, but it does provide a few good places to start with a contract review, even if you're playing a lot of golf with a legal expert.

What is Contract Review Software?

If you seek to use this then it works, but we always say that AI has a place, but people buy from people and people know what they want and expect when they agree contracts. Nothing worse than having a  dispute and someone blaming the machine.

How will Brexit Impact Commercial Contracts?

In  a nutshell; not very much really if your jurisdiction is English law and you have a well written disputes procedure therein, but there are some points you may wish to consider if your contracts contain these provisions.

1. Increased trade barriers: taxation / quotas
2. Regulatory divergence / parallel regimes
3. Changes to the territory covered / competition law
4. Movement of people
5. Currency fluctuation
6. Change in legal jurisdiction as the UK have stated they will not accept the jurisdiction of the ECJ and that is a red line we do not think the UK government will cross.

It is common sense  to read any existing contracts with European entities and enact a contract review to assess the impact of the UK’s exit with these issues in mind.

In any future negotiations jurisdiction and the seat of arbitration will be important.

Remember the other side might be looking at termination based upon the UK’s exit from the EU and is especially relevant to any commercial agreement and contractual obligation that references the EU in its territorial scope.

Remember if you alter wording in the body it is a variation and you will need re-signature

When considering contractual provisions that deal with the EU as a territory, you need to confirm whether the relevant clause definition covers the member states ‘from time to time’, or specifically names each country. If it is referencing ‘from time to time’ this will not include the UK, but if there is a full list of countries and the UK is named, then the UK may still be covered by the contract.

You may also want to review force majeure definitions in your contract and consider whether the end of the transition period or the UK leaving the EU fits within the definition. In particular, is there is a clause referring to ‘material adverse change’, or any similar wording which allows the renegotiation of terms should the contract become subject to a change in the law or unprofitable (which may be relevant post Covid).

Also worthy of attention is whether the possibility exists for either party to argue that following the UK’s withdrawal or the end of the transition period, that ‘frustration’ will actually apply, excusing future performance. This is probably not relevant, but always best to check, especially if there are obligations which the UK’s exit makes an impossibility for a party to adhere to notwithstanding that a contract cannot usually be deemed to be frustrated if the alleged frustrating event should have been foreseen by the parties and the UK’s exit was foreseen by General De Gaulle before we entered.

If a contract relies upon inherent EU rules, there may a stronger case for frustration once the transition phase has passed.

The withdrawal agreement states that the UK will continue to apply the EU’s General Data Protection Regulation (EU-GDPR). But as the UK will not be continuing as an EU member state, companies will be required to update commercial contracts wording and privacy notices. Are you sure you know what changes may need to be made and why?

Contract reviews should be part of best practise, but as we are entering another event that has never happened before alongside Covid 19 then it may create issues. To paraphrase Napoleon. Look to you clause wording on the left right middle and Schedules. Am I ready for any issues? If not you are not ready.

Contract reviews can save time, money and stress

Uncertainty causes issues in  business. A recent study by the Legal Services Board found that 20% of businesses reported ill health impacts for staff from prevailing legal issues. Having your commercial contracts drafted and checked by an experienced legal practitioner will assure that the legal advice provides clarity around the obligations and liabilities within the law of contract. It is the old holiday insurance peace of mind. The insurance does not give you carte blanche to tombstone, but you know you are covered against most risks.

Whatever business you are in the basic premise of contracts and the law of contract applies to you. It was sonly 50 years ago that George Best was used for breach of promise when he decided not to marry one of his many girlfriends he got engaged to. Whilst that law was removed from the statute books everything is governed by the law of contract and in life and business you will have disputes.

Here is sample of the types of contract we draft and check:

1. Supply and purchase of goods and services
2. Export and import of goods and services
3. Agency and distribution agreement
4. Leases
5. Partnership Agreements
6. NDAs
7. Software and IT contracts
8. Contractor and outsourcing contracts
9. Licenses and development agreement
10. Business Terms and Conditions
11. Franchise agreements
12. Joint venture agreements
13. Shareholder and investment agreements

Legal issues in contracts post COVID

Contract reviews may well become important to minimise performance or legitimately get out of the contract and the resultant liability for breach in the future, or you may want to be in a position where you can enforce the contract against someone else who is trying to avoid it.

There are some simple clauses we always include:

a.       Having a cap on liability for you if you are in breach

b.      Minimising your warranties to the other side;

c.       Making sure there is no indemnity (or a diluted indemnity from you if you are in breach

d.      Excluding performance guarantees from you, e.g. sales targets

e.       Back-ending any payments due from you, so that if something goes wrong you have not deployed all the cash required by the contract

f.        Having a disputes resolution procedure clause

g.      Setting out ways of working (lots of lawyers miss this simple insertion into contract ever fails because of the liability of  severability  or contract rights of third parties) it fails because of the lack of clarity of how people wish to work together. When you get married on a Friday  its always a good idea to tell your wife you go to football every Saturday afternoon.

h.      Choose the jurisdiction of English law if your business is in England & Wales.

i.        Cutting down or not including which make it easy to avoid performance

j.        Having clear remedies for any breach.

k.      Maximising warranties from the other side

l.        Make sure your remedies for late payment are clear and concise.

CW Contract Law and Legal offer a free no obligation consultation on all matters relating to contract law and business terms and conditions and business debt recovery.

Importance of Having Terms and Conditions

Post Covid these are going to become more and more crucial. It never ceases to amaze us how casual some people are in business when it comes to terms and conditions. In your business, you may enter into contracts with your customers or suppliers on a regular basis and naturally the process can sometimes become rather casual. However, if you have no formal Ts & cs and things go awry then disputes can arise as to whose terms and conditions apply to the contract. The situation can often be unclear, particularly when you both send paperwork, emails or letters  to each (if you have no standard Ts & Cs then you may well be accepting theirs) and no specific agreement is then made as to whose terms will apply. First rule of Jeff Bezos of Amazon is that you must agree his terms and conditions before you can make him richer so here are some simple pointers.

1. Negotiate the Contract
2. Fire the Last Shot
3. Beware the Exceptions
4. Train Your Staff

Under the law of Contract the precedence over whose Ts & cs prevail is called the "Battle of the Forms" and it is easy to lose the battle if you are not alive to the issues. So, what can you do to reduce this risk?

1 – Negotiate the Contract

One way to avoid issues on what was agreed and when is to negotiate the terms of any agreement/ contract with your customer or supplier and record the agreement in a document you both agree.

This should ensure that both you and the other party are aware of and agree to the terms. Remember an email is a contractual document. Whilst this will not necessarily avoid a contractual dispute later on, this should ensure that the terms you have agreed are incorporated into any agreement/ contract.

However, we appreciate that it may not always be practicable to negotiate each and every contract, particularly when you could be making or receiving orders on a daily basis. You might therefore choose to negotiate terms at the outset of the relationship in an overarching agreement and then agree/contract on those terms thereafter, which will create a custom between you.

2 – Fire the Last Shot

The general rule is that if you ensure that you "fire the last shot" before delivery of the goods, you will win the Battle of the Forms.

If in doubt always make sure your terms are those sent and if they come back with variations or they send you their invest in checking what has bene sent to you. Remember you do not have to sign anything for it to be valid as a contract under English law.

3 – Beware the Exceptions

As explained in 2, the usual position is that the terms and conditions of person who fires the last shot will apply to the contract. However, there are exceptions to that rule.

Recent case law indicates that if there is clear evidence of "contrary intention" that alternative terms and conditions should apply, then the party who fired the last shot may not win the battle. This means that if there is a long-standing course of dealing between you and your customer or supplier, whereby you always contract on a particular basis, then you (or they) may be able to argue that those terms will apply to any future contracts. In these circumstances, if you want to avoid those terms applying, you should expressly agree terms with the other party (as indicated at point 1).

Perhaps more worryingly, in a recent case in which terms were not agreed (indeed each party had expressly rejected the other's terms), the Court decided that neither party's terms applied. In this situation, the terms specified in the Sale of Goods Act 1979 applied - which may leave a seller open to potentially wider liability.  In a similar situation where you have both rejected the other party's terms, you should ensure that some conclusion about the applicable terms is reached before delivery is made.

4 – Train Your Staff

All too often it will be your junior staff who are tasked with making and receiving orders and so it is important that you ensure they are aware of the consequences of any paperwork they send (or fail to send), and, equally, receive.

As can be seen from point 2 above, it is important to ensure that you fire the last shot in the battle of the forms. You should therefore ensure that your staff take control of the process and ensure that all paperwork sent to the other party is stated to be subject to your terms and conditions. You could also consider giving your staff a checklist to work from when they are dealing with your suppliers or customers to ensure that you fire the last shot. In addition, if you are the seller, you may also want to persuade purchasers to submit orders on your own order forms which naturally will be subject to your own terms and conditions if you have included them.

And finally: remember KISS everything and always seek to work with your Ts & Cs. For those of you who do not have any Ts & Cs. Doh! Homer is at the nuclear powerplant if you want some help.

The Dangers of Using Free Contract Forms

The Internet is full of websites listing free contract or agreement forms which you can download and use in your business. Some are very good, but in the same way you would use the internet to look up symptoms of an illness would you necessarily take the advice of which medicines to take for the illness.

It sounds great to save money by using these template forms instead of paying expensive legal fees. But what might be the downside of using these free forms?

1. Apply Best Practise

Use the same criteria of skills that you apply in your business to selecting law via the internet. We always say it is your business and saving money on legal fees is often good business and our model and advice is use them then have them checked. Maximise your time and business, but here we set out some of the pitfalls.

2. Selecting the Wrong Agreement or Document

Many people fail to understand the way English law works. Often laypeople will select forms to use for a transaction or agreement based on the name or title of the form. But selecting the wrong form may have consequences other than the one that is intended. For example, there is a difference between "Partnership Agreement" and "Joint Venture" or a License to use.

3. Overlooking the Crucial Clauses

No contract ever fails on the legal wording. They always fail because of the ways people seek to work with each other , which is when the wording of any legal document is tested. Therefore, consideration of the document when it goes ‘ Pete Tong’ is crucial. We always put in a waterfall Disputes procedure and clearly set out the effects of termination. Many of the free documents do not cover this area.

4. Not Knowing Your Rights

Under English law the basic premise is that if you sign something you are responsible, but there is UK legislation called UCTA that covers unfair terms. There are other areas that are not covered off with free documents and the recourse to solving them is always reverting to costly law.

5. Not Knowing What You Don't Know

It sounds simple but the danger is always not knowing what you don't know. Whether your document leaves a legal loophole that precludes you getting paid or is in fact unenforceable or the document is missing important clauses pertinent to your business industry, you may be leaving yourself wide open. Common sense tells you that you lock the door of your business when you leave at night. Why risk leaving the legal door unlocked. Always we have the dreaded beast Ambiguity, stalking at all times waiting to pounce. Ignorance of the law is no defence.

6. Omitting Crucial Language

Many of these documents omit crucial language. Not the legal language as they are always good at those, but the language of the ways of working and a one size fits all can never include that. In the world of lettings, the wording of notices is crucial. Clauses that we set out as standard such as fees for debt recovery and liability for newly incorporated firms are hardly ever included.

6. Not Tailoring the Contract to Your Specific Situation

There are always areas that are unique and specific to your business and these are never covered off in free documents. Does your business need contracts, or should you seek to KISS it with Terms and Conditions only and simple order crib sheet? Do you require a signature driven document that might increase your margin for error?  Free document forms are not sufficiently specific to address these questions.

Here at CW Contract Law and legal we offer affordable legal services and contract checking services staring at £90.00 (just Google contract checking service anywhere in the world and we are there in the top 5), so we recognise that free documents are good and we bolt on to the requirement to save cost whenever possible. We also offer a bespoke drafting service, but recognise that 90% of SMEs really don’t need signature driven contracts and could work simply using Ts & Cs.

We also offer a FREE consultation service and analysis and legal document before we quote you a price. If you don’t like the price then there is no charge. Who says best practise  contract law for your business needs to be expensive

An Issue not to Ignore when You are in Business

When you are in the early days of starting up your business, there’s a never-ending list of tasks to complete. Sorting out the terms and conditions of trade is not at the top of people’s list although it should be. Getting your product market ready, finding customers and marketing your product take priority in the start-up process.

Neglecting this less glamorous part of your business, however, could impact your cash flow through delayed payments and having to pay for materials before taking payments.

In a worst-case scenario, you could end up spending lots of money waste your valuable time on debt collections then realise the late payer is a bad debt. . A bespoke set of Ts & Cs from CW Contract Law and Legal will cost you around £220.00, so why take the risk.

Late payment is a fact of life for small businesses, as customers often give lower priority to bills from small firms. With the right terms in place, however, you can ensure that you get paid first. Get your terms right and there’s no excuse for slow payments.

Protect your business

If you don’t specify terms and conditions you put yourself at risk of uncertainty, misunderstandings and the word ambiguity! It is crucial to establish the actual arrangement between the two parties involved in any deal. You need to cover yourself, so clients or partners have no opportunity to go back on their word (some will anyway, so reduce your risk at point of agreement of sale).

If there is nothing in writing there is no proof. If the terms are in writing, it is evidence you can produce if you need to.”

In a nutshell terms and conditions protects you as a business and have an important role to play, so much so that there are huge numbers of precedents about terms and conditions within contract law. They define all matters and the duties, rights, roles and responsibilities of the parties involved in any agreement or contract.

What to include

Look upon simple well drafted  Tso & Cs akin to Channel 4 bake off.. A recipe for a good cake without a soggy bottom – a recipe for doing business and having absolute clarity on your business agreement and the way you wish to do business. They should set out what the agreed terms are between parties and more importantly what happens if things go wrong or one party wants to leave or is unable to continue. Terms and conditions can also save a lot of money by addressing all the facets you want included at the outset. This in turn avoids disputes later on about what might or might not have been agreed.

The exact elements to include depends on the individual business but you should consider including:

a.         A clear definition of what products or services will be provided

b.         Setting out the payment terms – when is payment due

c.         Any guarantees or warranties offered

d.         Timelines for delivery and any queries

e.         Specifying what happens if either party doesn’t deliver or pay or wants to end the relationship

f.          The term of the agreement and what notice is required to get out of it

g.         Which law shall govern the contract

Some things must be included on the invoice. There is a legal requirement for invoices to set out the business name and address as a minimum. Additionally, if they are a limited company they must set out the company name; the company number; where it is registered; the registered office address, which may be different to your actual trading or correspondence address. If you want all the names of the directors include, but  all the names of the directors — not just some of them. If the business is registered for VAT, it must state the VAT number.

There is no legal requirement to include terms and conditions on invoices though many people put their terms on the back of them. However, if you send your invoice 30 days after delivery and the other party has sent over their terms their s will prevail so we say send over your Ts & Cs at point of agreement.

When things aren’t clear

Failing to specify terms could have a serious impact on your cash flow. You may end up in a situation where the customer thinks they will pay at the end of the project and you think you are being paid at the beginning or in stages, so you could end up having to pay for materials and staff before you have received the money from the customer.

“Equally, if you do not specify so in your terms, you may have no right to charge interest for late payment, so again you will be out of pocket if a customer pays late.”

One size doesn’t fit all

It is crucial to make sure your terms are specifically written for your business – you can’t assume another business will have the same needs as yours. Some people take flyer and cull someone else’s of the internet. Whilst there is a lot to do when starting a business it pays to get your Ts & Cs right at the start and update them as you grow. 

When you are in the early days of starting up your business, there’s a never-ending list of tasks to complete. Sorting out the terms and conditions of trade is not at the top of people’s list although it should be. Getting your product market ready, finding customers and marketing your product take priority in the start-up process.

Neglecting this less glamorous part of your business, however, could impact your cash flow through delayed payments and having to pay for materials before taking payments.

In a worst-case scenario, you could end up spending lots of money waste your valuable time on debt collections then realise the late payer is a bad debt. . A bespoke set of Ts & Cs from CW Contract Law and Legal will cost you around £220.00, so why take the risk.

Late payment is a fact of life for small businesses, as customers often give lower priority to bills from small firms. With the right terms in place, however, you can ensure that you get paid first. Get your terms right and there’s no excuse for slow payments.

Why Terms and Conditions are Imperative

The revelation that 89% of councils are in breach of the Public Contracts Regulations 2015 has emerged from a freedom of information request submitted by the Electrical Contractors Association (ECA) and the Building Engineering Services Association (BESA).

This reinforces why every business should have a set of terms and conditions and simply send them as an attachment to your  confirmation by email with the phrase; please find attached our terms and conditions. This applies to all services delivered , marketing digital marketing, and other service delivery, not just construction trades.

It is also revealed that 49% of local authorities do not have, or do not know whether they have, a built-in contractual requirement for 30-day payment. In fact, 18% of councils say they have no absolutely no intention of building in contractual requirements for 30 day payment.

This is despite the fact that the Public Contracts Regulations 2015 state that 30 day payment down the supply chain is mandatory, and that public bodies should take steps to ensure this takes place.

BESA public affairs manager Alexi Ozioro said: “There has been much talk of the payment culture change needed in the industry, and public bodies need to lead by example. The industrial strategy calls for a fairer payment system, the Chancellor has highlighted the need to tackle late payments and a Crown Commercial Services consultation even poses excluding bad payers from public contracts. We applaud the government for engaging with the poor payment debate, but it is about time action matched words.”

ECA deputy director Rob Driscoll added: “Non-compliance by the public sector with the Public Contracts Regulations is unacceptable. This is especially significant given the cautionary tale of the collapse of Carillion – one of the key strategic suppliers to government – which ultimately had a wider impact on SMEs.

If it is good enough to own the process that stops England losing on Penalties then ensure you own the process on Your Payment Terms

On Tuesday July 3 Gareth Southgate stated the England penalty takers had talked about owning the process of taking a penalties.  It is the same with payment terms.

Imagine a salesperson has skillfully closed a high-value deal, only to forget to set out what the payment terms are and when you send the invoice expecting to get paid on 14 days the customer states their terms are 90 days and they produce the email that shows their terms and conditions were sent last.

Believe it or not, this can happen quite easily if sales people fail to state payment terms at the critical moment the deal is struck, enabling the other party to do so instead.

It’s all to do with the English law ‘last shot wins rule’, which says the party that had the last say in negotiations ultimately defines the terms.

As a result, if the deal does eventually result in a payment dispute, then a Court of Law will look at the law surrounding the establishment of the contract and rule accordingly.

This kind of payment dispute often leaves small businesses and credit controllers to pick up the pieces, creating cash flow headaches that can easily be avoided.

The simple answer is to always have a set of terms and conditions that clearly set out you payment terms and if you do not have a set then set your payment terms our in a confirmation email and make sure that any salesperson (including any business owner) clearly establishes the 3 payment rules at point of sale

1. Who is paying us (you would be surprised how many companies do not have the name of the accounts payable person)
2. The payment terms for the sale.
3. Agreement from the purchaser they agree with the payment terms.

Best practise is also to set out interest payments on late payment in your Ts & Cs as well. It is not binding to set them out on an invoice, although the law on Late Payments for B2B is quite clear. It is no good stating it on your invoice some time after the purchaser established their payment terms under English law.

Common sense in setting out payment terms at point of sale isn’t a big deal at all… A good salesperson will never be frightened to ask the 3 payment questions. If it causes offense do you really want to risk making the sale?

On the internet you get asked those 3 questions as a matter of course on every transaction as well as having to accept Tso & Ccs at point of sale.

Nobody who is reasonable will think you are being unreasonable – it’s just common sense good practice

Business terms and conditions

Standard Terms and Conditions of business (Ts & Cs) are often given a zero or low priority low priority by sole traders and companies, yet they may be the best few hundred pounds any business ever spends. Companies who would never dream of leaving their front door unlocked with their computers on display do exactly that when they work without terms and conditions.  How many of us take the risk of going on holiday to USA without health insurance? Many sole traders and operate with and open season on risk by not having Ts & Ccs.

Many only give detailed consideration when a dispute arises, by which time it may be too late. In the meantime everybody keeps making sales which may leave a huge potential risk. We also have the companies who steal someone else’s off the internet when they may be wholly unsuited to their needs and may even be stealing a stolen set which were themselves poorly worded and legally weak..

Standard terms and conditions of business may be used in order to achieve any one or more of the following commercial objectives:

1.       To set out a framework for how your transactions will be dealt with and brought to a conclusion without the additional time and expense involved in drawing up specific terms for each individual transaction.

2.       To ensure that payment terms are clearly set out and the charges for those companies that do not pay on time. .

3.       To enable a company to impose terms favourable to itself on others without negotiation and, in particular, to limit its liability (in the case of sale terms) or to extend the liability of the seller (in the case of purchase terms).

4.       To provide certainty in relation to transactions which form the main offer through the use of the same set of terms in all cases.

5.       To standardise a company's contracting procedures, so as to preclude ambiguity and enable anybody to agree a sale without worry if everything is covered.

Whilst a set of Terms and Conditions cannot exclude anything that cannot be excluded by law. It is important that everybody large or small looks at the value of using  Ts & Cs.

Here are some standard issues that you might wish to consider:

·         Price

·         Payment terms

·         Late Payment Charges

·         Quotes parameters

·         Acceptance

·         Services provided

·         Liability

·         Warranties and indemnities

·         Specification

·         Delivery

·         Packaging

·         Retention of title; risk and insurance

We always reference Amazon. What is the last thing you must do before you are allowed to buy? Tick the box that states s you must agree to their Terms and Conditions.

Protect Your Intellectual Property

Many of us have watched the  film The Social Network? Which sets out how Mark Zuckerberg, hired by the creators of Facebook, stole the original idea and became Facebook’s owner?

Remember the conversation between Bill Gates and Steve Jobs where Bill Gates asked Steve Jobs if he could borrow his operating system and Steve forget to insist upon a license or set out his copyright for the IP rights that ultimately became the ‘windows’ operating system.

Ideas are not copyrightable. So, what is?

In 2014, Forbes Commentators claimed that around 80% of a Business' values are determined from intangible assets. 

 

Here are some different areas of Intellectual Property: 

1. Copyright
Copyrights arise naturally if you can prove that your work is original and situated on a fixed medium. 

2. Design rights
Design rights need to be registered and they relate to the physical configuration and texture of a shape. For example, Coca Cola's bottle is protected and cannot be replicated. 

3. Trademarks
Trademarks give you an exclusive right to a certain business good. Examples of this are Nike's tick symbol and Apple's logo. 

4. Patents 
A patent is essentially a trademark for a new invention or original idea. Assuming you are the first to develop it you are entitled to its patent and it cannot be copied. 

5. NDA
Non disclosure agreements are contracts between you and an external party to ensure that neither discloses specific information. 

If in doubt set out what you have in a simple document and never scrimp on the legal’s for the above mentioned five points. It might not cost you the billions it cost Steve Jobs, but he could afford it. Could you?

Terms and Conditions: Why You Should Have Them

What can T&Cs do for your Business?

1.         They can limit your company's liability

2.         Protect your Intellectual Property rights

3.         Clearly outline rights and obligations

4.         Ensure compliance with relevant regulations

… and most importantly .... protect and minimise legal action issues.

Why Do You Need Terms and Conditions?

Lawyers will put in lots of clauses that are legally required, but the most important area for any business is your ways of working.

We have never seen any agreement or contract fail on the legal clauses (e.g. Waiver or Severability), but they have on Termination or payment terms.

Your Ts & Cs should be bespoke to your business and specific on Deliverables, Liability, Termination and Dispute Resolution.

For the full text of this article visit more on this article

Terms and conditions do not require signature to be legally valid so if you are a small business who does not want the expense of contracts and use email or letters to set out what is agreed then just use the phrase:  “Please find attached our Terms and Conditions”, and attach them.

Jim calls you and wants 2 ton of sand delivered.

A simple email confirming all the details and price agreed and the phrase … please find attached out terms and conditions.

In the Ts & Cs always set out you payment terms and what the remedies are if you are not paid on time.

The law allows you to add interest on later payments, so set out what percentage rate above the Bank of England base rate you will apply.

If you are selling B2B then The Late Payment of Commercial Debts (Interest) Act 1998 allows you to add 8% above the BOE base rate.

If your Ts & Cs don’t have dispute resolution get them in.

If you are in IT or other areas where intellectual property (IPR) is important make sure the clause as written matches your business, as we have seen many business copy Ts & Cs from the internet for free.

Remember Steve Jobs lent Bill Gates his operating system without any IP rights.

Finally, always set out the jurisdiction and if you get sent a set of Ts & Cs check the jurisdiction and the seat of any arbitration. Better to arbitrate under English law in London than the law of the State of New York in New York.

Ts & Cs either sending them or getting one’s sent checked (just google contract checking service) is probably the best investment you’ll ever make. As we say what’s the last thing you must do before you are allowed to purchase from Amazon? – tick the “I agree” terms and conditions so if it works for a multibillion dollar company then don’t reinvent the wheel. 

What’s in a Footballers Contract

CW Contract Law and Legal Simplify the  in’s and outs of a Footballer’s Contract

It’s that time of year when rumours of players on the move from one club to another abound. Come the end of the Premier League season we’ll see swathes of football fans turn to the infamous rumour mill to get their fix of football. Exorbitant numbers and ludicrous weekly wages will be splashed across the back pages on a regular basis throughout the summer but in 2015 we still know very little about what goes into a football player’s contract.

Famously Robbie Fowler never looked at his Liverpool contract while Paul Gascgoine’s reportedly included a clause that demanded his accommodation be close to a fishing lake. Stefan Schwarz’s contract banned him from space-travel.

Regardless of the crazy clauses and ludicrous demands, Footballers’ contracts are often incredibly lucrative but usually incredibly complex.

“When I was playing, a contract was probably three, four, five pages long…nowadays they contracts are more like a John Grisham novel” Mark Lawrenson

But what exactly is in the mysterious pages of a professional football contract? We opened the door to a secret world inhabited by only those lucky enough to play the game professionally and wade through the ‘legalese’ to show you what goes on behind the closed boardroom doors of professional football.

SALARIES

The area of interest for the vast majority of football fans is the salaries of Premier League and Football League players but the reality is they are quite straightforward.

"A contract will include a basic salary, signing-on fees, loyalty fees, objectives based on games, sub-agreements for image rights and any clauses you may wish to negotiate." Matthew Buck – PFA

According to the PFA top earners in the Premier League (Wayne Rooney, Radamel Falcao) can earn upwards of £250,000 but the average player in the top flight will take home between £25,000 and £30,000 a week.

That represents a weekly income akin to the average yearly income in the United Kingdom.

The drop to League Two wages is remarkable but even players in football’s fourth division average a weekly wage between £1,300 and £1,500. That can vary wildly and some players make below the minimum wage (as revealed earlier this season by Torquay United manager Chris Hargreaves.

Financial Fair Play regulations introduced by UEFA have caused Clubs to focus on performance related earnings to drive down their wage bills and avoid any penalties.

BONUSES

It’s widely understood that players make a vast chunk of their change through bonus system built into the majority of players’ contracts. A short appearance from the bench could earn a player as much as £5,000 while goals, assists and clean sheets all come with a tariff.

In some contracts in the MLS players are remunerated for second assists, otherwise known as the pass that led to the pass to the player that scored.

Squads will split a bonus pot based on league positions and achievement in cup competitions and very often senior players at a club will hand their lucrative league bonuses to the junior players at a club as a gesture of goodwill.

Those bonuses can sometimes affect a player’s behaviour.

"I know some players who have come in on high goal bonuses and it's no surprise when they are shooting from all over the place." Preston Striker Kevin Davies

Apparently clubs are getting wise to this and have started to cut back on individual performance related bonuses; instead focussing on team achievements. 

THE BIZARRE

Sometimes contracts will contain unusual clauses. Upon joining Sunderland in 1999 Stefan Schwarz let slip that he would be interested in travelling into space one day so the club swiftly slapped a galactic travel clause into his contract.

Crystal Palace played host the twilight of Neil ‘Razor’ Ruddock’s career and then-chairman Simon Jordan reportedly included a clause in the aging midfielder’s contract that ensured his earnings would reduce if he was found to be overweight.

Occasionally it’s not the unusual clauses that provoke bizarre behaviour but the more routine. Buy-out clauses have been widely reported recently especially in the summer of 2013 when Arsenal bid £40m and one pound to trigger the release clause in Luis Suarez’ contract. The Uruguayan never made the trip to London permanent but the story became big news overnight. 

DISAGREEMENTS

"The biggest contractual issue comes when a perceived bigger club comes in for a player, or a player is aware of the interest via an agent or the media.

Players want to better themselves but the PFA encourages players to always honour their contracts because we expect clubs to do the same."

PFA regulations are clear in the matter that if Player’s do break widely accepted rules with regards to behaviour they can only be fined a maximum of two weeks’ wages by their club. While that can seem like a paltry figure, Carlos Tevez’ tantrum in Munich cost him around £400,000.

Usually it’s much more cordial and, should a player desire to leave, he’ll waive his basic salary but would continue to be paid signing-on or loyalty fees as per his contract.

Luckily for the vast majority of people in business, a contract or agreement is a much simpler matter than that of a footballer’s. CW Contract Law and Legal understand that and are committed to ensuring all your paperwork, contracts and legal documents are spelt out in language you understand. 

To get in touch visit us at cwcontractlawandlegal.co.uk or  call us on  0161 333 121  for a no charge no obligation discussion about how we can add value to your business proposition through a legally compliant affordable concise contract.

SHAREHOLDER AGREEMENTS ... WHY DO WE NEED THEM?

Whether you are two shareholders or several hundred, it is vital to have a shareholders’ agreement drafted to your unique requirements.

What is a shareholder's agreement?

A shareholder’s agreement manages the relationship between directors and shareholders within a business and allows directors to focus on the running of the business whilst providing protections for shareholders. 

Many people think that shareholders agreements relate to large corporations and think of large boardrooms as set out in the films, but many small businesses and SME’s operate shareholder agreements and often fail to put in place a basic agreement and issues arise when there are the minimum number of 2 shareholders with work allocations and specialities to be agreed.

It is very important that a shareholder’s agreement is specifically drafted to the individual requirements of the company, and addresses the specific needs of shareholders or groups of shareholders. For example, the agreement can be used to:

Clearly set out loan repayments and dividends;

control the decision making powers of directors ;

set the company’s dividend policy ;

put in place procedures which the company must follow for share transfers or on a sale of the company either to protect minority shareholders’ interests; or

clearly allocate areas of responsibility;

determine what happens to shares if a shareholder becomes bankrupt;

the employment of an appointed director with the company is terminated;

a shareholder dies;

place restraint of trade provisions on shareholders, restricting their ability to compete against the company .

Failure to put a shareholder’s agreement in place results in greater uncertainty in the event of a dispute or if an unexpected event occurs. Without an agreement in place it will be harder to resolve disputes between shareholders quickly –if at all and then the law becomes expensive and that is where it can get scary.

To get in touch visit us at www.cwcontractlawandlegal.co.uk or  call us on  0161 333 121,  for a no charge no obligation discussion about how we can add value to your business proposition through fixed price legal services.

Do your contracts comply with the new rules on late payment?

The Late Payment of Commercial Debts Regulations 2013 apply to all contracts entered into on or after 16 March 2013. 

AVC Debt Recovery sets out those areas you may wish to look at in your agreements relating to your payment terms.

The original legislation is The Late Payment of Commercial Debts (Interest) Act 1998, which is often referred to.

The aim of the Regulations is to encourage prompt payment of invoices - a continuing issue that may become a problem for all businesses. Recently the government stated that £34.2bn was outstanding as late payments and often larger businesses paying small suppliers are at fault. Late payment affects everybody, but particularly small suppliers suffering cashflow problems, particularly so in the current climate where margins seem to be shrinking.

Time limits for payment

There are now time limits for payment, depending on who you are contracting with:

Public authorities: 30 days unless the contract stipulates a shorter period for payment.  This period runs from the later of the date of the invoice or the receipt, acceptance (or, where the contract provides for it, verification) of the goods or services.

Private businesses: 30 days unless the contract contains an express clause on payment.   Any express clause may allow up to 60 days from the later of the date of the invoice or receipt, acceptance (or, where the contract provides for it, verification) of the goods or services. 

It is possible to agree more than 60 days provided the agreement is in writing and such terms are not “grossly unfair”.

“Grossly unfair” means anything which, in the circumstances, is a gross deviation from good commercial practice and contrary to good faith and fair dealing.  As this is a new concept under English law it will be interesting to see how the courts apply this in practice.

What if payment is late?

Under the Regulations the creditor can charge the following:

interest at a rate of 8% over the Bank of England base rate (or such other rate as is agreed);

a fixed statutory charge or compensation charge of £40, £70 or £100 depending on the size of the outstanding debt; and

any other reasonable recovery costs incurred.

What should I do about this?

We recommend that:

you review your standard terms of sale and purchase or any agreements or terms and conditions to see whether any amendments are needed;

When reviewing any new contracts, you enact simple checks and keep a look out for any clauses or terms which may not be in line of the new rules.

Here at AVC Debt Recovery we offer a full service including contract checking, credit control and invoice chasing at fixed cost as well as full recovery services tailoring the best practice to enable clients to get paid with a view to retaining the customer.

Contracts, Agreements and Terms and Conditions. Their Relevance when Selling a Business

Your contracts  and agreements are extremely valuable. If your contracts and agreements are not up to scratch then the process of a business sale can often bring any shortcomings into sharp focus and there is a risk that buyer may seek a price reduction or a potential buyer may walk away from the deal. Therefore best practice in scrutinising contracts is a potential source of revenue.
 
Selling a business is based upon the simple premise that someone wants to purchase your hard work and input, but it can become fraught with potential obstacles when your commercial dealings are looked at and scrutinised through an in-depth due diligence process to make sure that your business is worth what you think it is.
 
Before any communication or following any agreement and diligence starts you might wish to look at the following:
 

• Check to see if your supplier contracts have termination agreements following a change of control of your business. That clause halfway through that says non assignment may not be one you have previously read or taken notice of.
• Is your contract top heavy with legalese and less heavy on definitions and ways of working? Do you have onerous obligations set out in clauses under best endeavours?
• Do you have liquidated damages inserted that you were told were industry standard that ‘we never apply’
• Understanding of the wording and any lapsed never used  liabilities is important.
• Do your contracts contain a non solicitation clause that stop them approaching your personnel. Is there a risk of your customers poaching key personnel? If so, insert clauses to prevent your client base from approaching staff during the contract term and a fixed period following termination of the contract.
• Does your contract have adequate Disputes Procedures which reflect the ways of working? This is an area that is often overlooked, but disputes arise and a new business may encounter disputes.
• Are your confidentiality clauses strong enough? Are all facets of confidentiality flowed down.?Think about strengthening your confidentiality clauses during the terms of an agreement and for a specified period after completion or better still make sure crucial confidentiality clauses survive the termination of any agreement.
•  Are you prevented from implementing price increases? Are there fixed price increases which do not take into account market variables? For many years all suppliers have been asking for price increases on the increasing price of petrol, and many contracts had automatic increases. Can you implement price increases on long term contracts? A buyer will want to be assured that all agreements remain commercially viable in the future.
• Intellectual property rights are often overlooked. Do you have a sufficient IP rights clause set out? Do you have the requisite ownership and licence documents in place?
•  Don’t forget the Data Protection Act (DPA 1998). Always make sure this is covered off.

Are you covered for anti bribery compliance? Often overlooked, but we live in a global economy and remember that USA raided FIFA in Switzerland because monies were paid through USA banks and if your buyer is American they will insist upon anti-bribery compliance.

• Is your business sufficiently protected on title to goods? If you sell goods, then you can legally retain ownership prior to the goods being sold on, so check your retention of title.
• Ensure that the indemnities given by you to customers are acceptable to a potential buyer (including how they are capped). Check your liability caps. Is your liability capped at the value of an individual PO or the total value of the contract or do you have uncapped liability? Lawyers enacting due diligence get nervous about uncapped liability where the law says it does not have to be in place.
• Do your contracts have time of the essence clauses? A new business may not be able to hit the ground running and deliver what you did as standard. You don’t want the new business to lose a contract purely due to a delay in delivery.
• Do you have minimum sales volumes Are there areas of exclusivity that have lapsed and are now overtaken by custom? Are there potential breaches here that need to be re-drafted?
• Check your prices as too often contracts are not updated even though prices have changed. It can be amended, but it is best to preclude any doubt before scrutiny.
• Are there any preferred supplier clauses and the supplier is not longer trading? Are your payment terms commercially viable?
• Are there adequate remedies for non delivery and do you have liability flow downs in this area?
• Are your liability clauses in order? Your suppliers may limit liability to its own breach or negligence. Are loss of profits and/or loss of sales covered?
• Is your business required to approve a supplier subcontracting out and are you enforcing that? Perhaps you have such a good working relationship that you work on the handshake, but always best to ensure no poor wording trips you up.
• Finally always check that your contract are covered by English law as buyers always want to limit liability across jurisdictions, so check that your contracts do not allow for overseas jurisdictions or arbitration.

In short, perhaps it is best not to wait until you sell your business to check your contracts.

Here at CW Contract law and Legal we offer a fixed fee contract, agreement and terms and conditions checking service that tells you where your potential liabilities are.

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CW Contract Law and Legal Commercial agents guide

COMMERCIAL AGENTS GUIDE

CONTENTS

1. What is a commercial agent?
2. Duties of and to a commercial agent
3. Remuneration of commercial agents
4. Duration and termination of the agency contract
5. Compensation for the agent on termination
6. Where compensation does not apply
7. Restraint of trade clauses
8. Further information

Commercial agents can be valuable to any business. By working for a number of clients, or because of his contacts, a commercial agent can extend the marketing reach of the business and bring in customers which it otherwise could not obtain. However, commercial agents enjoy substantial legal protection which is not unlike that given to employees. Both parties need to be aware of the position.

In 1993, the Commercial Agents (Council Directive) Regulations 1993  were introduced pursuant to EU directive to bring the UK into line with other member states, notably France and Germany.

As so often happens with UK legislation imported from the EU, the regulations are not as clear as they should be. Whatever may be said about the shortcomings of English Law it is often better drafted than European law. Unfortunately the English tradition of clarity has not been carried into these regulations. In particular, the Regulations themselves do not deal with how compensation payments are to be calculated.

What is important is to realise the impact of these Regulation on agency contracts and the damages that may be payable on termination.  It is hoped this guide will provide a good starting point for both agents and principals.

1. What is a commercial agent?

The regulations say that a commercial agent is a self employed intermediary who has continuing authority to negotiate the sale or purchase of goods on behalf of another person (the "principal"), or to negotiate and conclude the sale or purchase of goods on behalf of and in the name of that principal.

However, a person who has power to enter into commitments on behalf of a company in his capacity as an officer of a company is not a commercial agent. Neither is a partner acting as a partner in his firm.

2. Duties of and to a commercial agent

A principal owes duties to a commercial agent:-

• To provide him with the necessary documentation regarding the goods concerned
• To obtain for the agent the information which the agent needs to perform the agency contract
• To notify the agent if he anticipates that the volume of commercial transactions will be lower than the agent could normally have expected.

An agent owes duties to the principal:-

• To make proper efforts to negotiate and conclude transactions.
• To communicate to the principal all the necessary information available to him.
• To comply with the principal's reasonable instructions.

The parties cannot contract out of these duties.

3. Remuneration of commercial agents

Rules make provisions which include the following:-

• If there is no agreement as to remuneration (which as a matter of good practice there should be) the agent is entitled to remuneration customarily allowed to agents for the type of goods involved in the area where the agent carries on his activities. If there is no such customary practice, the agent is entitled to reasonable remuneration.
• Where remuneration is wholly or partly commission based, there are general rules dealing with entitlement to commission payments, commission on transactions concluded after the end of the agency contract, apportionment of commission between old and new agents, and when commission becomes due.
• The principal must provide statements of commission quarterly and the agent must be provided with all available information which hew needs to check the amount of commission due to him. He is entitled to extracts from accounting records and this rule probably allows a right to inspect the actual books so far as relevant.

4. Duration and termination of the agency contract

Each of the agent and the principal is entitled to receive from the other on request a signed statement setting out the terms of the agency.

Where an agency contract is for a fixed term but continues after the end of that term, it is converted into a contract for an indefinite period.

Where there is a contract for an indefinite period, either party may terminate it by notice. The periods of notice are:-

• 1 month for the first year
• 2 months during the second year
• 3 months during the third and later years.

Shorter periods may not be agreed, but longer ones can be. However, if longer periods are agreed, the notice to be given by the principal may not be shorter than the notice to be given by the agent.

Unless otherwise agreed, notice must be given to coincide with the end of a calendar month.

These rules do not prevent immediate termination for breach or exceptional circumstances where the general law permits.

5. Compensation for agent on termination of the agency

It is very important to realise that on termination of an agency, the agent may well be entitled to claim damages (which can be substantial) from the principal. This may be payable whether or not the contract is terminated in breach of contract by the principal.

The rules provide that on termination the agent is entitled either to be indemnified OR to compensation for damage.

An agent is only entitled to an indemnity if that method of compensation is specified in the agency agreement. If the agreement is silent on that point, or there is no written agreement, the agent will be entitled to compensation.

Indemnity

The Regulations set out the basis upon which an agent will be entitled to receive an indemnity.  Two tests apply; firstly, the agent must have brought the principal new customers or have significantly increased the volume of business with existing customers and the principal is continuing to derive substantial benefits from this business.

Secondly,   the payment of an indemnity must be equitable, having regard to all of the circumstances and in particular, the commission the agent has lost on transactions with those customers.

If the above tests are satisfied, then the Regulations set an upper limit on the amount of the payment. That is said to be one year’s average commission  calculated with reference to the commission received in the preceding five years (or if less than five years the actual period).

Compensation

Where the agent is entitled to compensation the rule is that the agent is entitled to compensation for the damage he suffers as a result of the termination of his relations with his principal. The rules are rather vague about how compensation is to be calculated.

Until 2007, there had been considerable debate about the exact method to be adopted in calculating the agent’s loss. However, in July of that year, this was decided by the House of Lords (as they then were) in a case called  Lonsdale v Howard & Hallam Limited (Lonsdale v Howard & Hallam Limited [2007] UKHL 32)

The Law Lords decided that the damage suffered by the agent on termination of the agency relationship was the loss of the value of the agency relationship. They said that the value of the agency lies in the future income stream that it would have generated and it is this which must be valued. Valuing the agency relationship requires the parties to assess what a hypothetical purchaser might reasonably have been willing to pay for the agency as at the date of termination. Essentially, they said that compensation is based on the value of the goodwill in the agent’s business.

In order to assess the value of the business and what a hypothetical purchaser might pay, it will usually be necessary for an agent to obtain expert evidence. This is effectively an accounting exercise and the principles that apply are much the same as one would adopt when valuing a business for sale on the open market. Although it should be noted that in Lonsdale, the Lords set out a number of factors that should be taken into account.

Surprisingly, the agent is entitled to compensation if the contract ends because of his death.

Agents should take note that an agent loses his right to claim if he fails to notify the principal within a year of the end of the contract that he intends to make  a claim This does not mean a court action needs to be brought, just that the principal is notified. This is best done in writing.

6. Where compensation does not apply

The rights to compensation and/or indemnity is lost where:-

• The principal terminates the agreement where he could have justified immediate termination because of the agent's default.
• The agent terminates, EXCEPT where termination is justified because of the principal's default or where the agent terminated because owing to age, infirmity or illness he cannot reasonably be expected to carry on.
• The agent assigns the agreement to another person with the agreement of the principal.

Turing this round, this means that an agent can claim damages if he himself terminates his contract because he wants to retire or because he is too ill to carry on. It also means that where a principal terminates due to an agent’s breach, damages may be payable unless that breach is so serious that it would justify the principal terminating immediately.

It should also be noted that the parties cannot contract out of the rules for compensation and indemnity to the detriment of the agent.

Compensation or Indemnity?

It can be difficult to work out which is the method to adopt when negotiating a new agency contract. On the one hand, an indemnity requires satisfaction of the two tests and sets an upper limit. On the other hand, compensation is based on goodwill and has no upper limit.

In practice, each contract should be looked at in context. For example, in a growing business with large volumes of sales being concluded by an agent, an indemnity might limit the damages whereas compensation might be very costly.

7. Restraint of trade clauses

A restraint of trade clause is an agreement restricting the business activities of a commercial agent after the agency contract comes to an end.

A restraint of trade clause is valid only if and to the extent that:

• It is in writing; and
• It relates to the geographical area or to the group of customers or to the type of goods entrusted to the agent under the contract.

There is a maximum restriction period of two years.

Any such clause must also satisfy the usual common law tests of validity and must not be in unreasonable restraint of trade.

SUMMARY

As you will have seen, the Regulations will significantly affect the relationship between agent and principal. This guide is only intended to be an outline of the legal position and should not be used as a substitute for talking proper legal advice.

If you are thinking about entering into a contract (whether as agent or principal) that might be affected by the Regulations, we recommend you seek advice first. Equally, if you are already in such a contract and the issue of termination is on the horizon, take advice quickly or if you are worried about the threat of termination then take advice.

All too often people look for a remedy where parties were unaware of the Regulations or their extent and this has resulted in costly litigation.

At CW Contract Law and Legal we specialise in contacts. For a no obligation discussion please call 0333 121 0161, or email cwlegalservices@btinternet.com

8. Further information

Visit the government website legislation.co.uk for the full text of the Regulations.

The Regulations have been amended twice since made. Be aware that the Regulations as they appear on that site are as originally enacted. Changes made after enactment are not incorporated into the text.