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December 2011
November 2011
Recruitment
October 2011
Intellectual Property Update
September 2011
Commercial Disputes
July/August 2011
Holidays, Gym Memberships, Nights Out
June 2011
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Visit Our Archive for previous newsletters covering Hospitality, Recruitment, Intellectual Property, Food & Drink, Commercial Property, Employment, Hotels, Restaurants, Start Ups and many other topics
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Find Previous Featured Articles
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December 2011
November 2011
Recruitment
October 2011
Intellectual Property Update
September 2011
Commercial Disputes
July/August 2011
Holidays, Gym Memberships, Nights Out
June 2011
Social Media and Comparative Advertising
Visit Our Archive for previous newsletters covering Hospitality, Recruitment, Intellectual Property, Food & Drink, Commercial Property, Employment, Hotels, Restaurants, Start Ups and many other topics
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Find Previous Featured Articles
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December 2011
November 2011
Recruitment
October 2011
Intellectual Property Update
September 2011
Commercial Disputes
July/August 2011
Holidays, Gym Memberships, Nights Out
June 2011
Social Media and Comparative Advertising
Visit Our Archive for previous newsletters covering Hospitality, Recruitment, Intellectual Property, Food & Drink, Commercial Property, Employment, Hotels, Restaurants, Start Ups and many other topics
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Greetings!
Welcome to our January newsletter, the first of 2012.
The start of a new year is always an exciting time as businesses plan sales, make appointments, review targets and set budgets. However, it is equally important to make sure your infrastructure is secure and so we thought this might be a good time to go back to basics.
The focus of this newsletter is therefore Contract Law.
Contracts underlie everything in life and business, for example: the sale or supply of goods or services; buying a property; browsing online; taking on a new employee; incorporating a company or opening a bank account. For this reason, anyone and everyone in business can benefit from a good understanding of contractual principles.
This month, our newsletter includes the following articles:
- Back to basics: formation of a contract;
- UK website information requirements; and
- For our hotel clients, an update on a recent case dealing with a right of way.
Our featured client this month is Zealous Solutions Ltd, host of www.zealous.co which encourages independent artists worldwide to upload and share their work. Contributors have the opportunity to promote themselves, collaborate with other artists or hopefully get discovered; other users are able simply to enjoy the art on show.
Zealous currently operates on a no charge basis but even then contracts still arise and must be documented accordingly to protect the parties, prevent disputes and cover all the necessary terms. The internet itself raises potential issues in terms of acceptable use of websites, intellectual property, data protection, and the statutory information requirements of websites. If you need to put in place Terms of Use, an Acceptable Use Policy or a Privacy Policy for your site, we can draft and tweak these documents to cover you effectively.
If you need advice or assistance with website contracts and policies; standard terms and conditions for the sale or supply or goods and/or services; employment contracts and policies; contracts for the sale and leases of property; finance and loan agreements; or agency, distribution, confidentiality or consultancy agreements, then we are here to help. Do not hesitate to call us on 020 7440 2540 or email us at info@fortunelaw.com. We are always happy to help.
Further information
Fortune Law provides businesses with "a one stop shop" service dealing with
commercial property, commercial litigation, employment, hospitality, corporate and commercial law.
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Shainul Kassam
Fortune Law Solicitors |
Featured Client 
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Guy Armitage
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www.zealous.co
"The legal landscape is not an easy one to orient yourself on, especially when it comes down to technology, intellectual property and the arts. Fortune Law have not only provided us with exactly what we needed in good time, but have gone beyond the call of duty by giving us a deep understanding of the obligations we are bound to and forecasting any collateral issues brought upon by our changes to the Terms of service, Privacy and Usage Policies they drafted for us (might I also add all in a very friendly fashion!). We will gladly work with them again."
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Back To Basics - The Formation Of A Contract
An agreement must have four essential elements to give rise to a contract and its respective obligations: offer, acceptance, consideration and an intention to create legal relations. When you buy a newspaper, clearly these all exist in an instant; alternatively, for a large scale transaction there may be a lengthy negotiation resulting in an end contract.
Offer
An offer is a promise to enter into a contract on certain terms. It must be specific, complete, capable of acceptance, and intended to be bound by acceptance. It can be express or implied by conduct. It can be made to an individual or a group or persons. It can even be made to the world (such as in the famous case of Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256, where an advertisement in the Pall Mall Gazette was held to be an offer).
The key is that the offer cannot be an invitation to treat, being an invitation for persons to make offers, such as the display of goods in a shop, in product catalogues or at auctions.
Offers may be terminated prior to acceptance: by lapse, withdrawal, rejection, death of the offeror, or failure of a condition precedent.
Acceptance
An offer must be accepted to create a contract. It must be final and unqualified with no variation to the proposed terms. It must be communicated by the accepting party to the offeror or, in some cases, conduct will constitute acceptance (for example, where goods are delivered and payment taken).
Where an offeree purports to accept an offer but raises new terms, this is not acceptance, but a counter-offer. This is effectively a rejection of the original offer (meaning no contract exists) and the making of a new offer which, if accepted, will form the contractual terms.
In business, particularly supply agreements where both supplier and buyer have their own standard terms, this can lead to the "battle of the forms". For example, if the supplier provides its standard terms but the buyer raises a purchase order stating its own terms will apply, if the supplier then delivers goods (i.e. its conduct is acceptance of the counter-offer), the buyer's terms may well apply instead. Often, the last set of terms despatched will be the terms which apply.
Consideration
Consideration essentially means that a person cannot enforce a promise unless he has given or promised something in return. A contract without consideration will only be enforceable if made by deed.
A court will not look behind the value of consideration even if it is inadequate (i.e. a peppercorn rent). However, it must move from the promisee and not a third party. A third party cannot enforce a contract, unless the contract falls within the Contracts (Rights of Third Parties) Act 1999 which permits this where the contract expressly states that the party may do so or where the contract purports to give a benefit on him.
Consideration must not be historic, i.e. performance of a pre-existing obligation cannot be good consideration, unless the party does more than what was originally contracted. However, where the performance of a pre-existing duty provides a practical commercial benefit to the promisor, such as a saving of time or inconvenience in securing replacement performance, it can be valid consideration (although this principle has been judicially criticised).
Performance of (or the promise to perform) an existing contractual duty owed to a third party is good consideration. For example, where a party is contractually bound to deliver goods to A but is ordered to deliver to B instead, that delivery (an existing contractual duty to A) would be consideration to enforce B's promise to unload the goods in return (Scotson v Pegg (1861) 3 L.T. 753).
Intention to create legal relations
The parties must intend to create a legally binding agreement, else there is no contract. This is presumed in commercial dealings but rebuttable with clear evidence to the contrary such as express wording not to be bound. The phrase "subject to contract" can assist with this but is not conclusive.
Heads of terms, a letter of intent or a memorandum of understanding are often preliminary documents used to prevent such an intention arising, although morally they may have binding effect.
Capacity
In addition to the four elements above, contracting parties must have the capacity to be bound. For example, where a party is aware that the other is of unsound mind or drunk so that he is incapable of understanding the nature of the transaction, the contract will be voidable at the option of the other person. There are also special rules for minors.
Formalities
Finally, it is important to remember that although many contracts can be oral, others have certain formalities: for example, contracts for the sale of land and most share transfers must be in writing; transfers of land, leases and powers of attorney must be by deed. An intention to be bound may be shown by signing a contract, but signature is not an essential requirement.
Whether you are putting together a set of terms and conditions, a contract to document a specific transaction or relationship, Fortune Law has the necessary expertise to advise and assist you with all aspects of Contract Law. Please get in touch by telephone on 020 7440 2540 or by e-mail at enquiries@fortunelaw.com.
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UK Website Information Requirements
If you operate or intend to set up a website in the United Kingdom, you are legally required by the Electronic Commerce (EC Directive) Regulations 2002 ("E-commerce Regulations") to provide specific information on the website:
- The name of the service provider;
- The geographical address at which the service provider is established;
- The details of the service provider, including its e-mail address;
- If the service provider is a corporate entity, its company registration number;
- Where the provision of the service is subject to an authorisation scheme, details of the relevant supervisory authority; and
- If applicable, its VAT registration number.
Further, the European Court of Justice has held that any provider of online services must provide (before conclusion of a contract) consumers with information (in addition to an e-mail address), which would allow them to communicate directly and effectively with the provider directly, for example, an online contact form. If, however, a consumer subsequently loses access to the electronic network and requests a non-electronic means of communication, this must be supplied. Companies Under the Companies (Trading Disclosures) Regulations 2008, a company must additionally provide the following on their websites: - Its registered name;
- The part of the UK in which the company is registered;
- Its registered number;
- The address of its registered office;
- Where a limited company is exempt from the obligation to use the word "limited", that it is a limited company;
- Where a community interest company is not a public company, the fact that it is a limited company
- In the case of an investment company (as defined in section 833 of the Companies Act 2006), the fact that it is such a company;
- If a company discloses the amount of share capital on its websites, that disclosure must be to paid up share capital;
A company that is being wound up must also include a statement on all its websites that it is being wound up (s188, Insolvency Act 1986, as amended). Other requirements Where a service provider is a member of a regulated profession, it must give details of the professional body, its professional title and member state where that title was awarded, and a reference to the relevant professional rules. Where the website is used to conclude online contracts, the E-commerce Regulations have further requirements, and where "distance sales" are conducted, the Consumer Protection (Distance Selling) Regulations 2000 require a wide range of information to be provided. Failure to comply with any of the above requirements may be enforced by the Office of Fair Trading with enforcement orders. You have been warned. Please do get in touch with us if you need any advice on what information you should be displaying on your website, what you need to do to comply with the Distance Selling Regulations in respect of "distance sales" or any other matters concerning your website documentation, including Terms of Use and Privacy Policies: 020 7440 2540 and enquiries@fortunelaw.com. |
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The Kensington Close Hotel And Its Right Of Way
The case of London Tara Hotel Ltd v Kensington Close Hotel Ltd [2011] EWCA Civ 1356 serves as a helpful reminder and fair warning about the law of prescription: this enables a person to claim a right where it has been exercised for 20 years, provided that such exercise is "as of right", i.e. not be exercised by stealth, force or permission. The case concerned two hotels in the heart of Kensington.
In 1973, the then owner of the Copthorne Tara Hotel granted a personal licence (for a fee of £1.00 per year) to the then owner of the Kensington Close Hotel to use a private roadway on its grounds so that it, its agents and business visitors could access the hotel with or without vehicles.
The owner of the Kensington Close Hotel ceased trading in 1978 and the hotel was transferred several times after 1980, eventually to the defendant in 2002. In 2007, the claimant, who owned the Copthorne Tara Hotel, claimed that the defendant was trespassing on its land; the defendant claimed a right of way by prescription.
High Court
The High Court found that since 1980, when the licensee had transferred the property, thereby ending the personal licence, the private roadway had been used by coaches and vans to access the Kensington Close Hotel. No further licence had been implied and, as such, a right of way had been acquired by prescription. Therefore Kensington Close was not trespassing.
The claimant appealed on the basis that it did not know that the ownership of the Kensington Close Hotel had changed and so use of the road was not "as of right"; the hotels used to have a good relationship and refer guests to each other, and the licence only expired in 1996 on the transfer for another owner; in the event that a right of way was established, it did not extend to coaches (which were not operated by the defendant), and certainly not construction vehicles.
Court of Appeal
The Court of Appeal upheld the High Court's decision and found in favour of the Kensington Close Hotel. Applying the principles in R (Lewis) v Redcar and Cleveland BC and another [2010] UKSC 11 that a prescriptive right will be established where it is exercised without force, stealth or permission (with no further hurdles), it found that:
- The licence was personal and therefore did indeed expire in 1980 on the change of ownership;
- There was no permission granted thereafter to use to road;
- The claimant could have protected its position simply by enforcing its contractual right of payment of £1.00 every 18 or 19 years;
- Given that the original licence did not extend to coaches, the claimant should have enforced that at least. The defendant was aware of and party to the use by coach drivers and so this represented benefit for the defendant's land and therefore use by it;
- It was no secret that the defendant and its predecessors in title used the roadway and no deliberate intention to hide the change of ownership in 1980;
- There was no evidence of any positive act to imply a new licence since 1980; and
- The argument regarding construction vehicles was raised post-judgment, so was out of time.
This case highlights the importance of check any long-term licence arrangement every 18 or so years to ensure that no prescriptive right is established.
If you need advice in relation to prescription, rights of way or other property-related matters such as restrictive covenants and adverse possession or indeed commercial property transactions including leases, sales and licences, please contact us on 020 7440 2540 or at enquiries@fortunelaw.com. |
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