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Penalties – commercial cases

This flowchart gives a simple guide to how the new penalty rules should apply in complex commercial damages cases. Bear in mind that property transactions will often be more straightforward. 

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Contract – time of essence

   If ‘time is of the essence’ then even a minor deviation from the agreed timescales will amount to a fundamental breach of contract (allowing the innocent party to terminate the contract). But, the general position is that time is not generally considered to be of the essence unless (i) it is expressly agreed in the contract, or (ii) it is implied by the contract, or (iii) time is subsequently made ‘of the essence’ by the innocent party sending a notice requiring the defaulter to complete performance within a specified (‘reasonable’) time.

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Procurement – publishing documents

One of the major changes under the Public Contracts Regs 2015 is the obligation to offer unrestricted and full direct access to the ‘procurement documents’ from the time a notice is published in the OJEU commencing the procurement.

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Administration – pre-packs

The procedures on pre-pack administrations have been revised (as from 1 November 2015) as a result of a revised statement of insolvency practice (SIP 16).

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Administration – safeguarding ‘essential supplies’

IA 1986 prevents suppliers of essential supplies (such as gas and electricity) from holding insolvent companies to ransom by demanding payment of outstanding invoices as a condition of continued supply. Typically, such suppliers will have a clause in the supply contract that allows termination if the customer becomes insolvent, or if there are specified indicators of insolvency (eg enters into administration or goes into a CVA). The problem, of course, is that the administrator may want the company to keep trading so the business can be sold, and its assets sold for the maximum price. Hence the IA exception for ‘essential supplies’.

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Apple – apps

Apple has a standard developer agreement for iPhone apps. The reality is that developers have no choice but to accept the terms offered by Apple, and it is worth making the point that they are widely regarded as extremely one-sided. Thus, a client entering into such an agreement should, at the least, be aware of the potential downsides.

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IP – audit clause

Audit clauses are an important tool in IP agreements, since they allow the licensor to check that the licensee is complying with the terms of the licence agreement. In particular, it allows the licensor to check the correct royalties are being paid.

However, it is important to have a widely worded audit clause. This is an example of one that was not sufficiently wide:

‘Permit any duly authorised representative on reasonable prior notice to enter into any of its premises where any copies of the database are used, for the purpose of ascertaining that the provisions of this Agreement are being complied with.’ 

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Consumer Rights Act 2015 – digital changes

Digital content was unsatisfactorily dealt with under previous consumer legislation. That is now addressed by Consumer Rights Act 2015 which makes it clear that digital content is a new category of product, but is to be treated similarly to tangible goods and the provision of services. Thus, the supply of digital content will include implied terms as to satisfactory quality, fitness for purpose, trader’s right to supply, compliance with description, and compliance with pre-contract information. In particular, it is made clear that these provisions apply to streamed digital content (and not merely the physical purchase of software or digital content). 

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Consumer Rights Act – major change

   It is goodbye to some old friends: Sale of Goods Act 1979, UCTA 1977, Unfair Terms Regs 1999, Supply of Goods and Services Act 1982, and Sale and Supply of Goods to Consumers Regs 2002. The effect of Consumer Rights Act 2015, largely in force since 1 October 2015, is to largely replace all of these in consumer/trader transactions.

A consumer is an individual ‘acting for purposes wholly or mainly outside that individual’s trade, business, craft or profession’. This is a wider definition of consumer than the previous one, and businesses should be aware that the definition may include individuals who enter into a contract for a mixture of business and personal reasons. The term trader means ‘a person acting for purposes relating to that person’s trade, business, craft or profession, whether acting personally or through another person acting in the trader’s name or the trader’s behalf’ (ie it specifically includes agents). 

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Safe Harbor – data storage

The European Court of Justice’s decision that the EU/US ‘Safe Harbor’ arrangements are invalid has enormous consequences for data holders.

Under EU data protection law there is a general ban on transferring data outside the EEA unless the foreign country has an ‘adequate level of protection’. As far as the US is concerned, the EC agreed in 2000 that there would be ‘adequate protection’ if US companies complied with provisions known as Safe Harbor.

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