Tag Archives: Business Contracts

Unfair Contract Terms Act

Whenever you are entering into a contract, be that with another business or an individual, it is important to be aware that the law will sometimes intervene to invalidate terms, or even entire agreements, if the terms of your contract are considered to be ‘unfair’.

Consumer contracts

Consumers are subject to considerable protection when entering into contracts with businesses. The law automatically assumes that businesses and consumers have unequal bargaining power.

  • Where consumers contract with businesses who use standard form terms, such as ecommerce businesses, the customer will not have had an opportunity to negotiate those terms and there is a risk that the terms may be found to be unenforceable.
  • When developing business to consumer contracts for your business you need to take account of the Unfair Contract terms Act and all applicable consumer protection legislation.
  • Examples of unfair terms might include provisions which mislead a consumer, which compel them to pay an unreasonable penalty, or which free you from your obligations or vary the terms of the contract.

Specialist advice should be sought to develop business-to-consumer contracts which protect your business interests and do not fall foul of the Unfair Contract Terms Act.

Contracts between businesses

In contrast, the law assumes that businesses will have equal bargaining power. This is because in theory, if an unfair contract term was put forward, businesses would have the opportunity to go elsewhere and find another party to contract with.

  • However, in practice a small business does not have equal negotiating powers when compared to a large organization due to commercial expediency. A small software developer often has little bargaining power when negotiating with a big corporation.
  • Although protection against unfair contract terms for businesses is not as extensive as consumer protection, the Unfair Contract Terms Act 1977 does consider some terms within a contract as automatically unfair. Other terms are only deemed fair if they are considered by a court to be reasonable.
  • It remains important to consider the terms of contracts carefully to ensure that none of the terms within your contract could be considered unfair.

Specialist professional advice will give you confidence that your business contracts are enforceable and do not include unfair contract terms.

Implied Terms of Contract

Sometimes the law implies contract terms to regulate your relationships whether you have a legal contract in place or not.

These implied terms may arise due to specific legislative provisions, or as a result of general legal rules.

Some of the more common terms implied into your agreements relate to

  • quality,
  • ownership,
  • price,
  • timing or other similar issues

in respect of goods and services which you supply.

Terms may also be implied by the circumstances surrounding an agreement. For example, if there is a consistent course of dealing between you and another party; or if there are customs within the industry in which you operate.

Other situations where terms are implied are where the intention of the parties when the contract was made suggest that a particular point was implicitly in mind.

It is possible to override some of these implied terms by agreement. This is one benefit of contracting on written terms, rather than simply agreeing to do business with someone without using a contract.

Where no written agreement is part of the deal, then an oral agreement comes into existence. This is unsatisfactory in terms of risk management, and prevention of disputes.

If a dispute does arise where there is no written contract, it can be a lot more messy and expensive to resolve it.

We are able to assist with drafting your agreements to ensure that your intentions are made clear and unexpected implied terms can be avoided. Alternatively, if you are in a dispute with someone we are able to advise on the terms that are likely to apply to your relationship, and help you to reach resolution.

Contract

A written agreement is not necessary for a legally binding contract to come into being.

  • Under the law once there is clarity about the parties involved in the proposed contract, what the product or project involves doing, and the price, a contract will be deemed to have been formed.
  • Sometimes parties may want to include additional matters after the contract has been concluded. It is therefore important to record what is agreed in writing, to ensure that any additional terms agreed later form part of your agreement.
  • Depending on the subject matter of your contract there will also be legal regulations impacting on the terms you agree, such as the Unfair Contract Terms Act and various implied terms.
  • Many precedent contracts currently available are drafted in incomprehensible ‘legalese’. This can be off-putting to your customers. We aim to keep matters simple, and draft clear, comprehensible agreements in plain English.

How we can help

We are experienced commercial lawyers and can assist in drafting a variety of different legal agreements. Due to our expertise in IP and digital matters we are particularly suitable for commercial agreements with an IP/IT dimension, such as the following:

  • Software licenses
  • Maintenance agreements
  • SLA agreements
  • Software as a service
  • Software distribution agreements
  • Software support and maintenance service agreements
  • Software development agreements
  • Software reseller agreements
  • Service level agreements
  • Hardware procurement
  • Information technology outsourcing
  • Cloud computing contracts
  • Consultancy agreements
  • Framework agreements
  • Procurement contracts
  • Systems integration
  • Telecoms contracts

Terms and Conditions

Terms and conditions are sometimes called Business Terms or Terms of Business, or simply contract terms.

They are used in a variety of situations, such as to govern the contractual relationship between you and your customers.

Terms and conditions are essential to a business’s operation. They provide clarity for your customers, and guidance for both parties if a dispute arises.

  • You cannot assume that everything included in your terms and conditions are enforceable just because a customer accepts it, or does not query it. Consumer protection legislation could affect the validity of the terms you agree with customers.
  • If your customers are based abroad, your terms and conditions could also be affected by foreign law.
  • Your business may suffer reputational damage if your terms and conditions are unreasonable or unfair.
  • It is important to ensure that any sale is conducted on your terms and conditions and not on the terms of the other party.
  • Businesses operating online must be aware of additional requirements applicable to their business. For more information see our pages on ecommerce terms.

Use of Templates?

Some businesses may manage their budgets by creating their own terms and conditions, often based on those used by competitors or on templates purchased online. However, taking legal advice will add far more value that supplying you with documentation.

Also, remember that documents drafted without legal input, and which are not specific to your circumstances may not be worth the paper they are written on. They will also not give you any guidance on how implied terms of contract may affect your business.

Website Terms and Conditions

Website terms and conditions explain to visitors how they may use your website, and aim to limit your liability arising from the material you publish. These are not to be confused with ecommerce terms, which govern the terms of contracts you make with customers in respect of goods or services sold online.

Why do you need website terms and conditions?

  • Website terms give you the opportunity to insert disclaimers in respect of content you publish on your site
  • They can also limit your liability in respect of content published on your site by users.
  • Terms give you the opportunity to ensure that your website users are bound by the terms on which you allow use of your site
  • Unless you put in place terms to govern the use of your website, you may find it difficult to challenge complaints or legal action taken by visitors.
  • There are reputational benefits to having clear and reasonable terms and conditions. Consumers will find your organization easier to trust. Visitors will be able to understand how they can use your site, who you are, and how you will deal with their information.
  • Your website terms and conditions of use will also generally refer to other important documentation, including your privacy policy and your terms of business.

What other information should my website provide?

  • The law requires you to make it clear who is behind your website. If you are selling online as a limited company, you must provide full company name and registration details, along with your registered office address (a PO box is not sufficient).
  • The Equality Act requires you to take steps to ensure that your site does not discriminate against those who may be less able to use it, and this might include adding more information such as a verbal description of the contents of images, or a transcript of audio content.
  • If you are selling goods or services online, your terms and conditions must also provide certain information such as an explanation that consumers have a right to cancel within a specific ‘cooling off’ period and an explanation of how to submit or amend an order.

How we can help?

Our understanding of the web will save you time and unnecessary expense. We appreciate the unique issues relevant to doing business on the internet. We will be able to advise you on the documentation you need, and how to comply with other relevant legislation.

Sponsorship Agreement

Sponsorship can be an excellent promotional tool for the sponsor, and provide essential funding for a project. However, balancing the interests of both parties is a complex exercise.

  • Some recipients may want the deal to be exclusive, in order to secure their commercial advantage.
  • Both parties to the deal may require a license to use trademarks or other IP. For example, a sponsor will typically be licensing its brand to the recipient, requiring it to be displayed prominently on products, at events or perhaps on a website.
  • At the same time recipients of sponsorship may provide sponsors with a license to use their brands – for example they would likely want to advertise the fact that it is contributing to charity, and will need a license to do so.
  • Both parties will be concerned that their brand might be used incorrectly, as this could result in the loss of their rights to it, or reputational damage.
  • Certain sponsors might not want their brand to be associates with particular products or services if they do not complement the sponsor’s image.

Any license given in the course of a sponsorship agreement should be considered carefully, to ensure it is narrow or wide enough to serve your interests.

Advertising regulation

  • It is important to have regard to advertising regulations overseen by bodies such as the Advertising Standards Authority and to have a familiarity with marketing law in general.
  • Sponsorship activities which are misleading, or fail to comply with regulations in other ways may backfire and trigger complaints, or even result in legal action by a regulator such as the OFT.

How we can help

We have extensive experience of drafting and advising on sponsorship agreements so please do get in touch if you are considering a sponsorship deal.

Shareholder Agreement

A shareholders’ agreement is a way for those who have a stake in a business to agree terms between them to control how a company is to be run.

The agreements might cover:

  • How shares can be issued and transferred
  • How decisions are to be made
  • And how profits should be divided

Why a shareholders’ agreement is necessary.

Where there is no shareholder’s agreement in place, shareholders are typically treated equally, and dealings in shares are governed by legal rules which may not necessarily take into account the aims of the founders of the business.

An agreement is useful in a wide range of circumstances, for example if the founders would like to avoid having a stranger buy into the business, or if an investor who made a more significant contribution, or has particular expertise is to be afforded additional control.

A shareholder agreement can give you greater flexibility over the way your company is run.

If you are bringing a valuable asset into the business, for example a crucial piece of software, or a reputable brand, then it is important to use a written agreement so your intellectual property and investment is not left to waste if things do not go as expected

As experienced commercial solicitors, we are able to advise and assist in relation to the drafting of shareholder’s agreements.

SEO Contract

If a customer searches for your business or for goods and services you sell, it is important that your website comes up in the top listings on Google at least for some of the search terms they use.

Ensuring that your business is well placed in internet search listings is a key way to reach your customers, and is known as Search Engine Optimisation (SEO).

  • If you engage an SEO company, then your agreement should be in writing to make sure your interests are properly protected, and that you get what you expect for your investment.
  • These agreements require lawyers with a good grasp of SEO and technical issues. As lawyers focused on digital business we are well placed to understand the complexities of any agreement you are asked to sign.
  • Undertaking SEO activities involves intellectual property considerations and it is important to have a written contract in place.
  • Buyer beware is the mantra of the law.

Even if you outsource your SEO due to lack of time and resources to undertake the work yourself, it may make sense to have some internal procedures to ensure SEO is top of mind.

Having expert advice on the SEO contract will help you to manage your commercial risks and give you more confidence when dealing with contractors.

What if you are an SEO company?

We also act for SEO companies. If you are an SEO agency and need assistance in preparing standard terms or negotiating a contract to provide SEO services.

We have the experience and expertise to appreciate what is reasonable and practical for the parties involved.

Outsourcing Agreement

Outsourcing agreements are becoming more widespread as more and more work is done remotely. For example, the design, development and maintenance of websites and IT systems is often now outsourced.

The main issues which should be covered by an outsourcing agreement include:

  • Clarifying the goods and services to which the agreement relates
  • Timescales
  • Conditions which must be met
  • Insurance requirements
  • Termination provisions

International outsourcing agreements

As the internet makes even small businesses global, it may often be necessary to consider the contract laws of two or more countries when drafting an outsourcing agreement.

Different levels of protection in different countries for issues such as confidential information make it imperative to take professional advice before entering into an outsourcing agreement.

When acquiring systems for your business it is also important to consider intellectual property. For example:

  • are you entitled to modify software to better integrate with your business?
  • What if the original provider goes out of business, can you enlist a third party to support your systems?

As intellectual property rights are territorial, you may need to secure IP rights in other countries before engaging outsourced services.

Template agreements bought online would be inadequate to protect your interests.

Any important business contract should be drafted and negotiated with your needs in mind. That is the best way to manage commercial risks.

We are experienced commercial solicitors with extensive expertise in outsourcing agreements.

Ecommerce Terms

When you sell goods or services online, you need ecommerce terms and conditions to govern your contractual relationship with buyers, and comply with website law. It is important to have the ecommerce terms carefully crafted for your business, and to instruct your web developers to have certain automated emails in place to protect your position.

What should be covered by ecommerce terms and conditions?

Website terms and conditions must take account of legal issues such as:

  • Rules surrounding ‘unfair contract terms’ contained in the Unfair Contract Terms Act
  • Rules which operate to add implied terms into contracts
  • The Distance Selling Regulations
  • Ecommerce law and regulations

Website contracts should cover consumer cancellation rights, as consumers are normally entitled to a ‘cooling off’ period during which they are free to change their mind and cancel their contract.

Unless your website terms and conditions are drafted to comply with ecommerce law you risk not complying with the regulations, so that the cancellation period is extended over a much longer period.

It is also important to ensure that any website contracts you enter into are concluded in your home country where feasible, and website contracts should also manage the risk of pricing errors.

In 2002, Kodak.com’s website priced a digital camera at £100 rather than £329, and over 1000 orders were placed before the problem was fixed. This led to significant losses, and bad publicity as a result of Kodak’s initial refusal to fulfil the orders.

Web law is wider than simply ecommerce law.  So, in addition to ecommerce terms your business will also need to ensure an adequate privacy policy is in place, as well as terms and conditions to govern use of the website.