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Commercial - Insight

Insight is a quarterly newsletter which aims to keep clients and contacts up-to-date with the latest legal developments in commercial law.

Latest Issue

In our latest edition of Insight Eleanor Markey looks at the recent pricing spat between Tesco and Unilever and other cases of interest with a reminder of the fines if firms don't comply with the EU regulations. We also look at oral variations to contracts and if some set-top boxes are infringing copyright. Finally, we bring you the latest team news outlining our recent appointments plus Hayley Morgan looks back at her recent visit to the AEL's IP Group's meeting in Madrid.

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EU-US Privacy Shield agreed

Friday 26th February 2016

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Insight - Commercial Law Update - Issue 7

The European Commission and US government have struck a new deal relating to the protection of data in transatlantic data transfers. This new scheme will be called the “EU-US Data Privacy Shield” (the Privacy Shield).

Safe Harbor:

The Privacy Shield will effectively succeed the Safe Harbor Agreement which was recently declared invalid by the Court of Justice of the European Union (CJEU). In simple terms, the Safe Harbor Agreement allowed personal data to be transferred from the EU to the US, provided that the US entity which received it had an “adequate” level of data protection. US entities were able to self-certify that they complied with data protection laws and that they had an “adequate” level of data protection. Self-certification allowed US entities to be covered by the Safe Harbor Agreement and therefore allowed EU companies to legally send personal data to the US for processing.

Since the Safe Harbor Agreement was declared invalid, negotiations have been taking place between the European Commission and US government with the aim of redefining the level of protection afforded to personal data which is transferred across the Atlantic, resulting in the agreement of the new framework known as the Privacy Shield.  

Privacy Shield:

The Privacy Shield proposes to implement much more stringent obligations on US data controllers and processors in relation to EU-citizen’s data, as well as increasing the monitoring undertaken by US government bodies.

The Commission has not released full details of the Privacy Shield as yet. However, a press release by the Commission (available here) states that the Privacy Shield will include the following elements:

  1. US companies which receive personal data transferred from Europe will be required to agree to and abide by specific “robust” obligations on how personal data is processed and protected. Compliance will be monitored by the US Department of Commerce and the US Federal Trade Commission.

  2. Organisations which control or process European human resource data must agree to comply with European data protection authority decisions;

  3. Access to personal data by public authorities for the purposes of national security and law enforcement will be subject to numerous safeguards and clearly defined limitations;

  4. A yearly joint review of the effectiveness of data protection measures will be undertaken by the European Commission and US Department of Commerce.

  5. Companies which handle personal data will be more accountable to individuals, particularly in relation to complaints received. If individual complaints are not resolved, companies will be required to participate in arbitration proceedings under the Privacy Shield as a final course of action.

Before being finalised, the EU Commission must draft a new “adequacy decision” which defines the adequate level of protection of personal data which must be achieved by organisations handling EU data outside of the EU. The adequacy decision will be adopted following the “comitology procedure” which requires a proposal from the Commission and opinions from the Article 29 Working Party and the Article 31 Committee.

Reaction:

The new Privacy Shield has been welcomed by tech firms in both the US and EU following huge industry pressure for a new deal to be struck. However, some critics have suggested that negotiations surrounding the Privacy Shield have been rushed.

The wording of the Commission’s press release (detailed above) has been described as vague and broad. This, combined with particular concern relating to the adequacy of the rights data subjects have to seek redress against those who hold their personal data, indicates that the Privacy Shield may be vulnerable to legal challenge in the same way as the Safe Harbor Agreement was.

We will await further details of the Privacy Shield in the coming months.

For more information about these developments please contact either:


Jacob O’Brian

Solicitor - Commercial
Tel: 0161 836 8803
Email: jacob.o’brien@brabners.com



 


Consumer law is changing – A look at the Consumer Rights Act 2015

Thursday 25th June 2015

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Commercial Law Update

The Consumer Rights Act 2015 (CRA) which received Royal Assent on 26 March 2015 is expected to come into force on 1 October 2015 (with some provisions coming into force earlier).1

The CRA will change consumer law in several areas, including in relation to the supply of goods, services and digital content for contracts made from 1 October 2015 between a “consumer” and a “trader” and consolidates key consumer rights relating to each of these areas.2

Key Changes 

Goods

a) The CRA applies to all contracts where goods are supplied to consumers (including sales contracts, contracts for the hire of goods and hire-purchase arrangements).

b) Statutory rights - under the CRA, a consumer has a number of statutory rights which will be implied into a contract with a trader (if not dealt with expressly within the contract). Such statutory rights include that goods must:

  • be of satisfactory quality;
  • be fit for a particular purpose;
  • match the description, sample or model (when a consumer relies on a description, sample or display model, the goods supplied must confirm to it); and
  • be installed correctly (where installation has been agreed as part of the contract for the supply of goods).

c) Pre-contractual information - the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 require businesses to provide a consumer with certain information before the contract becomes binding (such as information about payment and delivery). Under the CRA, any such information supplied by a trader pre-contract, will become an implied term of the contract with a consumer.

d) Remedies - consumers will have a number of different remedies against a trader for breaches of the CRA where goods are supplied including:

  • the right to reject goods which have been supplied within 30 days;3
  • the right to have faulty goods repaired or replaced (even after the 30 day right to reject period has expired);
  • andthe right to a price reduction or the final right to reject goods after one unsuccessful attempt to repair or replace the goods has been made by a trader.

Services

a) Under the CRA, consumers will have a number of statutory rights where services are supplied by a trader, including that:

  • the service is carried out with reasonable skill and care;
  • information conveyed orally or in writing to the consumer is binding where the consumer relies on such information (this will include quotations and any promises about timescales for delivery);
  • the service must be performed for a “reasonable price”; and
  • the service must be carried out within a “reasonable time” (what is “reasonable” will depend on the type of service being provided)

b) Remedies4 - if the service provided does not conform to the contract, a consumer will have the following statutory remedies available:

  • the right to require repeat performance;
  • or the right to a price reduction.

Unfair Contract Terms

a) The CRA also deals with the use of “unfair terms” by businesses in contracts with consumers. The test for “unfair terms” is essentially the same as that under the Unfair Contract Terms Act 1977 (i.e. a term is “unfair” if “contrary to the requirements of good faith, it causes significant imbalance in the parties’ rights and obligations to the detriment of the consumer”).

b) In contrast to previous consumer legislation, the CRA includes a more extensive list of terms that may be regarded as “unfair” (such as terms allowing the trader discretion over the price after a consumer is bound to the contract).

c) However, a term in a consumer contract may not be assessed for “fairness” to the extent it sets out the main subject matter of the contract or sets out the price. Instead, the term must be: (i) “transparent” (i.e. expressed in plain and intelligible language); and (ii) “prominent” (i.e. brought to the consumer’s attention).

d) The CRA also applies to any “notices” (not just contracts) issued by traders to consumers (“notices” mean any announcement, (whether or not in writing) and any other communication issued by a trader to a consumer).

Digital Content

a) The CRA introduces specific rights and remedies for consumers in relation to the supply of digital content.

b) The CRA applies when: (i) digital content is supplied to a consumer for a price; or (ii) when digital content is supplied free with goods and/or services which the consumer has paid for.

c) Generally the supply of digital content is treated in the same way as the supply of goods in that it must be of satisfactory quality, fit for purposes and in conformity with the description provided by the trader.

d) Under the CRA, consumers are entitled to claim compensation if the digital content supplied by the trader damages the consumer’s electronic device on which the digital content is used or causes damage to other digital content and the damage is of a kind that would not have occurred if the trader had exercised reasonable skill and care. In such circumstances, the trader must either repair the device which has been damaged due to the digital content supplied by the trader or provide a replacement device.

Summary  

The CRA clarifies what rights and remedies consumers have in terms of their dealings with businesses who supply goods, services and/or digital content. In light of this, businesses should take the opportunity before 1 October 2015 to review their existing consumer terms and conditions and also the content of any communications / notices they issue to consumers to ensure they will be compliant with the CRA.

 

1 In general, consumer law has developed piecemeal over time and is contained in several pieces of legislation, including the Unfair Contract Terms Act 1977, Sale of Goods Act 1979 and the Supply of Goods and Services Act 1982. The existing legislation which deals with the supply of goods and/or services by businesses will be amended to cover business to business and consumer to consumer contracts only.

2 The CRA also deals with a number of other areas outside the scope of this article, such as the duty of letting agents to publicise their fees, secondary ticketing sales and options for consumers and small / medium businesses to challenge anti-competitive behaviour through the Competition Appeal Tribunal.

3 The time limit for a consumer to exercise this right to reject is the end of the 30 days beginning with the first day after the following have occurred: ownership or possession has transferred to the consumer; the goods have been delivered; and, if applicable, the goods have been installed.

4 Such remedies do not prevent the consumer seeking other remedies for breach of contract by a trader such as claiming damages or seeking specific performance.


Apps – Key Legal Developments

Monday 9th February 2015

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Insight - Commercial Law Update - Issue 6

With over 1 million apps available on Apple’s iOS App Store alone, it is clear that businesses are using technology to reach out to customers.

As the use and influence of apps increases, so too does the importance for businesses of observing the developments in the law in this area.

2014 saw the emergence of two distinct developments in the law surrounding the development of apps:

1. Apps and users’ privacy

A global survey of over 1,200 mobile apps by 26 privacy regulators conducted last year has revealed widespread data privacy failings in the collection and usage of users’ personal information. The survey made the following key discoveries:

  • 85% of the apps surveyed failed to clearly explain to users how they were collecting, using and disclosing personal information;
     
  • almost 30% of apps unlawfully requested excessive personal information from users; and
     
  • 43% of the apps surveyed failed to tailor privacy communications to small screens for tablet and mobile devices, either by providing information in a too small print or by hiding the information in lengthy privacy policies that required scrolling or clicking through multiple pages.

Why is this important to your business?

The UK’s privacy watchdog, the Information Commissioner’s Office (‘ICO’), recently conducted research which showed that 49% of app users had previously decided not to download an app due to privacy concerns.

Whether your business already has an app or is considering developing an app, it is important to be aware that the ICO has several options available to it for breaches of data protection/privacy legislation such as the power to issue enforcement notices and fines of up to £500,000 in the most serious of cases.

What can your business do to comply with the law?

The ICO’s latest guidance emphasises the need for transparency from businesses regarding their use of users’ personal information.

Examples of best practice include:

  • providing a basic explanation to users of how any personal information they provide to you will be used by your business;
     
  • using ‘just-in-time notifications’/‘pop-ups’ to let users know when they are required to submit personal information; and
     
  • providing clear links for users as to where they can obtain more detailed information about how their personal information will be used by your business.

The ICO also recommends that businesses check periodically whether they actually need all of the information from users of their apps which they collect and store (e.g. by conducting regular audits). You should delete any app users’ information that your business collects for marketing, commercial, accounting or other legal reasons but doesn’t require or use.

Given the risks of non-compliance, businesses should ensure that they seek appropriate contractual protections in their arrangements with app developers. In particular, such arrangements should deal with compliance with applicable laws such as privacy / data protection laws and responsibility for non-compliance.

In addition to your business complying with its legal requirements in this area, collecting, storing and using the personal information you obtain from users of your app correctly will help establish a relationship of trust which could give your business a competitive advantage, with users feeling reassured that their personal information will be used properly and kept securely.

2. In-app purchases and advertising

2014 also saw the beginning of a concerted effort by the Office of Fair Trading and the Advertising Standards Authority (‘ASA’) to clamp down on misleading add-on costs once an app has been downloaded.

Businesses should be aware that advertising an app as being ‘free’ (e.g. in the promotional overviews of apps displayed in the Apple iOS Store / Google Play Store) may be misleading if the proper functioning and users’ enjoyment of the app is dependent upon in-app purchases. For example, the ASA has found app advertisements to be misleading where in-app purchases have had a more significant impact on the functionality of the app than the user would have initially expected from the information given in the original advertisement.

Advertisements should therefore be clear about what users can expect from the ‘free’ aspects of the app and informed if in-app purchases may have a significant impact on the functioning and performance of the app.

Summary

Nowadays apps play a key role in the marketing and commercial strategies of many businesses as they create new ways for businesses to interact with their customers. At the same time it is vital for businesses to understand and abide by their legal obligations in respect of how their app operates.

 


Don’t lose on penalties – Top tips for liquidated damages clauses

Monday 9th February 2015

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Insight - Commercial Law Update - Issue 6

An important part of managing risk is minimising exposure to potential liability under arrangements with third parties. One way of achieving this is through the use of liquidated damages clauses although, as with any provision seeking to exclude or limit liability, there is a risk that such clauses could be held to be unenforceable if challenged. Careful drafting is, therefore, essential in order to enhance the robustness of such clauses.

Liquidated damages clauses seek to fix the amount payable by the defaulting party in the event of breach. In the absence of such a clause and in the event that the parties cannot reach an amicable solution, the court is often required to intervene in order to assess the level of damages to be paid by the defaulting party (subject to other relevant terms of the agreement). Liquidated damages clauses avoid this (costly and time consuming) process, by allowing the parties to assess the appropriate level of damages for themselves at the time of entering into the contract, giving certainty and making recovery easier.

So, are liquidated damages clauses that simple? And does this give parties absolute freedom to determine the level at which they are set? No – if a liquidated damages clause is too severe or is intended as a deterrent or punishment then it will be regarded as a “penalty clause”, which is unenforceable. Here are our top tips in this area:

  1. Courts generally award damages for breach of contract to compensate loss, not to punish the party in breach. Liquidated damages clauses must follow this principle and should therefore be a genuine pre-estimate of the loss likely to be incurred as a result of the breach.

  2. Make sure that you would be able to evidence why and how the value given in a liquidated damages clause is indeed a genuine pre-estimate of loss. Keep a record of any calculations, assumptions made and any negotiations between parties.

  3. One size may not fit all, as different breaches may warrant different levels of damages, which should be reflected.

  4. In long-running contracts, make sure that the liquidated damages clauses are kept under review, particularly if the contract is amended. For example, if a contract price is varied, this may affect the level of any relevant liquidated damages clauses.

  5. Consider alternative approaches and drafting options such as service credits or bonus payments for early or good performance.

As far as contracts between businesses are concerned, recent case law suggests that courts may be becoming more open to considering the “commercial justification” behind liquidated damages clauses in order to determine whether or not they are unenforceable penalties. This may hint at a move towards a more lenient approach by the courts; however, any party which seeks to rely on commercial justification alone runs the risk of the court not agreeing with their interpretation of what is and is not commercially justified. With this in mind, the above approach should be adhered to, to try as far as possible to ensure the robustness and enforceability of liquidated damages clauses.

 


Brabners is a proud sponsor of the Merseyside Innovation Awards…once again!

Monday 9th February 2015

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Insight - Commercial Law Update - Issue 6

The Merseyside Innovation Awards is now open to applicants following this year’s launch on 19 January 2015.

Now in its 19th year, the Merseyside Innovation Awards (MIAs) recognise and reward the use of innovation as a means of boosting growth and profitability on Merseyside.

Brabners has been sponsoring the MIAs for over a decade during which we have been helping to support the transformation of great ideas into great businesses.

Since its establishment the Awards have seen applications from companies and individuals with a vast variety of businesses including IT, automotive, pharmaceutical, green technology, design, industrial and construction, and the sponsors are always keen to see something new.

We are to happy receive applications from all parts of Merseyside which includes the areas of Liverpool, Wirral, St Helens, Knowsley, Sefton & Halton.  As the economic development of Merseyside is the drive behind the Awards, part of the scoring criteria is based on an innovation’s expected ‘impact on Merseyside’.

The Awards have monthly winners, which are decided by the sponsors based on set scoring criteria.  These monthly winners have the benefit of free local PR and the chance to be selected for the Grand Final.

The Grand Final, held in July, sees three shortlisted finalists present their innovations to a distinguished panel of judges from across the commercial spectrum who then decide on a winner.

The winner of the Awards receives £10,000 in cash, financial support that can have a huge impact on a small business.  The runners up each receive specialist business support worth up to £2,000.

The 2014 winner, Briggs Automotive Company (BAC) Ltd, manufactures the world’s first road-legal single-seat production supercar.  Last year’s other finalists were Pulmorphix Limited, who developed what they believe is the world’s first ‘lung bio-simulator’ and Ultromex Limited, who develop novel and safe economic processes to improve recycling of metals.

Any Merseyside-based individual or company with less than 50 employees with an innovative product or service is eligible to apply.

More information as well as the application criteria can be found on the Awards website at http://www.merseysideinnovationawards.co.uk/default.aspx.

If you have an innovative business that you would like to be considered for 2015’s Award, please contact Hayley Hall.


Hayley Hall

Intellectual Property Executive
Commercial team
Tel: 0151 600 3466
Email: hayley.hall@brabners.com


Don't Gamble on Third Party Promotions

Friday 10th October 2014

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Insight - Commercial Law Update - Issue 5

At present, gambling companies can be based overseas and provide remote gambling facilities for UK consumers without requiring a UK licence.

On 1 November 2014 (implementation has been delayed one month in light of a judicial review), new legislation is expected to come into force which seeks to change this and tighten the level of control by the Gambling Commission by requiring all remote operators to hold a UK licence if their gambling facilities are used in Great Britain. For a more detailed summary of the new provisions, please click here.

As well as it being an offence for any gambling operator to provide remote gambling facilities to UK consumers without a licence, it will also be a criminal offence to advertise/promote such companies/services – although at first glance it may appear that this area only affects those in the gambling industry, this does not necessarily hold true as the changes have a significantly wider application. “Advertising” covers a range of activities and encompasses sponsorship arrangements, brand-sharing and promotional agreements. Businesses therefore need to carefully consider whether any of their commercial activities fall within the broad definition of “advertising” and whether they may therefore be affected – the potential sanctions for committing an offence include imprisonment and/or fines.

For example, if a rights holder (such as a sports organisation or venue) has a sponsorship deal with a gambling operator who is not appropriately licensed, such rights holder could be exposed to significant risk and liability. Similarly, advertising of gambling operators by third parties (for example advertising on physical sites such as hard copy publications or billboards, or in digital media) could be affected, whether such arrangements are managed internally or through a third party (e.g. an advertising agency). For example, if a business engages an agency to sell/manage the advertising content on its website, any advertising/promotion of an unlicensed gambling operator in or on such media could lead to liability for the business and/or the agency.

As such, businesses should be aware of the potentially wide application of the legislation (with particular reference to any third party advertising or promotional associations it has in place) in order to consider the potential risks and take appropriate action, both on a practical level and in its associated  contractual arrangements.


Bit buy bit – dealing with the rise of cryptocurrencies like Bitcoin

Friday 10th October 2014

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Insight - Commercial Law Update - Issue 5

What is Bitcoin and why is it important?

Bitcoin is a decentralised electronic currency and the first fully implemented cryptocurrency. Bitcoin is an open source project and as such is not controlled by any single government or organisation

Bitcoin is an important consideration for businesses as it is growing incredibly quickly – at the end of August 2013 the total value of bitcoins in circulation was over $1.5 billion. Bitcoin is now being used by a growing number of businesses, there are currently 3114 companies listed who accept bitcoin payments, including Wordpress and Reddit. Most recently, Paypal have joined up with three Bitcoin payment processors to enable sellers of digital goods in North America to receive payments in bitcoins.

Legal Implications

As Bitcoin’s use has increased exponentially since it was first created in 2009 it has become increasingly clear that governments, regulators and tax authorities are struggling to place it in an existing legislative framework. Different countries are dealing with the issue in a range of ways however for the purpose of this brief the focus will be on the UK

The UK’s position on cryptocurrencies such as Bitcoin to date can be described as ambiguous at best. However as a global centre for financial services this has not stopped cryptocurrencies from joining the UK market.

There are three main areas of regulation which apply to cryptocurrencies; taxation, money laundering and consumer protection.

Taxation

On 3 March 2014 HMRC issued a provisional brief setting out its position on the tax treatment of cryptocurrencies. This brief sets the ‘mining’ or creation of bitcoins outside the scope of VAT. However, the treatment of bitcoins for corporation, income or capital gains tax purposes will generally follow the normal rules although this will be decided on a case by case basis depending on the parties and activities involved.

Money Laundering

Bitcoin businesses in the UK are, at present, under no obligation to conduct money laundering checks for any transactions completed using bitcoins.

Consumer Protection

The Financial Conduct Authority (FCA) has so far yet to make a decision on how, if at all, Bitcoin should be regulated. However, in June 2014 it announced that it would be launching a new project, Project Innovate, which will look at ways of ensuring that positive new developments such as Bitcoin are properly overseen by the FCA. Project Innovate is due to publish a report in Autumn 2014. Currently the position remains that any Bitcoin businesses in the UK are not registered or regulated by the FCA and as such there are no standard rules or guidance for businesses using Bitcoin.

What next?

It is clear that there is still a huge degree of uncertainty about Bitcoin, in particular whether it is to be treated as a currency, commodity, payment protocol or something else and how it should be regulated.  It would seem unlikely that more traditional businesses will choose to adopt bitcoins as a payment method until greater clarity is achieved. However given Bitcoin’s rapid rise so far and with international businesses such as PayPal beginning to accept it, this may not be too far off.

If you would like advice or information regarding the issues raised in this article or any other Commercial Law matter please contact:

Eleanor Markey
Eleanor Markey
Solicitor
Tel: 0151 600 3122
Email Eleanor


Intellectual Property Act 2014 - we summarise the key changes

Friday 10th October 2014

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Insight - Commercial Law Update - Issue 5

The Hargreaves Review of Intellectual Property and Growth (2011) and the Gowers Review (2005) suggest a number of changes to UK intellectual property law, including new exceptions to copyright law as discussed in our previous article.

The Intellectual Property Act 2014 implements some more of the reforms suggested in the Hargreaves Review with the stated aim of modernising and simplifying intellectual property (IP) law to encourage innovation and growth and support businesses, particularly SMEs.

The IP Act 2014 includes a number of measures, many of which are a consolidation of existing laws and practices, and focusses on patents and design rights in particular.  This article aims to summarise the main implementations.

Design Rights

  1. Blatant (exact, or immaterially different) infringement of a UK or Community (European) registered design right can now be a criminal offence, in certain circumstances where it is intentional and the infringer “knows or has reason to believe that the design is a registered right.”  This brings the law more into line with existing UK copyright law, for which there is also a criminal offence. It is punishable by a fine and up to 10 years imprisonment. This criminal offence appears to use a higher test than the current civil offence of infringement where an infringer is one who uses a design that does not give a “different overall impression”.

    Rights holders are recommended to register their rights and ensure that they have notifications of these rights on the products or packaging making it difficult for infringers to plead ignorance.
     
  2. For commissioned designs, the first owner of a design will be the designer, unless a contract provides otherwise.  Previously the first owner had been the commissioner.  This change brings design law into line with copyright law which addresses a complexity that exists in the present law.

    Designers and commissioners are recommended to always have clear contracts in place identifying the owners of any subsisting IP.
     
  3. Certain acts, including those done for teaching, privately or for experimentation, will now be exempt from unregistered design right infringement.  This again brings the law more into line with existing UK copyright law and harmonises with the EU system.
  4. Those who have permission to use registered Community designs can now not be sued for copyright infringement of the respective design.  This aligns the law with the existing law on UK registered designs and is less complex and fairer than the existing law.
  5. Third parties who are already using a design that is subsequently registered will be allowed to continue to use the design.  This means that those who have made investments in good faith are not at risk.  This aligns design law with patent law in relation to this issue.

Patent Rights

  1. The Act allows the European Unified Patent Court to be implemented.  Each House of Parliament will need to approve the order before it is brought into effect. We refer to our article on the unitary patent for further information.
  2. While there is no obligation to, patent owners often mark their products with the patent number to provide public notice of their rights.  Under the Act owners will be able to mark a patented product with a web address that contains the relevant information. This will avoid the need to change information on products such as the relevant numbers and when as patents are granted, revoked or foreign-filed.
  3. The IPO will be able to give non-binding opinions on a wider range of patent validity issues and will be able to revoke clearly invalid patents on all invalidity grounds.  As well as on lack of novelty or inventive step, the IPO will therefore now be able to opine on non-entitlement, insufficient disclosure and cases where the subject matter extends beyond the disclosure.  This is designed to help to focus any litigation and reduce the burden that affected parties have when dealing with invalid patents.

Many of the above changes are intended to make the law simpler and clearer by bringing the current laws in line with EU law and existing UK laws on other forms of IP protection.

It is not clear at this stage what effect the above changes will have in practice.  These provisions are due to be implemented on 01 October 2014.  It will become known after this date what practical effect (if any) the changes have, in particular the criminal penalties for design right infringement.

In the short term, however, changes in legislation generally tend to generate complexities as the intricacies of the changes may be subject to debate and argument.

There are a number of additional changes to the law which are envisaged to come into effect in 2015 or later which have not been discussed here, including the provision for the electronic inspection of documents and the introduction of a Designs Opinion Service.

If you would like advice or information regarding the issues raised in this article or any other Commercial Law matter please contact:

Hayley Hall
Hayley Hall

Intellectual Property Executive
Tel: 0151 600 3466
Email Hayley

 


Looking at... Personal data - Trade Mark infringement - Price of a contract

Friday 10th October 2014

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Insight - Commercial Law Update - Issue 5

Did You Know?
  • If you wish to use someone’s personal data for unsolicited marketing purposes via email, fax, telephone or SMS you need his/her explicit consent to do so via an appropriately worded opt-in. It is not sufficient to rely on that person failing to opt-out by ticking a box or other means. Bear this in mind when collecting personal data which you may wish to use for marketing purposes.
     
  •  Case law has confirmed that a registered European Community Trade Mark (CTM) cannot be used as a defence to infringement of an earlier registered CTM. Conversely in the UK, a registered UK trade mark can be used as a defence to infringement of an earlier registered UK trade mark. Accordingly, it would be necessary for the later UK trade mark to be cancelled before a successful infringement claim could be made.
     
  • The price of a contract is normally an essential term of the contract; a contract lacking certainty on this point may well be invalid. However, if a contract includes an agreed process for negotiating the price (particularly if it is in a range and the minimum and maximum price are set out), or a process for identifying a reasonable sum for payment, preferably by a certain date with recourse to expert determination the contract may be sufficiently certain to ensure a valid contract. However this will depend on the contract at hand and should be reviewed by a solicitor to ensure your contract is legally binding.

If you would like discuss any Commercial Law matter you may have please contact:


Michael Winder
Solicitor
Tel: 0151 600 3085
Email Michael


Which is Best? Best or Reasonable Endeavours?

Friday 10th October 2014

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Insight - Commercial Law Update - Issue 5

Read a commercial contract and you will frequently find that in addition to an absolute obligation to do something (“Party 1 shall…” or “Party 1 will not…”) a party to a contract is often required to use their ‘reasonable endeavours’ or ‘best endeavours’ to achieve a certain contractual objective. It is clear that both phrases are less than an absolute obligation, but what is the expectation of reasonable endeavours and best endeavours and how much are you required to do to comply with such a requirement in a contract?

Best Endeavours

The Courts have been required to consider what “best endeavours” means on several occasions.  The Courts have made it clear that a best endeavours clause is not to be considered as ‘second-best’ to an absolute obligation.  The Court considers the phrase ‘means what the words say’, that is, a contracting party under such an obligation must endeavour to take all those steps in their power which are capable of producing the required results. Such steps are those which a ‘prudent, determined and reasonable obligee, acting in his own interests and desiring to achieve that result, would take’.

Reasonable Endeavours

Whether a party has met a reasonable endeavours obligation is slightly more subjective and involves that party ‘balancing the weight of their contractual obligation’ to the other contracting party against all relevant commercial considerations. Such relevant commercial considerations would include its relations with third parties, its reputation and the cost of such a course of action.

When considering the issue of reasonable endeavours, the Courts have suggested that a reasonable endeavours clause would only require a party to take one reasonable course of action to fulfil its obligation under a contract, rather than many courses of action required by a best endeavours obligation.

Best v Reasonable

In light of the above, a best endeavours obligation is more certain than its reasonable endeavours counterpart. Having said that, neither phrase offers a clear-cut definition of what is required and so expectations of a contracting party who must use their ‘reasonable’ or ‘best’ endeavours cannot always be ascertained. Indeed, whilst using your best endeavours clearly places a higher burden on the party subject to the obligation than simply using their reasonable endeavours, the less tangible nature of the latter potentially creates a higher risk of non-performance.

A recent Court decision stated that it was down to the nature and terms of the contract in question to ascertain the level of expenditure and regard to the commercial interests of a party that would be required as part of fulfilling an endeavours clause in a contract. Trying to achieve a qualified contractual obligation under a contract using your best endeavours will likely require significantly more expenditure in comparison to using reasonable endeavours to fulfil the same obligation.

With all this in mind, it is best practice to outline as precisely as possible the objective of the clause in question and what explicit steps must be taken in order for the party to fulfil that objective when drafting a contract. The clearest course of action is to use absolute obligations (“Party 1 shall…”, etc) as much as possible, then the obligation and standard of performance is clear.

Only where absolute compliance with an obligation is impossible, unlikely or undesirable should an endeavours clause be used.  Even then the objective and the steps required should be made as clear as possible to provide certainty as to what the obligation requires of the obliged party. This will protect such a clause from failing for lack of certainty and becoming unenforceable. Always consider however that where a contract stipulates the actual steps required to fulfil an endeavours obligation, all of the particular steps set out in the contract must be fulfilled regardless of the present commercial considerations of the party, which is of particular importance when under a reasonable endeavours obligation where the commercial considerations of the party seem to carry more weight.

In Summary

There can be uncertainty as to what an endeavours clause may actually require of a party in a given contract. These uncertainties are best resolved with drafting of ‘objective yardsticks’ so as to not over-obligate (or indeed, under-obligate) a party against their commercial interests.

As the party benefitting from an obligation, an absolute obligation or a best endeavours clause will be preferable as there will be a high requirement for the obligation to be satisfied by the other party to the contract.  For the party subject to the obligation, while they would also benefit at times from a clear, absolute obligation, alternatively it may be more likely that they would benefit from the lower level of obligation imposed by a reasonable endeavours obligation, although this may come with its own issues.

If you would like advice or information regarding the issues raised in this article or any other Commercial Law matter please contact:


Michael Winder
Solicitor
Tel: 0151 600 3085
Email Michael


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