Morgan Russell Solicitors

Commercial Law News - June 2012

  1. Rights of termination in contracts
  2. Grace period for “Cookies” ended on 25th May 2012
  3. How to protect your business from interruptions
  4. Are you ready for the Olympics?

 

 SONNING EVENT - A Charity Evening is being held at The Mill at Sonning on Saturday 6th October 2012

Please see below for further details

 1.         Rights of termination in contracts

When seeking to terminate a contract care needs to be taken to avoid finding yourself in breach instead, as this could affect your entitlement to damages. There is a well-established rule in English law that if X terminates a contract with Y for a flawed reason but later discovers there was a better reason  (even though X did not know it at the time) then X can rely on the later better reason to justify the termination (i.e. the terminating party can rely on any grounds which were available to it at the time it gave notice to terminate even though it did not yet know about them or mention such reasons in its termination notice).

In a recent case however, Leofelis v Lonsdale Sports [2012] EWHC 485 (Ch) the High Court expanded on this rule. Although X could rely on this rule to justify the termination, X may not be entitled to recover damages for the losses caused by Y’s non-performance of the contract after the termination date.  The point is that the loss must be shown to flow from the breach. So, whilst X could use evidence not previously known to it to prove Y was in breach and therefore termination was justified at the date of the original notice of termination, the High Court ruled that the loss suffered was not actually a result of that reason and it was not entitled to the damages sought.

However, this was the first time the court has considered this issue and there may well be future challenges. For now though, anyone considering terminating a contract should carefully consider all the factors involved to see if there are any other grounds for termination available. All such reasons should  be set out in the notice of termination in an attempt to avoid the reasoning that the terminating party’s right to damages does not flow from the reason given.

2.         Grace period for “Cookies” ended on 25th May 2012

Last year the EU’s amended Privacy and Electronic Communications Directive came into effect in UK law in the form of the Privacy and Electronic Communications (EC Directive) Amendment Regulations 2011. This was intended to protect the privacy of internet users by implementing rules on how electronic communications networks store information or gain access to information stored on the hardware of subscribers/users in the form of “cookies”. The Information Commissioner’s Office (ICO) gave businesses one year to find workable technical solutions and make the changes. This period ended on 25th May 2012.

The key rules:

  1. You must inform users/subscribers to your website that you are using cookies and explain clearly and comprehensively what their purpose is; and
  2. You must obtain the user’s/subscriber’s informed consent to store such cookies on their device – either before the cookie is set or as soon as possible after they have accessed the website.

There are limited exemptions available to these rules. Examples are connected with goods in the checkout basket for online purchasing or secure online banking.

Non-compliance may result in enforcement notices and/or fines up to a maximum £500,000.

What should you do?

  1. Cookie audit: find out what and how cookies or similar technologies are used in your website. Also consider how intrusive they are.
  2. Decide how best to obtain consent for using cookies for your website – how will it best fit in with your website. Consent is only required once, unless the cookies change.
  3. Speak to your web designer about implementing the change and how they can include it – what about pop-ups, message bars, etc?
  4. Make sure there is a prominent notice explaining about the use of cookies on your website.
  5. Consider updating your website privacy policy and website terms of use. You may need to include further information regarding cookies, how you would change the policy and how users can withdraw their consent.

For further information on compliance and implementation see the ICO website: www.ico.gov.uk

3.         How to protect your business from interruptions

Contracts usually contain future or ongoing performance obligations that could be affected by problems with business continuity  - such as terrorism, natural disasters or traffic nightmares caused by the Olympic Games.  Under English law a party that is unwilling or unable to perform its obligations as a result would be in breach of contract, giving the other party a right to terminate the contract and/or seek damages. So, what can you do to minimise these risks or otherwise, what legal remedies do you have?

In order to avoid being in breach of contract, one option would be for the non-performing party to argue that the contract had been “frustrated” or another option could be to argue that a “force majeure event” applied (if there is such a clause in the contract).

Frustration is a legal concept that allows the automatic and immediate discharge of the contract. However, there needs to have been a significant change which either renders performance of the contract physically or commercially impossible, or too “radically different” from the original intentions of the parties. This is unlikely to be a route that is taken.

Force majeure is a commonly used contractual provision to relieve or suspend one party’s liability to perform its contractual obligations in certain defined circumstances without being in breach. Performance must be prevented by an event or circumstance beyond the reasonable control of the affected party. It gives greater flexibility if something catastrophic happens but only if the effects of the force majeure event could not reasonably have been anticipated and/or avoided. 

Business continuity planning:

Businesses should consider how they will cope in the event of a disaster and put in place adequate security measures, business continuity plans and disaster recovery procedures to cope with major operational disruptions.  It is always best to consider these things in advance and test them before they are ever needed.  Plans and procedures should be drawn up without delay – you never know when you will need them.

Business owners should also speak to their broker about appropriate insurance cover to ensure all their needs are properly covered and whether a business interruptions policy would be practical or cost-effective.

The 2012 Olympic Games and Paralympic Games are likely to have a significant impact on businesses this summer given the range and extent of them. Businesses therefore need to review if and how they will be affected and then implement solutions to deal with the effects it may have on customers, staff, contracts and the business operations in general.

For further information and items to consider read our the briefing note “Business Continuity”.

4.         Are you ready for the Olympics?

Before you make plans to start advertising take a moment to consider what you can and cannot do legally if you are not an official sponsor of the Games. The Olympics are a well-oiled machine when it comes to protecting their intellectual property and therefore you must be very careful before you start creating your own marketing strategy piggy-backing off the Olympics.

The Olympics logo of the five interlocking rings, the Paralympic logo of the three agitos, the mascots and the emblem of the London 2012 Olympics, the Olympic motto and words are all protected either by trademarks or through two Acts of Parliament: the Olympic Symbol (Protection) Act 1995 and The London Olympic Games and Paralympic Games Act 2006. 

The effect of this is that it is an offence to reproduce the Olympic symbol or to reproduce something so similar that it is “likely to create in the public mind an association with it”. Criminal offences are committed under the Acts for which the maximum penalty for prosecution is a fine of up to £20,000.  Claiming to be a sponsor of the Games or otherwise associated with them without permission could result in a civil claim for passing off or, more likely a criminal action for breach of the right created by The London Olympic Games and Paralympic Games Act 2006.

The point of all this protection is to manage and control commercial exploitation of the Games in order to protect the considerable investment of those who are official sponsors.  So, unless your business is an official sponsor of the Games, check our briefing note “The Olympics – Legal Dos and Don’ts” for further details of what you can and cannot do. 

 SONNING EVENT

 A Charity Evening is being held at The Mill at Sonning on Saturday 6th October 2012

 From the office here in Esher we are underwriting a Charity Evening to be held at the Mill at Sonning in support of the Walton Firs Charity, an Activity Centre for young people, set in 28 acres at a rural location in Cobham, Surrey. (See www.waltonfirs.co.uk.)

 The evening promises to be great fun and will allow friends and colleagues to enjoy each others’ company and support a good cause at the same time.

 Sonning Theatre is a charming dinner theatre set in an ancient mill beside the Thames near Reading, about 40 minutes drive from Esher.

 If you and your family, friends and colleagues would be interested in joining us to see the ghostly thriller, "Scared to Death" on the evening Saturday 6 October 2020 we will send further details to you; if you would email Mel at [email protected].

 Tickets including dinner are £55 per person. (The centre seats at £60 per person are SOLD OUT.) 

Further Information

If you have any questions regarding the above or require any assistance, please do not hesitate to contact Debbie Turner, Katya Cleere or Tim Nathan +44 (0)1372-461411.

The data contained within this document is for general information only. No responsibility can be accepted for inaccuracies. Readers are also advised that the law and practice may change from time to time. This document is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.
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