The Practical Lawyer


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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Flight delay – ‘extraordinary circumstances’

We all know that the rules on flight delay compensation are potentially very strict, and airlines such as Ryanair have gone to great lengths to avoid paying compensation. However, we now have a new European Court of Justice decision making it clear that the ‘extraordinary circumstances’ defence for airlines is extremely narrow. 

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Contract – ambiguity?

When interpreting a contract, the starting point is that you take the ordinary, natural and grammatical sense of the words used. Thus, if the language is unambiguous, then a strict interpretation should apply. Indeed, as Lord Neuberger has said, the court should be ‘very slow’ to reject the ‘natural meaning of a provision merely because it appears to have been imprudent’. 

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Insurance – non-disclosure

Rules on non-disclosure are very strict (although they will be relaxed from August 2016 when Insurance Act 2015 comes into force).

A good illustration of how the rules currently work is a case involving a super-yacht bought in 2007 for €13m. When her insurance was renewed in 2011, the declared value was again €13m, but two years earlier the insured had obtained a valuation of €7-8m, and he had been trying to sell for €8m.

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Security – failure to register

What is the effect of failing to register a security over property at Companies House?

For instance, suppose a company signs a legal mortgage over property which is then registered at the LR but is not registered at Companies House. Under CA 2006, if a certified copy of the security document (and the statement of particulars) are not delivered to Companies House within 21 days then the security will be void against a liquidator, administrator or any creditor of the debtor. In that situation, the security holder has two options.

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