Main menu


+44 (0)151 600 3000


+44 (0)161 836 8800


+44 (0)1772 823 921

Search form

Search form



Public Procurement Law – A new exemption to the Regulations?
Thursday 19th January 2017

Does the recent ruling in the case of Remondis GmbH & amp Co KG Region Nord v Region Hannover and others (Case C-51/15) open a third way for contracting authorities to organise the delivery of public services without being subject to the EU public procurement rules?

The case concerned the transfer by the Region of Hannover of waste treatment tasks which were its responsibility, to another public body, which was a special purpose association (SPA) that had been created by local authorities for the purposes of waste management. The referring court asked whether such a transfer constituted a public contract, and if it was, whether it could fall outside the scope of EU public procurement law either by the ‘in-house’ (Teckal) exception or the ‘cooperation’ (Hamburg Waste) exception.

German law allows for public authorities to create SPAs to carry out duties conferred on the relevant authority. When formed, the public authority transfers the rights and powers to perform the duty to the SPA. Such transfer can include an obligation on the public authorities to pay contributions to the SPA where other sources of revenue are not sufficient to cover its financial needs. However, the SPA at the subject of this case was generating substantial revenue, both from the tasks formerly carried out by the conferring public authorities and also, from tasks performed for other third parties. This prompted Remondis to make the initial application for review.

The referring court referred four aspects, which it considered characterised the arrangement:

  1. The tasks carried out by the SPA were ‘services’ within the meaning of Directive 2004/18;
  2. The transfer was effected for consideration;
  3. The SPA carried out other activities beyond those within the remit of the original public authorities; and
  4. The transfer did not fall within the ‘in-house’ (Teckal) or ‘cooperation’ (Hamburg Waste) exemptions.

The ECJ noted that case law had previously determined that agreements which transfer powers between public authorities and do not provide for remuneration for contractual performance, are deemed to be an internal reorganisation and therefore are not public contracts. 

The ECJ found that the arrangement did give rise to a genuine transfer of powers and to the Region of Hannover relinquishing its own responsibilities in relation to the relevant services. Whilst waste services were a ‘service’ within the scope of Directive 2004/18, the arrangement as a whole, concerned the genuine transfer of power to perform a public service task and was not confined just to the performance of a service. The fact that activities beyond the task and duties of the original authorities were being performed was not relevant. Whilst the authorities could be required to contribute financially to the SPA if it could not generate sufficient revenue to meet its financial needs, this was considered to more akin to a subsidiary or a form of guarantee and could not be construed as remuneration for services. The ECJ concluded that the SPA had financial and full autonomy in the performance of the tasks. It therefore found that the conditions for the existence of a public contract were not met. 

This case provides for a very different kind of solution to that which has previously been explored by public authorities using the ‘in-house’ and ‘cooperation’ exemptions. If you would like to explore the options that may be available to you, or to discuss public procurement law in general, please do not hesitate to contact Victoria Trigwell  on 0151 600 3429 or email


Onerous practices in Public Procurement – new CCS Guidance
Wednesday 21st December 2016

The Crown Commercial Service has released its latest procurement policy note (PPN 10/16). The newly published guidance marks an attempt to reduce the number of public procurements (a.k.a. OJEU tenders or OJEU procurements) which involve onerous or inappropriate risk allocation between contracting authorities and suppliers. 

PPN 10/16 comes into force with immediate effect and applies to all central government departments, their executive agencies, and non-departmental public bodies.

The PPN reiterates the importance of contracting authorities conducting public procurement and contracting activity in accordance with published guidance and best practice. In particular, it highlights the following:

1. Pre-procurement market engagement between contracting authorities and potential suppliers, as permitted by provisions included in the Public Contracts Regulations 2015, is described as ‘essential good practice’. It is envisaged that such engagement will encourage innovation and maximise value for money.

2. Contracting authorities should ensure that accurate and reliable data is made available throughout the procurement process, especially when such data relates to forecasting volumes, and managing demand and performance under the contract.

3. Contracts should be awarded based on the supplier’s ability to provide value for money over the life of the contract.

4. Proportionate mechanisms should be employed to identify and address risks inherent in the contract and contracting authorities are encouraged to discuss these risks and possible solutions with suppliers at the pre-procurement stage.

5. When establishing limits of liability in contracts, contracting authorities should use the guidance developed by the Crown Commercial Service to support their Model Services Contract and in particular, they should ensure that:

  • The commercial risks of each contract are considered in detail;
  • Risk management proposals are discussed with potential suppliers in the pre-procurement stage;
  • Bespoke liability provisions are drafted to reflect the requirements, value and complexity of the contract, avoiding unlimited liability except where required by law; and
  • Deeds of Guarantee and Performance Bonds are only used where the contract is at high risk of performance or supplier failure.

6. Contracting authorities should adopt a collaborative relationship with suppliers, using established contract management tools and techniques so that any changes in contract delivery are identified early enough to be able to be resolved without creating unmanageable risk for either party.

The release of PPN 10/16 highlights the concern of suppliers that their adoption of risk in performing public contracts is disproportionate to the risk adopted by the contracting authority. Following this guidance, contracting authorities, acting in accordance with best practice, will need to consider the level of risk each party to the contract is best placed to bear and to consider the cost consequences associated with such risks, even before issuing an OJEU notice.


For further information regarding risk allocation in public contracts, or public procurement law in general, please visit our public procurement page or contact Victoria Trigwell at 0151 600 3429 or email



The 12 Days of Procurement
Tuesday 13th December 2016

Unlike the Coca-Cola truck arriving in your hometown or the eagerly awaited John Lewis advert, the real sign that Christmas is approaching is the publication of our now iconic “12 days of procurement” article, a Christmas concept which is so strained and far-fetched that not even the brazen legal team at European Dynamics consider it to be credible. 
But credibility is often temporarily suspended at this time of year, as anyone who recently witnessed our Christmas hat competition would testify, so here are our 12 procurement presents to you this Christmas take a look back on the procurement law highlights of the last 12 months:
  1. First, the partridge in a pear tree. In a further attempt to simplify the selection process and to assist small and medium enterprises, the UK government introduced the mandatory Supplier Questionnaire (SQ), which standardises prequalification questions and aims to reduce the administrative burden on SMEs when tendering for public contracts. Mmmm. No partridges nor pear trees. I told you it was strained. We’ll just move on to number two, shall we?
  2. Cases such as Woods v Milton Keynes and Energy Solutions EU Limited v The Nuclear Decommissioning Authority demonstrate that the courts are willing to look into how a contracting authority has evaluated tenders to see if there have been breaches of the equality and transparency duties but also to see if there are manifest errors in the scoring of tenders.
  3. Changes introduced by settlement agreements designed to address issues with a contractual relationship can breach the limitations of substantial modifications to contracts under the Public Contracts Regulations 2015 (i.e. the old Pressetext rules) and lead to a challenge in the courts. 
  4. Despite point 3, the Supreme Court has endorsed contracting authorities’ rights to include the ability to expand the contractual duties of a supplier so long as the ability is clear from the start, and is not used to circumvent the regulations (Edenred v HM Treasury).
  5. We learned that mitigation strategies may allow more flexibility for contracting authorities to swap procurement routes in certain limited circumstances.
  6. The Nuclear Decommissioning Authority (NDA) led the way in showing exactly what not to do in the evaluation of tenders; examples of such bad practise included not providing evaluators with sufficient time or knowledge to properly evaluate bids, encouraging evaluators to apply scoring criteria unevenly and discouraging and shredding contemporaneous notes, decisions or scores made during the evaluation.
  7. The query ‘does Part 4 of the Regulations actually have any teeth?’ was partially answered when the case of Judetul Neant confirmed that ERDF funding can be clawed back or withheld if the contracting authority fails to comply with domestic public procurement law.
  8. The UK courts showed that the declaration of ineffectiveness remedy also has teeth in the UK when it was deployed for the first time in the mainland UK in the case of Lightway (Contractors) Limited v Inverclyde Council.
  9. The case of Faraday v West Berkshire Council clarified once and for all that if carefully drafted, development agreements can sit outside of the ambit of public procurement law.
  10. The Crown Commercial Service reminded everyone that the Regulations allow and encourage contracting authorities to consider environmental, social and ethical considerations, a far cry from the dark days of 2006 when it was unclear whether such matters could be considered.
  11. Because it’s so bad it merits a second mention, further examples of bad practise by the Nuclear Decommissioning Authority include (1) not permitting notes to be made during dialogue meetings, so months later solutions that were encouraged during dialogue were then marked down during evaluation, and (2) most importantly of all, breaching its own tendering rules and allowing a bidder to carry on (and win) the process even though that bidder had failed to meet one of the NDA’s mandatory pass/fail criteria.
  12. And for all of the political upset the referendum on the 23rd June caused, it has been widely considered that due to both domestic and international reasons, Brexit (in whatever form it happens) will be very unlikely to have any material effect on the application or the content of UK public procurement law for the foreseeable future, albeit we note that one prominent QC is arguing passionately to use the opportunity to improve access to remedies for bidders. Therefore, while public procurement appears to be low on the government’s priority list and is under no immediate pressure to change in a post-Brexit world, watch this space…
The above are just a sample of some of the key issues and developments in the world of public procurement law from the last 12 months. 
If you require any further information on any of the developments referred to above or any advice on any of your procurement activities, please do not hesitate to contact the Brabners procurement team, as we would be happy to assist you. Alternatively, you can have a look at our public procurement page here
The Brabners procurement team wishes you a very merry Christmas and, to those of you who work for contracting authorities, a challenge-free New Year. 


Last orders for illegal broadcasting by pubs?
Wednesday 9th November 2016

If you were to take a walk through town, you would be guaranteed to find a pub which broadcasts subscription sports services. But at a time when a commercial subscription to Sky averages £1,500 per month, it comes as little surprise that some pubs are cutting corners when it comes to their sports coverage.

Simon Hopkins and Leon Passlow - already serving prison terms for conspiracy to defraud in accordance with s.12 Criminal Justice Act 1987 - have been ordered to pay back the £992,947.60 they earned whilst undertaking a 2015 subscription scam. The pair were found guilty of fraudulently obtaining Sky and other subscription cards and selling them to commercial establishments at a cut price, making them hundreds of thousands of pounds in the process. Failure to make payment within three months will trigger an additional seven year prison term. Read the Surrey Police article here.

The FA and Sky have historically pursued pubs which fraudulently broadcast Premier League football with unrelenting vigour. The outcome of this case comes as no surprise at a time when copyright infringement is easier than ever for those who wish to dishonestly access subscription content. Detective Sergeant Chris Rambour of the Surrey Police Economic Crime Unit claimed: ‘Seeking a confiscation order following a conviction is a lengthy, complex process’, but recent moves towards stronger protection of Sky and BT copyright suggests that this may not be the last confiscation order to be handed down to criminals who profit from their dishonesty.

One such move to protect Sky and BT came earlier this year, with a minor but significant change to copyright law. Previously, s.72 of the Copyright Design and Patents Act 1988 (CDPA) permitted businesses such as pubs, which don’t charge an entry fee, to show ‘broadcasts and any film contained in the broadcast’ without the permission of the copyright owner. Certain permission was still necessary for original artistic works within the broadcast or film, but holders of unauthorised subscription cards could darken the on-screen branding during a sports event and silence the sound of the broadcast, in an attempt to rely on the s.72 CDPA copyright ‘loophole’.

Inclusion of, and confusion over the word ‘film’ in s.72 CDPA made successful civil and criminal proceedings against unauthorised copyright users much more challenging. The recent change to the CDPA, in removing the word ‘film’, has made it easier for those public establishments which infringe copyright to be held to account, and signals a concerted effort by government to crack down on illegal broadcasters.

This recent case, alongside changes to the substantive law, serves as evidence that the infringement of copyright in relation to illegal broadcasting is of great interest to both private broadcasters and public bodies. It demonstrates that a zero-tolerance approach will be employed against any establishment which attempts to breach or avoid intellectual property law when broadcasting sporting events. Pubs or other businesses wishing to broadcast premier league football can no longer take the risks associated with illegal broadcasting, and must now obtain subscriptions through the proper channels to avoid both civil and criminal liability. 


EU confusion over trade mark injunction
Tuesday 1st November 2016

The Court of Justice of the European Union (CJEU) handed down an awkward interpretation of EU-wide injunction rules recently as the case of combit Software GmbH v Commit Business Solutions Ltd made its way through the German courts.

Combit Software GmbH (combit), owner of the ‘combit’ mark, applied for an injunction against the use of ‘Commit’ within the European Union (EU) by Commit Business Solutions Ltd (Commit), alternatively in Germany exclusively. Although the application for the EU injunction was dismissed, the German injunction was upheld.

It was found that the terms ‘combit’ and ‘commit’ are distinguishable to English speakers because of the technological connotations of the terms ‘com’ and ‘bit’, in contrast to the unrelated, widely used verb ‘commit’. On the other hand, Germans would find the marks confusingly similar because they would not appreciate the English conceptual meanings and would therefore consider only the aural and visual similarity between the two terms. For this reason, the grounds of the injunction would not be apparent in certain EU Member States where the confusion would not exist.  

During an appeal against the award of the partial injunction, combit argued that the grant of an injunction relating to a trade mark should cover the entirety of the EU, even if the likelihood of confusion arose in only one Member State. This point was referred to the CJEU, which held that although EU trademarks are infringed if confusion exists in any individual Member State, exemptions to the injunction can arise for those Member States in which confusion could be ruled out.

The judgment, which can be read here, states that in a scenario where an EU trade mark does not, “in a given part of the European Union, create any likelihood of confusion, in particular for linguistic reasons, […] that court must limit the territorial scope of the aforementioned prohibition”. The Court also stated that a partial injunction should include an exact specification of the territory to which it applies, i.e. not ‘French speaking’ or ‘English speaking’ countries only, as parameters for defining one of the aforementioned countries are too subjective to be enforceable.

The case of combit highlights an important consideration when seeking an injunction which is factually just and legally applicable by the standards of some Member States, but not others. It is important to adequately and sufficiently define the parameters of a partial injunction, if sought, and prepare for a situation in which the territorial scope of the injunction comes under question.


Robust and fair evaluation processes in public procurement are important
Friday 21st October 2016

Contracting authorities are required to treat all bidders equally and without discrimination, and must also act in a transparent and proportionate manner. This is of particular importance when evaluating each bidder’s tender submission in line with the published award criteria.

The recent case of Energysolutions EU Limited v the Nuclear Decommissioning Authority highlights the importance of these fundamental principles. In this case, the Nuclear Decommissioning Authority (the “NDA”) was found to have manipulated its evaluation of a long-running procurement process, which led to the NDA awarding the contract to a bidder which should have been disqualified for not satisfying a mandatory requirement set out in the NDA’s own tendering rules.

The NDA did not complete the evaluation process in accordance with the spirit of public procurement law. Instead, it was found to have undertaken the process with the active aim of restricting the amount of information that would be available to any potential challenger to the award decision. By restricting the availability of information, the NDA sought to avoid any grounds for a challenge arising in the first place. Unfortunately, this case can be seen as an example of how not to evaluate a public procurement process.

  • Amongst other examples of bad practice, the NDA:
  • Discouraged evaluators from making contemporaneous notes of decisions or scores;
  • Shredded those notes which were made in relation to the evaluation process;
  • Did not provide the evaluators with sufficient time or knowledge to properly evaluate bids;
  • Did not permit notes of dialogue meetings, which meant solutions encouraged at dialogue stage were marked down at the evaluation stage as evaluators had forgotten their discussions; and
  • Allowed scoring criteria to be applied inconsistently across bidders.

Ultimately, the court found that had the scoring process been completed correctly, even if the successful bidder had not been disqualified at an earlier stage, Energysolutions would have won the tender.

It was decided that in order to uphold its duty of transparency, the NDA should have maintained and encouraged the keeping of contemporaneous records throughout the evaluation process, and certainly should not have shredded them. In contrast to the NDA’s approach, the court noted that an ability to adequately justify its decision making procedure with the aid of properly generated records would have protected the NDA from future litigation initiated by disappointed bidders.

This case reiterates the importance of open and transparent evaluation procedures when engaging in a selection process for awarding a public contract, and ensuring the project and evaluation teams are correctly prepared and have suitable and sufficient time to undertake the evaluation process. Contracting authorities must adhere to their scoring criteria when evaluating bidders, be consistent in the application of such criteria, and must also maintain records of their process.

For any queries regarding the evaluation process, or public procurement in general, please visit our procurement page or contact: 


Oral Variations to Contracts - Be Aware
Friday 5th August 2016

The Court of Appeal has given, not one, but two judgments on the issue of making changes to contracts without having to put them in writing.  This is an important clarification to the law that all businesses should be aware of.

The basis of the judgments can be found in the foundations of contract law.  To have an effective contract there must be four elements:

1.     An offer;

2.     Acceptance of the offer;

3.     Consideration (the flow from each party of money or something that is worth money); and

4.     Intention to create legal intentions.

Another governing principle of contract law is that each party has autonomy to enter into a contract known as the “principle of party autonomy”.

Contracts can be agreed orally, i.e. over the telephone, or by conduct over a period, and they can be in writing.  There is no requirement in English law for any contract to be in writing.  The main reason to have a contract in writing is to record what the parties have agreed.   

In many written contracts, to ensure a level of certainty, the parties to the contract will insert into the contract that the contract may not be varied except by agreement in writing.  Often such variations must also be expressly signed by the authorised representatives of each party.  This is to ensure that if there is a dispute of a purportedly varied term, the parties can point to the fact the variation needed to be written (and signed) by the parties for it to be effective.

In the recent case of Globe Motors, Inc. and others –v- TR Lucas Varity Electric Student Limited and another, the Court of Appeal said that parties are able to modify the terms of their contract orally or by conduct, even if there is a clause in the contract which requires all variations to be in writing.  This is due to the principle of party autonomy.  Parties cannot tie their hands to remove from themselves in the future the power to vary the contract informally simply because they can agree to dispense with the original restriction itself. 

Whilst the Court of Appeal was simply expressing its view in Globe and not deciding on a point in issue, given it is a higher court its opinion will likely be followed by English courts in the future.

Secondly, in the case of MWB Business Exchange Centres Limited –v- Rock Advertising Limited the argument over oral variations was at the heart of the issue to be decided.  The Court of Appeal here agreed with its earlier comments in the Globe case due to the principle of party autonomy.  The Court went so far as to note that those who make a contract can unmake it.    The Court further said that a clause which forbids change may be changed like any other and therefore a prohibition of an oral waiver may itself be waived.

The upshot of the Globe and the MWB cases means that whilst parties may agree they cannot vary their contract without certain hurdles, the parties are free to change their minds and agree to vary by conduct, by email or just over the telephone.

It is key therefore for businesses to make employees aware of this to ensure that employees do not change a fundamental principle of a contract simply by a loosely worded email or a loosely worded telephone call.  There is also still value in including a “variation only in writing and when signed” clause because it heightens the burden of proving that a variation of other means has occurred.  It should be noted that when it comes down to it, parties seeking to rely on an oral variation of contract may encounter evidential difficulties in showing that that is what both parties intended and agreed to do, so it is always best to record any agreed variation in writing and have both parties sign it.

We would consider that such clauses will still have places in contracts in the future but businesses should operate in the knowledge that written contracts are not set in stone and can easily be varied.  Accordingly employees should be trained to be aware of such risks when talking with suppliers and customers.


Act Now: New Data Protection regime for the European Union.
Wednesday 8th June 2016

Following months of negotiation between the European Commission, European Council and European Parliament, agreement has finally been reached in relation to the new European data protection framework.

The new legislation will take the form of a regulation called the General Data Protection Regulation (GDPR). The GDPR will have direct effect, so will directly enforceable without Member States needing to implement national legislation.

The GDPR is unlikely to come into force any time before 2018 due to the need for continued discussion and approval of its contents. However, many larger companies are already taking steps to ensure that they are prepared to comply with it exhaustive and onerous requirements it places on data controllers, and we recommend that you do the same.

To assist you, here are some of the key changes likely to affect you:

Consent to data processing

Any consent given by a data subject will need to be specific, informed and unambiguous. It must be given freely and in writing or by affirmative action which signifies consent. If the data subject fails to provide a response to a consent request, consent will be deemed not to have been given.

The data subject must be able to freely withdraw or refuse their consent without experiencing any detriment.

Key point:

Consider whether any consent you currently have will be considered to be sufficient under GDPR.

Enhanced rights for data subjects

Data subjects will have the right to individual ‘data portability’ meaning that a data controller or processor, if requested, must transfer the personal data it holds for that individual to any organisation requested by the individual.

Data subjects will also benefit from the ‘right to be forgotten’. If requested, organisations will be required to erase any personal data it holds which relates to that individual. Organisations will also be required to contact third parties, where applicable, and notify them of the data subject’s exercise of the ‘right to be forgotten’.

Data controllers and processors will be able to continue to process individual data, regardless of a request of erasure, if there is a legitimate reason for doing so. However, the burden of proof will be on the data controller or data processor to show that there is a legitimate reason for continuing to process the data.

Key point:

Does your organisation effectively categorise its personal data and will it be able to efficiently locate and destroy all personal data it holds for a particular individual, if so requested? What are the likely legitimate grounds for you retaining and continuing to process the data?

Data Breach Notifications

Data controllers must notify their respective Data Protection Authority (DPA) of any data protection breaches without undue delay, and within 72 hours where possible. If this timeframe is not met, data controllers must provide a justified reason as to why.

However, this notification requirement will not apply unless there is a risk that the rights and freedoms of that data subject will be affected.

Data controllers must also inform the data subject likely to be affected, without undue delay, if there is a “high risk” of it affecting their individual rights and freedoms.

Key point:

What mechanisms and processes does your organisation have in place to quickly identify breaches of data protection? How and by whom are such breaches dealt with? What are the possible justifications for your organisation delaying notification to a relevant DPA?

Your organisation may wish to consider creating and implementing clear policies and procedures relating to the monitoring and assessment of data protection risks and breaches. 

Data Protection Officers for Public Authorities

If you are a public authority who processes or controls personal data or either i) the core activities you carry out require monitoring of a large number of data subjects by their very nature, or ii) the core activities you carry out process special categories of data on a large scale, you must designate a Data Protection Officer (DPO).

DPOs will be responsible for managing effective data protection and data security processes which relate to the personal data held by the data controller or data processor. As such, the DPO will need sufficient expert knowledge.

Key point:

Does your organisation need a DPO? If so, do you currently employ an individual who is sufficiently skilled to be a DPO? If not, are you able to train existing employees?

Territorial Reach

Data controllers and data processors who principally operate outside the EU may be caught by GDPR if its activities relate to the offering of goods or services of EU data subjects. This may also be the case if such controllers or processors monitor the behaviour of EU data subjects.    

Organisations are likely to be deemed to offer goods or services within the EU if they use the language or currency generally used in one or more Member States, or if they make reference to EU customers or allow EU citizens to easily place orders with the organisation.

Key point:

Does your organisation primarily operate outside the EU? If not, does your organisation contract with other organisations which primarily operate outside the EU?

If you contract with an organisation outside the EU, it may be favourable to ensure that such organisations comply with the GDPR as they will be required to. This offers your organisation and your organisation’s customers greater security.


A tiered approach to fines will be adopted in the GDPR.

Less serious, ‘low level’ data protection breaches may attract fines of up to €10 million or 2% of an organisation’s annual global turnover, whichever is greater. More serious breaches, such as significant breaches of basic data protection principles, may attract fines of up to €20 million or 4% annual global turnover, whichever is greater. 

Key point:

Your organisation should ensure it complies with its data protection principles in order to avoid sanctions entirely, particularly given the potential high value of such fines. 


Contract Toolbox No. 2: Conditions, warranties, intermediate terms and indemnities
Wednesday 11th May 2016

Contractual terms can generally be classified as conditions, warranties, intermediate terms or indemnities. The remedy available for a breach of a term of a contract will depend upon the classification that the court gives to that term. Considering how particular terms should be classified at the outset of a contract’s creation can prove to be beneficial further down the line in the event of a breach.


If a condition is breached, the non-defaulting party will have the option either to terminate the contract and claim damages, or to affirm the contract (in effect, electing to continue with the contractual relationship). Breach of a condition will result in this option no matter how negligible or accidental the breach or its consequences.

Conditions generally constitute the key elements of the contract e.g. price, transfer of ownership etc.


Warranties are terms in a contract which do not allow the non-defaulting party to terminate. Generally, the non-defaulting party in a warranty claim will seek the remedy of damages, the aim of which is to put that party in the position it would have been in if the breach had not occurred (as far as it is possible to do so).

Intermediate Terms

Intermediate terms can fall into either of the above categories depending on the significance of the breach.

If the breach has the effect of substantially depriving the non-defaulting party of the main benefit of the contract, then the term will be considered a condition, giving rise to the option to terminate the contract. If the breach does not do so then the term will be considered a warranty, resulting in a claim for damages.


An indemnity is an express promise that if a potential liability materialises, the promisor will reimburse the promisee on a pound for pound basis.

Generally, an indemnity is used if a specific thing has been identified as a problem or a potential future problem. For example, a designer might give an indemnity to their customers for any intellectual property claims brought against the customers as a result of the designer having copied his work from another designer.

Classifying Terms

Classification of a contractual term generally occurs in three ways:

1.     Statute implies its classification;
2.     The contract expressly states its classification; or
3.     The contract is silent and its classification is determined by the Court.

If the contract expressly states how a term is to be classified, then this will be the default position in the event of a breach, although if there is a dispute, the Court may determine the matter by reference to appropriate statutes or case law or the contractual consequences associated with the term.

Giving thought to the classification of contractual terms should assist in bringing certainty to a contract and help avoid Court intervention in the event of a breach.

If you would like to find out more please see Contract Toolbox #1 were we looked at
Formation – avoiding accidental contracts in the age of electronic communication

If you would like more information about the issues in this article, please contact:


Contract Toolbox No. 1: Formation – avoiding accidental contracts in the age of electronic communication
Wednesday 11th May 2016

Business owners regularly negotiate and reach agreement via e-mail and then ask their lawyers to draw up a contract to formalise the commercial arrangement. Often, to their great surprise, businesses can find that in doing so they have inadvertently formed a legally binding contract. This is because the law looks to the substance rather than the form of agreements to decide whether a legally binding contract exists.
Legal Requirements
A legally binding contract will be formed as soon as the four elements are met. These four elements are:
  1. Offer;
  2. Acceptance;
  3. Consideration (e.g. cash, mutual obligations on the parties etc.); and
  4. An intention to create legal relations.
These four elements are often satisfied between parties during what they may consider to be merely pre-contractual negotiations.
Significance of E-mail Negotiations
The informality and instantaneous nature of e-mail can lead to the accidental use of contract-forming language, resulting in unintentional binding agreements being formed.
In addition, in two recent decisions, the court held that the terms of an existing written contract were varied through an exchange of emails, this was the case even though one of the contracts contained a clause stating that the contract could only be varied if the variation was made in writing and signed by both parties.
This illustrates the potential for contracts being unintentionally entered into even if no single signed document is created to formalise the agreement. A chain of informal e-mails intended to negotiate terms could even be read together to form a single binding contract.
So, what steps can you take to protect yourself against accidental contract formation in your e-mail exchanges?
  • When you are in pre-contractual negotiations, include the words “SUBJECT TO CONTRACT” on all communications and make it clear to the other side (in writing) that you only intend to be bound by a physically executed, formal written agreement. Although this will not eliminate the risk entirely, it helps evidence your intention. 
  • Be explicit about any relevant conditions that must be met. You may think it is obvious that an offer is subject to conditions, but the other side may disagree and argue that you have unconditionally accepted their offer. It is best practice for e-mails to say that contracts are subject to other requirements being fulfilled, such as being given management or board approval, or being subject to satisfactory due diligence.
  • Do not rely on the absence of a signature. Even an email signature block may well be taken to be sufficient to authenticate a legally binding contract. Consider applying automatic disclaimers to business e-mails, to reinforce that informal e-mails will not constitute contracts. Such disclaimers might state that “the e-mail ‘signature block’ does not constitute a signature for the purposes of a binding contract”.
  • Avoid terms such as “offer” and “accept” in e-mails unless you intend to be bound by such terms.
  • Implement internal policies within your business that restrict the use of imprecise language in business e-mails.

If you would like to find out more please see Contract Toolbox #2 
Conditions, warranties, intermediate terms and indemnities

If you would like more information about the issues in this article, please contact: