Contract disputes: Don’t leave it to chance or common sense

Posted by Colin Fenny Feb 15th, 2012, in Business Protection, Dispute Resolution

Last year I posted a blog that highlighted the importance of ensuring terms and conditions are properly drafted to minimise the risk of contract disputes arising over the interpretation of such clauses at a later date.

This is a scenario all businesses could well do without in the current economic climate, particularly as the Supreme Court recently provided some clarification on how it would interpret such clauses.

The case of ‘Rainy Sky S.A. & Ors v Kookmin Bank’ confirms that where language used in a contract has more than one potential meaning, the courts are to adopt what it considers to be the construction most consistent with business common sense.

The case involved a dispute over whether a clause in a contract to finance the purchase of a ship, which required the defendant bank to repay pre-delivery instalments to the claimant purchaser, applied in the event of the insolvency of the shipbuilder. (more…)

Bribery law heralds caution over corporate Christmas gifts

Posted by Roger Spence Dec 19th, 2011, in Business Protection, Employment Law

Employers should beware of tough new anti-bribery laws when giving or receiving corporate gifts this Christmas.

The Bribery Act affects everyone from global businesses to individuals, prompting the Royal Mail’s recent warning to postal workers to refuse Christmas gifts worth more than £30.

Roger Spence, head of Employment law at Preston-based Harrison Drury Solicitors, commented: “This will be the first festive season to be affected by the Act, which makes it illegal to offer or receive bribes, and to fail to prevent bribery.

“Christmas is high season for corporate hospitality and giving. Despite the downturn, some businesses might be tempted to splash out to keep key customers on board, and a number of grey areas make this a risky undertaking.” (more…)

Protecting your intellectual property

Posted by David Filmer Nov 23rd, 2011, in Business Protection

The ownership and right to use intellectual property is an increasingly important consideration as businesses seek to gain a competitive edge.

Where a product is protected by intellectual property, this can assist when trying to take it to market and to exploit it commercially.

However, where value is involved, disputes can all too often occur as to who actually owns the intellectual property in any such item, and without clear documentation put in place in advance, it is all too easy to end up in costly litigation to try to determine the rightful owner.

Many such problems can occur around the area of copyright. Copyright is a right which occurs automatically when anybody creates something, whether that is a book, a work of art, a piece of music, or computer software. Once an idea is set down and crystallised, copyright arises, and it is this automatic nature which can lead to dispute. (more…)

HD Anytime launched to counter ‘fear of the billable hour’

Posted by Communications Director Sep 26th, 2011, in Business Protection, HD news

Harrison Drury has launched a dedicated service aimed at removing business owners’ fears of being charged on the clock when speaking to their lawyer.

HD Anytime allows clients to gain access to a full range of commercial law services for a fixed monthly price.

John Chesworth, managing partner of Harrison Drury, believes the tough economic conditions call for a move away from the traditional charging structures in the legal sector.

He said: “We have spent 12 months speaking to clients and professional partners about provision of legal services and, at a time when the need for clear advice at an early stage has never been greater, value for money is the biggest issue for businesses. (more…)

Does your business need a social media policy to prevent misuse?

Posted by Roger Spence Jul 6th, 2011, in Business Protection, Employment Law

Social media, such as Facebook, Twitter, LinkedIn and blogs have become an excellent new tool for businesses to market their products and services.

Many businesses now use social media to engage with customers and it is now commonplace for individual employees within businesses to log onto social networking sites at least once a day.

However, in recent months there have been a number of high profile cases where employees have been the subject of disciplinary investigation due to inappropriate comments on, or general misuse of, social networking sites. This throws up a number of employment law issues. (more…)

Why shareholder agreements are vital in family businesses

Posted by David Filmer Mar 22nd, 2011, in Business Protection, Dispute Resolution

In any business, when shareholder disputes arise, it‘s always a difficult time. However, when the owners of a business are also members of the same family, then things can turn especially nasty.

The benefits of relying on family members in business affairs are evident in the hallmarks of greater trust and stronger commitment to the success of the business. However, when problems at home spill over into the office, there is rarely a happy outcome.

The Patak’s family business dispute

This was highlighted in a high-profile case surrounding the family-owned Indian food business Patak’s. This business was developed from a small family enterprise making curry sauces, into a multi-million pound business, but things turned sour when the patriarch of the company died, and the shares in the business were being distributed between the siblings. In the end, a protracted case in the High Court led to two of the siblings being awarded multi-million pound settlements in 2006, but at the expense of family unity. (more…)

Case study: contract guards against unfair competition

Posted by Roger Spence Dec 2nd, 2010, in Business Protection, Case studies, In HD enewsletter

A client in the North West automotive sector approached us after a disgruntled employee resigned and set up in competition, while also pursuing a legal claim for constructive dismissal.

How your key players can become arch rivals

The former employee’s lawyers were threatening to go to an Employment Tribunal following allegations he had been unfairly treated in a number of ways, which included the level of bonus payment awarded to him.

Although our client had a robust defence, the prospect of having to defend an Employment Tribunal claim represented a major management headache. However, the former employee had signed a post-termination restrictive covenant, drafted several years earlier which barred him from competitive activity for a specific period.

Why restrictive covenants are crucial for safeguarding a business

We countered the move to bring a constructive dismissal claim by threatening to seek an injunction at the High Court to enforce the post termination restriction. Almost immediately, the other side hoisted the white flag.

Not only did the ex-employee drop his constructive dismissal claim, but also agreed to sign binding and enforceable undertakings that he would immediately cease trading and would respect the post termination restrictions.

The restrictive covenant was so tightly drafted in favour of our client that the issue was settled quickly and efficiently, avoiding the need for an expensive and time-consuming Employment Tribunal.

Vital steps you should take

All businesses can protect their legitimate business interests by barring key employees from dealing with or soliciting work from customers and suppliers for a period of time. This can be done within the employment contract. However, it is vitally important that such restrictions are drafted on a bespoke basis to avoid the risk of the courts determining they are too broad to be enforceable.

When recruiting key members of staff who will soon have the ear of your customers and suppliers, it is crucially important to ensure restrictive covenants are added to their employment contracts. An audit of your existing key employees is also highly advisable to ensure that they too are covered.

By taking this cost-effective action, a business will gain a set period when it can focus on strengthening relationships with customers or suppliers who might be tempted to move to a competitor or a new business set up by an ex-employee.

If you require advice on post termination please call Roger Spence on 01254 258321 or email roger.spence@harrison-drury.com

In HD news articles:
Welcome to our enewsletter, In HD, issue one
Remove the burden and risk of employment claims
Case study: contract guards against unfair competition
Don’t let boardroom disputes become a turf war
Delivering results: testimonial

Don’t let boardroom disputes become a turf war

Posted by David Filmer Dec 2nd, 2010, in Business Protection, In HD enewsletter

Written by David Filmer, associate solicitor

These days we are used to hearing about the power struggle between the owners of a football club and its manager but the recent High Court battle between the owners and the directors of Liverpool Football Club (LFC) highlighted a different problem which is potentially relevant to any incorporated company.

The matter focused on the areas of company law relating to the control of a company, and the power of shareholders to control who is on the board of directors. The basic position with any incorporated company is that the shareholders own the company, and the directors run the business. In many smaller companies, the same people may fulfil both functions, but this is not always the case.

Where disputes arise, these different roles can give rise to conflicting interests. For example, while the directors run the business, they are under a duty to do so in the interests of the shareholders. In addition, shareholders have the power to remove directors from office, providing that they adhere to certain procedural matters, most notably, giving 28 days’ notice of their intention to do so.

In the case of LFC, it would appear that the owners agreed to cede the power to hire and fire directors to the chairman, Martin Broughton, in addition to giving undertakings to Royal Bank of Scotland (RBS), to whom the company owed some £237m, that they would not do anything which would frustrate a potential sale.

It would appear that the court considered their actions to be unlawful in seeking to effectively sack the existing board, and replace it with one of their own choosing. It also ruled that they breached the undertakings to RBS, paving the way for the sale of the club, and for the bank to recoup its money.

For any company, no matter what the size, clarity is essential when these sorts of disputes arise.

Due to documentation put in place at the outset, the court was able to ascertain exactly what the position was and to make a ruling. Unfortunately, many companies neglect to put correct documentation in place, such as shareholder agreements, or bespoke articles of association, leading to uncertainty when disputes arise.

If you would like me to conduct a free headline review of your current shareholder agreement, please call me on 01254 258321 or email david.filmer@harrison-drury.com

In HD news articles:
Welcome to our enewsletter, In HD, issue one
Remove the burden and risk of employment claims
Case study: contract guards against unfair competition
Don’t let boardroom disputes become a turf war
Delivering results: testimonial

The punitive cost of failing to protect your brand

Posted by John Chesworth Nov 30th, 2010, in Business Protection

The need to protect your assets – especially goodwill – was highlighted when a Preston hair salon had to change its brand after legal action involving another hairdresser with the same name.

The Preston salon, called Bonce, started trading in 2007 – a year before its namesake in Birmingham was launched. However, the Midlands salon had trademarked the name, whereas the Preston hairdresser had no legal protection.

As a result, the Preston salon had to spend £1,000 on new signs and price lists – not to mention concerns that clients may have thought the salon was in the hands of a new owner. (more…)

Liverpool FC’s boardroom struggle highlights potential turf war for businesses

Posted by David Filmer Oct 15th, 2010, in Business Protection, Mergers and Acquisitions

These days we are used to hearing about the power struggle between the owners of a football club and its manager but this week’s High Court battle between the owners and the directors of Liverpool Football Club (“LFC”) highlighted a different problem which is potentially relevant to any incorporated company.

The matter focused on the areas of company law relating to the control of a company, and the power of shareholders to control who is on the board of directors. The basic position with any incorporated company is that the shareholders own the company, and the directors run the business. In many smaller companies, the same people may fulfil both functions, but this is not always the case. (more…)