Restrictive covenants case – form over substance
July 2017 A case about what I think is quite a silly way for the law to treat restrictive covenants...If you are entering into a business deal with someone, whether they are selling their business to you as part of which you are expecting to take over their customers, or providing services to you as part of which they could get to know your customers, you might well want to add a ‘restraint of trade’ or ‘restrictive covenant’ clause to your contract saying that after your business deal has ended they must not try to steal your customers or compete with your business. There is a whole lot of law about whether such clauses will be enforceable or not...
Penalty clauses – English penalties will be missed
Nov 2015 Apparently for the last 100 years we have been getting a law wrong. This law says that a clause in a contract which sets out in advance the consequences of a breach of contract will be unenforceable if it is extravagant, exorbitant or unconscionable. It is one of the few exceptions in UK law to the principle of freedom of contract...
Can’t claim damages because of a limitation of liability clause? Thought about trying for an injunction instead?
June 2015 Under normal contract law, if a party to a contract is in breach, the other party can ask a court to order the naughty party to compensate it for the loss it suffered as a result of the breach. It is common in contracts for parties to exclude and limit their liability for breaches. (For a fascinating article I have written about exclusion and limitation of liability clauses click here). They generally try to exclude liability for indirect losses and loss of profits (click here for another article I have written about this). And they try to limit the amount of liability, for example to the amount they have insurance cover for, or even the amount they have been paid under the contract. Normal contract law is based on ‘common law’. But there is a different kind of law – the law of equity...
Why you shouldn’t lie to your insurer
Dec 2014 Your Latin term for the day is ‘uberrimae fidei’. This vaguely seasonal-sounding expression means ‘utmost good faith’. It’s an implied term in any insurance contract. A recent case is an example of how important it is...
The importance of well-worded exclusion clauses
Dec 2014 The law relating to exclusion and limitation of liability clauses is quite difficult. Many people (including many good lawyers I have known) have been confused by it. One area which causes confusion is that the law says that there are two broad categories of loss which you can seek to recover as damages for breach of contract – direct and indirect losses. But some types of loss, eg physical damage, loss of profit, economic loss, and loss of reputation and goodwill, are capable of falling into either category. Broadly, direct losses are those which are the direct and natural consequences of a breach. Indirect losses (also known as consequential losses) are those that do not arise naturally in the course of events, but are still contemplated by the parties at the time the contract is entered into because of the particular circumstances. This recent case is an example of confused drafting (or possibly of a party trying to wangle a different result from clear drafting…)...
The penalty for seeking a penalty
Dec 2014 You have to be very careful if you want to say in a contract that the other party must pay a pre-determined sum if it doesn’t do what it agreed to. The law says that if this sum is a genuine estimate in advance of the loss you might suffer it will be called ‘liquidated damages’, whereas if it is designed to scare the other party from committing a breach it will be called a ‘penalty’. And under English law a clause which seeks to impose a penalty is unenforceable. The general rule has always been that a court will decide things based on the situation at the time you entered into the contract...
Misrepresentation – something to grouse about
Aug 2014 In this case a Mr Erskine was looking to hire a grouse moor for commercial shooting. The hirer (‘VR’) overstated the number of grouse (or grouses; but not grice). Mr Erskine later set up a separate entity, Cramaso LLP, which entered into the contract. The grouse shortage was discovered and Cramaso sued VR for misrepresentation. Did it succeed, bearing in mind that it didn’t even exist when the representation was made?...
Late payment – interested in recovering interest and recovery costs?
Jan 2014 I thought it would be topical (seeing as I have quite a few overdue bills owing to me at the moment) to pen a quick article about the late payment legislation. In particular, did you know that since March 2013 you can recover ‘reasonable costs’ in recovering the debt?..
A guarantee precedent
Jan 2014 here’s a precedent you could use for a clause to slot into an agreement between you and a customer. Get legal advice on it before you use it. And of course make sure that it fits the agreement (eg getting the parties’ details right; you, for example, are ‘us’)....
What comfort is a comfort letter?
Jan 2014 If you are doing business with any company you want to know they’ll be good for their obligations and won’t go bust on you. If you’re dealing with a subsidiary of a large successful company you might be prepared to overlook the subsidiary’s weak-looking financial position (assuming you’ve checked it out in the first place) provided that you are given what is known as a ‘comfort letter’ from the parent company. But are comfort letters worth the paper they’re written on? Shouldn’t you be asking for a proper guarantee instead? Check out this case from last year...