Can someone who breaches a contract receive credit for a benefit received by the other party?
Nov 2017 A cruise ship, the New Flamenco, was chartered under a contract until November 2009. The charterer wrongly thought they could return the ship in October 2007. The owner sought damages for this breach. At about the same time the owner also sold the ship for over US $23.5m. Two years later in November 2009, when the ship had been due to be returned under the contract, it was only worth US$7m – largely because of the financial crash. So the owner was $16.5 million better off as a result of selling in 2007 rather than in 2009 – considerably more than the $7.5m of lost profits it was claiming in damages. Should the court have taken this into account and given credit for this $16.5m benefit in calculating the damages, so that the damages would have been nil? What did the court say?...
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...
Drafting: A pedantic article about commas
March 2016 Years ago, legal documents didn’t have much punctuation, and they didn’t use commas and stops, let alone colons, to draft things. I’ve no idea how they managed. More recently (like, in the last century or so) things have changed and punctuation has become important. So, how important are commas? Some commas aren’t really needed and are just a matter of style and you can do without them (like when I wrote ‘like, in the last century or so’, above, (or when I wrote ‘century or so’, above’ above…), or when I wrote ‘so, how important are commas’ above) (brackets can be quite important too). Others are rather important. There are rules as to how to read commas (and the lack of them), but they can be rather grey. Confusion over commas (and the lack of them) is now probably the biggest cause of dispute over the interpretation of contracts. A recent case is a good example...
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...
Retention accounts – what’s the point?
June 2015 In some acquisitions the buyer will not want to pay all the money up front. It may be worried about some potential liability of the seller arising under an indemnity or warranty in the purchase agreement. It won’t want to take the risk of the seller going bust before any claim is finally resolved, which could be many years after completion. So it will want to hold some money back until this risk goes away. But...
Completion Accounts in acquisitions – what does ‘Accounting policies adopted in the Accounts’ mean? (Accountants out there may be surprised at this)
April 2015 Many share and asset sale deals require a price adjustment to be made based on a set of completion accounts which needs to be drawn up. As everyone knows, a set of accounts will usually tell you what the company and its accountants want to tell you. So it’s important for both sides to set out as clearly as possible in the sale agreement how the completion accounts should be prepared and how any adjustments to the price should be worked out...
A few things you may not have known about the law relating to confidential information
April 2015 People often ask me to put together confidentiality agreements/non-disclosure agreements (NDAs) for them. A recent case is a good example of how the courts can apply the law. Would you have guessed the decision?..
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…)...