ICO consultation on privacy notices code of practice
The Data Protection Act 1998 requires organisations to provide to people from whom they are collecting personal information a statement setting out how their personal data will be used. Such a statement is often called a privacy notice. Earlier this year, the UK’s data protection watchdog the Information Commissioners Office (ICO) launched a consultation on a new draft Code of Practice aimed at helping organisations to produce more user friendly privacy notices. The ICO’s draft Code of Practice, when finalised, will be of interest and use to all businesses which are obliged to provide privacy notices, for example in their customer-facing documentation (such as application forms and reply slips) and on websites which involve the collection of their personal information.
Contractually bound by email …
A recent High Court decision will be of interest to all businesses which conduct contractual negotiations by email. In Grant v Bragg [2009] EWHC 74 (Ch), the court held that the claimant had agreed to be bound by a draft share sale agreement when he accepted its wording in an email to the lawyer of the defendant, without having signed the actual document. His agreement to its terms in his email, which was not marked as ‘subject to contract’, was sufficient to conclude the contract in the court’s view. The case underlines how important it is, when parties are negotiating a draft contract via email, that such e-correspondence is clearly stated as being non contractual, otherwise an email acceptance could be legally binding.
… but not by performance
Perhaps slightly unexpectedly (in the context of the preceding article), the Court of Appeal has recently found that, in spite of the parties to a case having performed what looked like a contract for a period of time, there was in fact no contract. In the case (RTS Flexible Systems Limited v Molkerei Alois Muller GmbH [2009] EWCA Cie 26), the proposed written agreement between the parties was very long, and they decided to enter into a simpler, interim written contract to allow the work to commence while the main contract was being negotiated. The Court of Appeal held that, despite performance, there was no contract between the parties. This judgement is relevant to businesses which, due to time pressures, enter into interim arrangements while main contracts are being negotiated. It gives helpful guidance on the sort of protective wording which should be included in the draft agreements under negotiation to prevent any contract being implied from the parties’ interim performance .
Ruling extends customers’ remedies against suppliers
The Court of Appeal has ruled that a customer which terminates a contract due to the other party’s breach, and is entitled to remedies under the contract (for example, return of any monies paid), can sue the defaulting party for common law damages (what are known as “repudiatory damages”) as well. The case, Stocznia Gdynia v Gearbulk Holdings Limited [2009] EWCA Civ 75, concerned a shipbuilding contract. The court held that not only was the claimant entitled to recover instalments of the contract price it had paid to the shipyard, but also that exercising its right to terminate the contract had not excluded the claimant’s “right to recover damages at common law for the loss of its bargain”. This ruling gives businesses reassurance that they can make both contractual and common law claims on termination for cause, unless the contract contains an explicit exclusion or waiver preventing this.
Exclusions of indirect or consequential losses
It is common for commercial contracts to include a provision excluding the parties’ liability for ‘indirect or consequential losses’. These are losses which do not flow directly from the event which creates the liability. However, the courts have recently been interpreting what counts as direct loss (which is usually claimable from the other party) increasingly broadly. The recent High Court case of Ferryways NV v Associated British Ports provides an example of this trend. The claimant had had to pay death benefit and repatriation expenses in respect of one of its employees who had been killed as a result of the negligence of the defendant. The defendant refused to compensate the claimant for these sums, arguing that they were indirect or consequential losses which were excluded by the liability provisions of the relevant contract. However, the High Court ruled that the requirement to pay such costs was a direct and natural consequence flowing from the defendant’s breach of contract, and therefore these were not indirect or consequential losses. Businesses need to take care when drafting provisions purporting to exclude liability for indirect or consequential losses and to be aware that the applicability and effectiveness of such clauses will need to be assessed on the facts of each individual case.
Duties of agents
A recent decision of the Court of Appeal has vividly demonstrated the strict obligations which an agent owes to its principal, including the duties to act in the principal’s best interest at all times and not to make a secret profit from the agency. In the case, Imageview v Kelvin Jack, Mr Jack, a Trinidadian footballer, instructed an agency, Imageview, to find him a British football club to play for. The agency did so. However, Imageview also arranged directly with the football club to obtain Mr Jack’s work permit, in return for a payment from the club. Imageview did not declare this payment to its principal (Mr Jack) and when he found out about it he stopped paying them their agency fees. Imageview sued him for the unpaid fees. The court ruled that Imageview had put itself in a conflict of interest situation by using its connection with Mr Jack to obtain a benefit for itself which it did not disclose to its principal, in breach of the high standard which the law imposes on agents. As a consequence, Imageview was not only ordered to hand over the secret profit which it had made, but also lost its right to future commission from Mr Jack and all the past fees which he had paid to them as well. The case underlines for businesses which are agents themselves, or which retain agents, the strict duties which agents owe to their principals, and how severe the consequences of failing to comply with these obligations can be.
High Court rules on software licence agreement
The maintenance provisions of a software licence agreement came under the scrutiny of the High Court recently. In the case of Data Direct Technologies Limited v Marks & Spencer plc, a software provider sued Marks & Spencer for the annual maintenance fee of which it claimed was payable under its software licence agreement with M&S (the “Agreement”). The dispute concerned some ambiguous wording in one of the schedules to the Agreement which appeared to make the obligation on M&S to pay for maintenance of the software optional. The judge held that a reasonable reader of the relevant wording, if it was taken together with the other parts of the Agreement, would understand that it could not sensibly be read as creating an option for M&S to choose to receive maintenance. Therefore, the maintenance fee was payable by them. As with any contract, the parties to a software licence agreement should take care to ensure that the drafting is internally consistent within the document and gives effect to their intentions.
Removals firm allegedly removes copyright image
A claim raised recently in the High Court has underlined the fact that just because an image can be easily uploaded onto the Internet does not mean that such copying can be done without getting the permission of the owner or the licensee of any copyright in the image first. The claim was brought by a global image company, Getty Images, against a removals company, J A Coles. The claimant alleges that Coles used on their website, without Getty’s consent, a photograph in which the copyright had been licensed to Getty. Apparently the claimant used an image tracking device to detect the unauthorised use of its image on the Web. Getty are seeking from Coles a payment equal to the commercial licence fee which they would have charged the defendant for the use of their photograph, together with compensation. In the current economic conditions, copyright holders are likely to adopt a more aggressive stance in defending their rights, including those in images on the Net. Businesses which trade online should therefore be more careful than ever to check that copyright and other rights clearance in the content which they use has been obtained.
EC Recommendation on RFID
The European Commission has issued a recommendation on radio frequency identification (RFID) product tracking technology to encourage organizations which employ such applications to observe the privacy and data protection principles of European Law. Among the Commission’s recommendations are that businesses using RFID technology perform a data protection and privacy impact assessment before using them and inform consumers of the existence of RFID readers and tags by using a common European symbol, which is to be created by European standards bodies. It is also recommended that retailers operating RFID should de-activate or remove RFID tags at the point of sale unless: the consumer has consented to these tags remaining on their purchases; or the data protection and privacy impact assessment carried out by the retailer concludes that the tags do not present a likely threat to the protection of personal data or individuals’ privacy.
China pulls back from restriction on IT imports
It was announced recently that a certification scheme proposed by the Chinese government applying to “information security” products, which might have erected a trade barrier to imports of IT products into China, will go ahead, but in a much restricted form. The China Compulsory Certification (CCC) scheme, which mandates compliance with national standards, applies to thirteen product types and was due to be introduced in May. However, by a notice published in April the Chinese Certification and Accreditation Administration announced that it would be postponed until May of next year, and then would only apply to public procurement of the affected products. This news will come as a great relief to IT suppliers which are increasingly marketing their products to Chinese customers. However, the part of the scheme which has been retained means that, as of May 2010, vendors selling into China under government contracts will require to develop products and designs which comply with the CCC standards.
Consultant caught in mosquito nets dispute
In a long and complex judgment the High Court has provided valuable guidance to businesses which seek to protect their confidential information which has been acquired by consultants working for them. The case, Vestergaard Frandsen A/S and others v Bestnet Europe Limited and others involved a consultant who worked for a company which produced mosquito nets. He left the company and joined another business, assisting it in developing its competing mosquito net. In his new job he used recipes and test results from a database of technical information which he took with him from his previous employers. The judge held that the consultant owed express and implied duties of confidence to his former employers, and that the information in the database comprised the claimants’ trade secrets. This confidentiality obligation survived the termination of the consultant’s employment with the claimants and therefore the consultant’s use of the information constituted a breach of confidence for which he and his new employers were liable. The main previous authority on the question of whether ex-employees can use their former employers’ confidential information, including trade secrets, dates back to the 1980’s, so the High Court’s detailed explanation of the current law on this point will be welcome to the broad range of businesses for which their confidential information and trade secrets are major assets.
ECJ gives guidance on calculation of termination payments due to agents
The European Court of Justice (ECJ) has ruled that Article 17 of the Commercial Agents’ Directive (86/653/EEC), does not allow a national court to restrict automatically the indemnity payment payable to commercial agents on termination of their agency to the amount of commission which the agents would have received in the period of agency remaining at the time of termination. In the case, Turgay Semen v Deutsche Tamoil GmbH, the ECJ also held that, unless otherwise agreed by the parties, any benefits accruing to other companies belonging to the group of which the principal is a member are not deemed to be benefits accruing to the principal itself and therefore do not need to be taken into consideration when calculating the amount of the indemnity. This judgment will be of interest to businesses which appoint commercial agents to act on their behalf, or which are themselves agents to other principals. The extent of any indemnity payment to which the principal is committed, should the agency need to be terminated, is an important consideration for parties entering into an agency relationship.
Party which deliberately breaches a contract cannot benefit from exclusion clause
In Internet Broadcasting Corporation Limited and another v MAR LLC [2009] EWHC 844, the High Court recently ruled that an exclusion of liability clause should not apply to the deliberate personal repudiatory breach of a contract by a party. The court’s decision was partly based on the limited availability, or non-availability, of insurance against deliberate repudiation, especially personal repudiation of contracts. This restricts the ability of the innocent party to protect against such a breach. The court held that it would be possible for an exclusion clause to cover deliberate personal repudiatory breach, but the drafting of the contract would have to make it very clear that this was what the parties intended. Exclusion of liability clauses are a standard feature of commercial contracts so any guidance from a senior court on their limitation is of interest to businesses of all kinds.
Court overturns ruling on restrictive covenant in franchise agreement
The Court of Appeal has overturned the judgment of a lower court that had interpreted a restrictive covenant in a franchise agreement very narrowly. In ChipsAway International Limited v Errol Kerr [2009] EWCA Civ 320, the apparent intention of the restrictive covenant was to prevent the former franchisee from engaging in any business which competed with that of the franchisor for the period of 12 months after termination of the franchise agreement. The court of first instance construed the relevant clause to mean that the ex-franchisee was only restrained from competing if the franchisor had appointed a replacement franchisee in the territory. The Court of Appeal reversed that decision, ruling that the purpose of the covenant was to allow the franchisor adequate time to find a new franchisee and that it was irrelevant to the operation of the provision that the franchisor did not look for one. Many contracts include restrictive covenants (which have to be reasonable to be enforceable) and any guidance from a superior court on their interpretation is useful to businesses which use them in their terms.
Government publishes draft regulations and HMRC publishes guidance on cross-border supplies of services
The Department for Business Enterprise and Regulatory Reform (BERR) has issued a draft of the regulations it is proposing to implement the Services Directive (2006/123/EC) in the UK. The Directive is intended to assist service providers and customers, principally by streamlining administrative procedures in member states to facilitate cross border trade. HMRC has also issued guidance on substantial changes that are to be made to the VAT “place of supply” rules which are to come into effect from 1 January next year. These changes include alterations to the time of supply rules for cross border supplies of services and the introduction of a new electronic VAT refund procedure. The HMRC guide notes that there are still areas of uncertainty within the VAT rules on cross border supplies of services which need to be resolved at EU level. However, the guidance will be useful to businesses which require detailed advice as early as possible to allow them time to make the possibly significant changes to their VAT handling systems in order to apply the new rules in time for 1 January.
European Commission publishes a guide to free movement of goods
The European Commission has also issued a new edition of its guide on the free movement of goods within the EU. The guide provides information on barriers to trade between member states which are still encountered in practice (52 years after the signing of the Treaty of Rome!), explains relevant case law and gives commentary.
Software Distribution Agreement – Exclusivity
An interim injunction was granted against a software company in relation to its alleged breach of an exclusive distribution agreement with the claimant company. The claimant, Talaris (Sweden) AB, manufactures cash machines, the software for which is supplied by the defendant company, Network Controls International Limited (NCI), under an exclusive distribution agreement (the Agreement). The Agreement appointed Talaris as the exclusive distributor of NCI’s cash machine software. Talaris learned that NCI’s parent company had demonstrated one of its own machines, which included the NCI software, at an exhibition during the term of the Agreement. Talaris considered this a breach of their exclusivity as distributor of the software and sought an injunction to prevent recurrence. Included in the injunction granted by the court were prohibitions against marketing the software and demonstrating the software without the claimant's logo. Businesses pay a premium for the exclusive right to distribute suppliers’ goods, and so are alert to conduct which might compromise that exclusivity. Court cases involving exclusivity clauses are of interest to all businesses in the distribution industry.
Regus –v- Epcot – exclusion clauses upheld
A recent ruling of the Court of Appeal in the case of Regus (UK) Limited v. Epcot Solutions Limited was welcomed by business commentators. In Regus, the appeal court overturned a lower court’s decision which had called into question the enforceability of standard exclusion of liability clauses which were contained in a contract for the provision of serviced accommodation. Exclusion clauses are very common in a wide range of contracts including, for example, IT supply contracts. The higher court’s judgement, which confirmed the effectiveness of such clauses so long as they are reasonable, was reassuring news for the many businesses which need to be able to rely on exclusion clauses contained in their standard contract terms and conditions. However, exclusion of liability provisions still need to be drafted carefully to ensure that they do not exclude liability for types of claim which cannot by law be excluded – e.g. for death or personal injury – and are thereby inadvertently rendered void.
DPA is of limited use to political candidates
In an unusual dispute involving two candidates for the District Council elections in May 2007, the High Court has ruled that political candidates cannot rely on the Data Protection Act 1998 (DPA) to obtain advance notice from their rivals of any personal information about them which is to be included in their opponents’ election literature. In the case, Quinton v Peirce and Another [2009] EWHC 912 (QB), the claimant based his argument on the “fair processing code” contained in Part II of Schedule 1 of the DPA. Among other things, this requires persons who process the personal data of others (for example, by preparing documents about them on a computer) to give notice to the individuals who are the subjects of the data of how their information is going to be used. However, the court gave the claimant’s argument short shrift, declining to interpret the statute “in a way which results in absurdity”. The judge said “Plainly, it cannot have been the intention of the legislature to require electoral candidates to give their opponents advance warning each time reference is to be made to them in a document that happens to be computer generated.” Any judgment concerning the DPA is of interest to businesses, most of which are “data processors” for the purposes of the DPA, and this seems to be a commonsense application of the Act.
For more information or advice on commercial matters, please contact
Christine Jackson
First published June 2009
