Commercial Newsletter November 2014
Commercial Newsletter November 2014 ‘I Dreamed a Dream’: but protect it with a contract Joint ventures can be fraught with difficulties, particularly if insufficient consideration is given to adequate and effective contract terms. Commercial contracts should always contain unambiguous clauses that govern what should happen should a dispute arise, and where one party wants to break the contract. The commercial lawyers at Herrington & Carmichael Solicitors are experts in negotiating and drafting commercial contracts. Dreaming of the money Immigration Checks on Residential Tenants the changes are coming! 2 Email exchanges 3 can form a binding contract: What about Twitter and other social media? Enforcing contracts: beware a bad bargain 4 Herrington & Carmichael LLP Announces Growth in Departments. 5 A rather unusual case has recently thrown the spotlight on the importance of contract terms, particularly in relation to joint ventures. A man (the defendant in the case) dreamt that he was holding a large bundle of cash and standing in front of him was his employer (the claimant). A lottery ticket was bought resulting in a £1m prize. A dispute arose between the two parties: the issues were - who bought the ticket, and who was entitled to the winnings1? the most effective way is also vital to a successful joint venture. Whether it is a simple arrangement or a complex joint venture business – litigating disputes arising out of a commercial arrangement is expensive. One wonders how much of the lottery win was needlessly spent on litigating the dispute. How can we help? If you are considering entering into a joint venture, the expert commercial solicitors at Herrington & Carmichael are available to assist in negotiating effective contractual terms that will protect your interests. We will also clearly advise you on the pitfalls and risks associated with the joint venture. For further help and expert advice, contact Mark Chapman on 01276 686222 or Yavan Brar or Alex Canham on 0118 977 4045 1 Kucukkoylu v Ozcan [2014] EWHC 1972 (QB) The High Court held that it was (or it was to be implied) a contractual term that any winnings would be shared equally. Such a term represented the obvious, but unexpressed intention of the parties and that it had also been necessary to give business efficacy to the contract. What’s lessons can be learnt? Work Life Balance 6 and Shared Parental Leave Should Employers Include Overtime on the Calculation of Holiday Pay? 7 Contact Details 8 Whatever the relationship between the parties, drawing up clear, unambiguous written contractual terms that reflect the express intentions of the parties in a joint venture is critical. Structuring joint venture agreements in For further information on any Company Commercial matters please contact our team on 0118 977 4045 / 01276 686222 or email [email protected] Immigration Checks on Residential Tenants - the changes are coming! Private landlords are going to be required to undertake immigration checks on all residential tenants and lodgers over the age of 18. The Home Office has announced that the first phase of the roll out will cover properties in Birmingham, Walsall, Dudley, Sandwell and Wolverhampton. Checks must be made for all new tenancies in these areas beginning on or after 01 December 2014 under the “Right to Rent” scheme introduced by the Immigration Act 2014. It is anticipated that further phased introduction will see the scheme sweep across the country during the course of 2015, although this is subject to the outcome of the General Election in May 2015. Failure to comply with the checks on the immigration status of tenants leaves the landlord open to a fine of up to £3,000 if their tenant is in fact in the UK illegally. The official Code of Practice published alongside the announcement has recommended that the immigration status of every tenant is checked to avoid accusations of discrimination/racial profiling. So, what checks need to be done? If the tenant has a passport, or biometric residents permit, sight of the original document will be sufficient, although it is recommended that you take a photocopy to prove you have seen it and keep the evidence for at least 12 months after the end of the tenancy. Where the prospective tenant does not have one of these documents, usually because of an on-going Home Office investigation, an online search facility run by the Home Office can be used, with results provided within 2 working days. Care must be taken when the tenant does not have indefinite leave to remain, as on-going checks must be made to continue to comply with the legislation. Checks should be made for all persons over the age of 18 who will be living at the property, even if they are not named on the tenancy agreement or Page 2 are lodgers living with the landlord in their own home, to give the best possible protection from a fine. Student accommodation where tenants have been nominated directly by colleges, local authority housing, hostels and refuges will be exempt from the checks at this stage to avoid undermining the protection of vulnerable groups. This proves to be a significant issue as statistics from insurance company AXA suggest 38% of landlords fail to undertake any pre-tenancy checks on their tenants. The landlord can be held responsible for criminal acts undertaken on their property under various pieces of legislation, including the Misuse of Drugs Act. The legislative requirements on residential landlords are significant, some carrying criminal liability if not met. Should you be uncertain of your obligations, or have any queries as to whether your landlord is not meeting the necessary standards, please contact our Dispute Resolution Team at [email protected] who will be happy to help. Email exchanges can form a binding contract: what about Twitter and other social media? For some time now it has been accepted that email exchanges can form binding contracts recognised in England and Wales, but can Twitter, Facebook and other social media and instant messaging platform exchanges produce the same outcome? The answer is likely to be yes! Whilst there has been no case law in this area, the issue is likely to arise in the future, particularly as more and more businesses are beginning to use social media as a marketing and networking tool. In order to create a contract there needs to be: • • • Consideration (e.g. money, services • An intention to create legal • Certainty of terms. As a result of the above, if you are intending to negotiate terms before entering into a binding contract, it is important to mark all communications “subject to contract”. This should be made clear, and where possible in bold, in the subject field or, in the case of instant messaging, at the beginning of the message. It is important to ensure all employees are trained to use social media and instant messaging platforms correctly and warned about the dangers of creating legally binding contracts. Any employee could inadvertently enter into a legally binding contract by adding their name or e-signature to a communication or series of communications with another party. If the other party believes the employee has authority to enter into contractual negotiations and that belief is reasonable, then the communication is likely to create a binding contract despite the fact the employee may not have authority to do so. If you would like further advice on this subject, or any other Dispute Resolution matter, please contact Herrington & Carmichael LLP’s Dispute Resolution department on 01276 686222 or by email on [email protected] There is no reason, as we have seen with emails, why the above criteria cannot be present when communicating using social media or instant messaging platforms. The Electronic Communications Act 2000 has made ‘electronic signatures’ admissible as evidence if they are incorporated into an electronic communication. It is the Law Commission’s view, which has been supported by recent cases, that the voluntary addition of the sender’s name or an e-signature will be sufficient to show intention to create legal relations. For further information on any Dispute Resolution matters please contact our team on 01276 686222 or 0118 977 4045 or email [email protected] Page 3 Enforcing contracts: beware a bad bargain A recent judgement emphasises the crucial importance of scrutinising commercial contracts to ensure that the parties are satisfied with the terms that they are agreeing to. What was the basis of the judgement? And what should we take away from it? Fujitsu Services Ltd. V IBM United Kingdom Ltd The decision was made in Fujitsu Services Ltd. V IBM United Kingdom Ltd. The DVLA had contracted PricewaterhouseCoopers (“PwC”) to provide IT services, and there was a subsequent sub-contract entered into between PwC and Fujitsu. When IBM went on to purchase the PwC unit concerned, IBM effectively took over the agreement with Fujitsu, with the sub-contracts amended accordingly. parties, particularly where the parties in dispute are sophisticated commercial entities. In the light of this judgement, it’s increasingly clear that contracting parties and their legal advisors should scrutinise contracts closely, with a keen eye for clauses which may - if reaching the Courts - be interpreted to their detriment. How can we help? The expert lawyers at Herrington & Carmichael advise businesses on all aspects of commercial transactions and commercial projects, including the most detailed and complex elements of drawing up agreements between contracting parties. If you are looking for expert legal services regarding this or any other issue, contact Mark Chapman on 01276 686222 or Yavan Brar or Alex Canham on 0118 977 4045. In practical terms, this meant IBM overseeing the DVLA’s IT strategy, whilst Fujitsu managed day-to-day IT affairs. The sub-contract The terms of the sub-contract stated that the two parties were to work co-operatively and share certain kinds of work. Fujitsu claimed that IBM had failed to sub-contract work as set out in the contract and made a claim against IBM for £36.8million of damages, in the form of lost profit, arising form alleged breach of contract. The key question for the Court was the interpretation of a fairly standard sub-clause: “Neither Party shall be liable to the other under this Sub-Contract for loss of profits, revenue, business, goodwill, indirect or consequential loss or damage….” The Court held that the clause effectively excluded IBM’s liability for any profits lost by Fujitsu. The clause was clearly expressed as part of a detailed agreement: IBM was not seeking to rely on an implicit assumption that the parties intended to abandon remedies for loss of profit. Lessons learned It is clear the Courts are willing to enforce contractual wording which is clearly expressed even if it leads to an outcome which might be deemed unfavourable to one of the contracting Page 4 For further information on any Company Commercial matters please contact our team on 0118 977 4045 / 01276 686222 or email [email protected] Herrington & Carmichael LLP Announces Growth in Departments The Real Estate Department Welcomes New Team Members The Herrington & Carmichael Real Estate team has grown in step with the continued growth in the Real Estate sector. We would like to welcome Mark Izquierdo, Daniel York and Steph Richards to the team and take this opportunity to introduce them. Mark Izquierdo joined us as a Partner in July having previously been Head of Commercial Property at Lamb Brooks Solicitors in Basingstoke. He is able to offer advice on all commercial property transactions together with expertise in acting for property developers and landowners selling for development. In March we welcomed Daniel York to the team. Daniel has over 10 years experience at major firms in Reading and specialises in Landlord and Mark Izquierdo Daniel York Tenant work, secured lending and the sale and purchase of commercial properties. In addition to Mark and Daniel, Steph Richards has also joined the Real Estate team as a newly qualified solicitor after having completed her training contract with Herrington & Carmichael. Steph is developing experience in all types of Real Estate work and has gained valuable experience being part of the team on a number of large transactions during her time as a trainee. The Real Estate team now has 9 fee earners specialising in all types of commercial property work. If you should require advice on any Real Estate transaction, please contact the team on: 01276 686222 or email [email protected]. Steph Richards New Addition to the Herrington & Carmichael Corporate & Commercial team Herrington & Carmichael are pleased to announce that Jo Noddings has recently joined our Corporate and Commercial Team as an assistant solicitor. Jo joins us with two and a half years post qualification experience working on a wide range of corporate and commercial matters and will be assisting the team with a focus on providing legal services to the healthcare sector. To contact Jo telephone 0118 9677 4045 or email [email protected]. Jo Noddings Page 5 Work Life Balance and Shared Parental Leave With effect from 30 June 2014, the Government introduced new Regulations relating to flexible working requests. The principle was to open up the ability for employees to work flexibly regardless of whether or not this related to the requirements of childcare or caring for elderly parents. We have previously reported on these Regulations in our article in June 2014. On the whole, these Regulations appear to have had minimal impact on business given that many employers were already operating arrangements for their employees to work flexibly. The Government has, however, continued its initiative towards the idea of supporting working families with the introduction of Shared Parental Leave (SPL). New Regulations have again been enacted to take effect in relation to babies born or children adopted on or after 5 April 2015. Employers need to be aware of the implications of these Regulations as they will potentially face questions from expectant parents or adopters looking to use their new found rights. The idea behind SPL is that parents or adopters will be able to share the burden of childcare. No longer will this fall squarely at the feet of one parent, who takes either maternity leave or adoption leave. Instead, the idea is that eligible parents will be able to divide SPL of up to 52 weeks, less the period spent by the mother on maternity leave or one partner on adoption leave. In addition, the parent who is taking SPL will be able to share an unused proportion of the parent’s statutory maternity or adoption pay as statutory shared parental pay (SSPP). There are notification processes that parents will be required to follow in advance of taking SPL. In particular, parents will have to provide 8 weeks notice in advance of commencing a period of SPL (a ‘Leave Period’). Under the Regulations, parents can give up to three Leave Period notices meaning that they may be able to take three separate Page 6 blocks of SPL. Parents are also likely to look to structure their SPL in the way that is most favourable to them and their family life. These Regulations give employers a number of potential problems and areas to consider. For example: 1. The SPL Regulations are complicated and, therefore, to avoid confusion employers should introduce clear policies on how they will operate SPL with their employees. This will avoid uncertainty and questions. 2. Employers will need to review their other policies and practices in relation to maternity, adoption and parental leave. SPL replaces additional paternity leave and, as a result, further policy changes will be required. 3. Employers who offer enhanced company maternity or adoption pay will also need to review their existing pay structures to ensure that these are complaint with the principles of SPL and SSPP. This may require a detailed contractual review and consultation to change applicable terms and conditions. 4. Employers should enter into discussion with expectant parents and potential adopters to ensure that they understand the employee’s intention around maternity leave, adoption leave and SPL. Employers will need to verify that SPL rights are being used appropriately with the parents and any other employer of the parents. Herrington & Carmichael’s Employment Department are providing employers with regular advice on SPL, its implications and how to ensure compliance. For further information, please contact us on 0118 977 4045 email [email protected] Should Employers Include Overtime on the Calculation of Holiday Pay? On 4 November 2011, the Employment Appeals Tribunal decided that payments made to employees in respect of their annual leave should include normal non-guaranteed overtime. This is an important decision that could have subsequent costs implications for employers who regularly pay their employee’s overtime but do not include it into their holiday pay. Based on this decision, moving forward, employers should consider whether to include overtime into their holiday pay calculations. In addition, employees will be able to claim for arrears of holiday pay as ‘unlawful deduction of wages’ provided there has not been a gap of more than 3 months between successive underpayments. od (of usually 12 weeks) are included within calculations for holiday pay. The reference period may be longer than 12 weeks and employers should ensure that the reference period is representative of the employee’s ‘normal remuneration’. Accordingly, if overtime fluctuates widely during the year, a longer reference period may be required. For further information on this case and the implications of the decision please contact either: Alistair McArthur, Head of Employment, on 0118 989 8158 or alistair.mcarthur@herrington - Katie Harris, Solicitor, on 0118 989 9710 or [email protected] Travel time payments which exceed expenses are taxable remuneration and so should also be included as part of holiday pay. While, on the face of it, this ruling appears to be potentially damaging for employers, some relief may be found in the fact that: • This case concerned overtime which employees were obliged to work.. It is unlikely this judgement will cover truly voluntary overtime. Although there may be some factual debate on this issue on • It only applies to the basic 4 weeks’ leave granted under the Working Time Directive, and not to the additional 1.6 weeks under regulation 13A of the Working Time Regulations. Nor does it apply to contractual annual leave over • Permission to appeal to the Court of Appeal has been granted. The Government has set up a “task-force” to review holiday pay in the wake of this decision. This opens up the potential for further changes for employers. Employers should review their arrangements for calculating holiday pay to ensure that, in respect of at least 4 weeks leave, any normal overtime employees have worked over a given reference peri- For further information on any Employment matters please contact our team on 0118 977 4045 or email [email protected] Page 7 Department Heads Yavan Brar Head of Company & Commercial [email protected] Frankie Tierney Head of Dispute Resolution [email protected] Tim Hardesty Head of Real Estate Alistair McArthur Head of Employment [email protected] [email protected] Maria Mulroe Head of Family Anthony Tahourdin Head of Private Client [email protected] [email protected] David Keighley Head of Residential Property [email protected] If you have any questions about the articles in this newsletter please call us or email [email protected] Our range of services include: Camberley Waters Edge, Riverside Way, Watchmoor Park, Camberley, Surrey GU15 3YL Telephone: 01276 686222 Wokingham 27 Broad Street, Wokingham, Berks RG40 1AU Telephone: 0118 977 4045 Corporate Commercial Employment for Individuals Employment for Businesses Dispute Resolution Insolvency Real Estate Residential Property Shared Ownership and HomeBuy Wills, IHT, Power of Attorney, Services for the Elderly, Probate Family including Mediation and Collaborative Law. Disclaimer: Articles in this newsletter are written as a general guide only, and are not intended to contain definitive legal advice, which should be sought as appropriate in relation to a particular matter. Herrington & Carmichael LLP is a limited liability partnership registered in England and Wales (Reg: OC322293) and is regulated by the Solicitors Regulation Authority SRA No.446245 Registered office is Waters Edge, Riverside Way, Watchmoor Park, Camberley, Surrey, GU15 3YL VAT number 211 3698 83. www.herrington-carmichael.com
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