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Articles 15th Mar 2022

Travis Perkins: Commercial Focus – Spring 2022

Cases

Legislation

Our latest updates in relation to the impacts on businesses as a result of Brexit, the Coronavirus pandemic and the Russian invasion of Ukraine, can be found in the Freethinking Hub on the Freeths website, in the Brexit Exchange, the Coronavirus Exchange and the Ukrainian Crisis Exchange. This review does not replicate the wealth of guidance on our website in respect of those issues.

News

Recent Case Law

Reconciling bespoke and standard terms

Septo Trading Inc v Tintrade Ltd [2021] EWCA Civ 718

Where a contract covers both standard terms and bespoke terms, it can sometimes be a challenge to determine how the two interact. In a recent case concerning an international contract for the sale of oil, a standard set of terms and conditions was incorporated, with a covering e-mail with additional terms. The e-mail stated that “where not in conflict with the above…” the terms would apply. However, although the e-mail said that a quality certificate issued at the load port would be binding, there was wording in the standard terms that the quality would not be inferior to a specification, creating a potential conflict between the two.

Ultimately the court agreed that the standard term concerning the quality certificate was inconsistent with the e-mail, and therefore should not be given effect. In reviewing previous case law, the court settled on a three-stage approach: ascertaining the meaning of the bespoke term, considering the effect of the standard form term, and considering whether there is an inconsistency between the two. In this case the two could not be fairly and sensibly read together.

Comment: This case looked at the confusion which can arise where there are two inconsistent sets of terms which both form part of the contract. A practical suggestion is to ensure that where multiple documents form the contract between the parties, a clear order of precedence should be included within the documents and that position should be reflected across all the documents so that it is clear which provisions will prevail.

For further details, please contact Rebecca Howlett.

 

Importance of serving remediation notices in material breach

Digital Capital Ltd v Genesis Mining Iceland EHF [2021] EWHC 2462 (Comm)

Case law often highlights how important it is to correctly follow the notice provisions in a contract. A recent Commercial Court decision in Digital Capital Ltd v Genesis Mining Iceland EHF raises this point in the context of material breach provisions. The case itself related to an agreement for the development and maintenance of a platform to facilitate cryptocurrency transactions. As with many cases arising out of IT projects, the project was not completed on time, and the customer sought to terminate for material breach.

However, the material breach provisions required the terminating party to first serve a notice requiring the breaching party to remedy. The customer had not done this and could not therefore rely on the right to terminate for material breach, but instead needed to show repudiatory breach in order to rely on common law termination rights. It was unable to do so and had therefore terminated unlawfully.

Comment: When terminating a contract, it is crucial that you do so to the letter of the contract, that you follow all the conditions within the termination clause and that notification of termination is also in accordance with the notice provisions. Failure to do so can have significant consequences and as this case shows, you could find that you are subject to an action for unlawful termination. Take your time and work through the contract carefully to ensure you exercise your right to terminate in accordance with the provisions of the contract.

For further details, please contact Rebecca Howlett.

 

Supreme Court confirms loss of control of data not enough for claim

Lloyd v Google LLC [2021] UKSC 50

The recent big news in relation to data claims has been the Supreme Court’s decision in the case of Lloyd v Google. This is one of several claims that has been pursued arising out of the so-called “Safari workaround”, a technique allegedly used by Google in 2011-2 to track the activity of iPhone users on the Safari browser, even when they had not agreed to be tracked. The claim was significant for two reasons – it was an attempt to bring a group claim on behalf of the millions of affected iPhone users, without them “opting in” to the litigation; and it was a claim on behalf of all of those users on the basis that merely losing control of their personal data was enough to entitle them to damages.

The Supreme Court rejected both of those arguments. While it may still be possible to bring a claim for a wide group without them all choosing to be involved, it would have to be clear that all of them are affected by the breach in exactly the same way. In this case, the impact would be different for each individual depending on how much they used the browser and the sensitivity of what they were searching for. That also put paid to the second argument – the Court said that “loss of control” of the data was not enough – there needed to be evidence of actual harm having been suffered by an individual.

Comment: This case was bad news for consumer rights groups, who had seen the strategy that Lloyd was pursuing as a way to hold very large businesses to account without needing to mobilise a very large number of small (and disproportionately costly) individual claims. But it is better news for data controllers, who had been starting to encounter increased numbers of large volume claims for compensation based on minor technical breaches of the legislation, massively adding to the already substantial cost of dealing with the aftermath of data breaches and other incidents.

This judgment is also key to data protection litigation as it confirms the position of the Data Protection Act 1998, that to be awarded damages for the ‘loss of control’ of personal data, material damage by way of financial loss is required (or mental distress as a result of the data having been processed unlawfully).

A decision to the contrary risked a possible floodgate of claims due to the lack of a requirement to prove a loss and so this is a welcome decision within data protection law.

For further details, please contact Luke Dixon.

 

Trivial data protection complaint given short shrift

Rolfe and others v Veale Wasbrough Vizards LLP [2021] EWHC 2809 (QB)

Further comfort for data controllers comes in the form of a recent High Court data breach case in which a law firm acting for a school had incorrectly sent a demand for overdue fees to the wrong e-mail address. The parents of the child in question claimed against the law firm for damages for misuse of confidential information, breach of confidence, negligence and breach of data protection legislation, as well as seeking other remedies including an injunction. They claimed that they had “lost sleep worrying” about it and that it had “made them feel ill”. The offending e-mail, however, did not contain any bank, income or other financial information, any reference to the child’s location other than her home and school address, and no information about the reasons for non-payment.

The court gave the claim short shrift, saying that there was no tangible harm or loss, and that effectively the claim was not sufficiently serious. It went on to say that “courts should, in the absence of special facts, generally expect people to adopt a reasonably robust and realistic approach to living in the 21st century” and that “no person of ordinary fortitude would reasonably suffer the distress claimed”.

Comment: This case should provide a degree of reassurance for businesses that, despite the rise in data claims, the courts will take a pragmatic approach and not allow claims where no credible harm has been suffered.

For further details, please contact Luke Dixon.

 

First shot in the battle of the forms, or framework agreement?

TRW Ltd v Panasonic Industry Europe GmbH & Anor [2021] EWCA Civ 1558

According to the last shot doctrine, the last party to send its standard terms to its counterparty before performance will generally govern the contract and win the battle of the forms. On a contract formation analysis, the last party to send its standard terms makes an offer which is accepted by the conduct of the other party. However, in a recent Court of Appeal case it was held that, exceptionally, the “first shot” had won the battle by creating an overarching master agreement.

It should be noted that since this case can be distinguished from previous cases concerning the battle of the forms, it is unlikely to overrule the last shot doctrine.

Comment: There are some practical implications to consider in light of this judgment:

  1. Putting in place a framework agreement for future contracts, where appropriate: In this case, Panasonic used the wording “Conditions of the buyer diverging from our terms and conditions shall not be valid even if we effected delivery or rendered services without reservation.”
  2. Setting out standard terms or references to standard terms on all pre-contract documents: This could potentially include inserting a live link to a website containing such terms in the footer of a pre-contractual document.
  3. Acting on acknowledgement of order, not receipt of the purchase order: Sending customers an acknowledgement of the order, stating that it is accepted upon incorporation of standard terms and conditions, can help a supplier get the “last shot” in.

For further details, please contact Louise Wilson.

 

Force majeure provisions in contracts

European Professional Club Rugby v RDA Television LLP [2022] EWHC 50 (Comm)

European Professional Club Rugby (EPCR) is the governing body and organiser of two premier club rugby union competitions in Europe. Under a Media Rights Agreement (MRA), EPCR licensed its media rights in the competitions to RDA Television LLP (RDA) for four seasons.

The MRA contained force majeure provisions which sought to protect:

  • a party from a claim for damages for a breach of contract arising from a force majeure event; and
  • gave the non-defaulting party the right to terminate the agreement if the force majeure event delayed the other party’s performance by more than 60 days.

As a result of the Coronavirus pandemic, several rugby union matches were postponed for more than 60 days. The World Health Organisation declared COVID-19 to be a global pandemic and with this information, RDA terminated the MRA, relying upon the force majeure terms. There was no dispute between the parties that the pandemic was a force majeure event. The question for the Court was whether RDA was entitled to terminate the MRA.

The Court held that the wording of the force majeure terms, which refers to the ‘party not affected by the Force Majeure Event’, “was clearly intended to distinguish between the party whose performance is affected and the party to whom the performance is owed”.

Judge Pelling QC explained that the clause “does not have the effect of depriving a party of the benefit of protection from liability simply because it has been affected in a general sense by the same Force Majeure Event that has prevented, hindered or delayed the performance by the other party of its obligations under the contract”. To do so would lead to a “commercially absurd” outcome. On this basis, Judge Pelling QC found that RDA had been entitled to terminate the contract as a result of the postponed matches and was further entitled to a refund of the amounts prepaid and a pro rata reduction in the fees owed.

Comment: The judgment provides helpful guidance on how the Court generally approaches force majeure provisions in contracts. The Court’s decision as to RDA’s right to terminate its contract was a matter of contractual construction and the outcome of such cases will tend to be fact specific.

For further details, please contact Louise Wilson.

 

Material adverse change clauses – can they be triggered by COVID-19?

The Football Association Premier League Ltd v PPLive Sports International Ltd [2022] EWHC 38 (Comm)

In this case, it was held that a material adverse change (MAC) clause was not triggered even where the COVID-19 pandemic had caused significant disruption to the 2019/20 football season (particularly, a lack of fans in attendance and a change to the timescale/dates and times during which matches took place).

The wording of the MAC clause was important to this decision as the clause was structured in a way where only the occurrence of a “fundamental change” to the “format” of the Premier League could trigger a material adverse change. As the court considered that this definition did not extend to the disruptions experienced (mentioned above), there was no need to consider whether the particular disruptions constituted a material adverse change in their own right; such were categorised as not being covered within the scope of the clause’s definition.

Comment: This judgment shows that the Court will look at the express wording of the contract and the facts presented. The Court’s decision as to whether the MAC clause was triggered was again based around the specific facts and was a matter of contractual construction. The pandemic did not lead to a “fundamental change” to the “format” of the Premier League. The matches could still take place and therefore there was no trigger event.

For further details, please contact Rebecca Howlett.

 

When is adjudication applicable to collateral warranties?

Whether the beneficiary of a collateral warranty can use adjudication, the quicker and cheaper dispute resolution procedure applicable under the Construction Act 1996, was for a long time uncertain. In 2013 the Technology and Construction Court ruled that it depended on the precise wording of the warranty and whether the warranty was signed before or after Practical Completion. This helped nobody as it meant that the beneficiary of a warranty needed legal advice on whether adjudication was an option, and this advice could not be unequivocal in most cases. That left the beneficiary having to decide whether to incur the cost of adjudication and get a decision which the court might not then enforce, or whether to slog through the courts in the normal way.

It has been announced that the Court of Appeal is going to look again at the issue, probably in the first quarter of 2022, in the case of Toppan Holdings Limited v Simply Construct. It seems a real possibility that the Court of Appeal will take the opportunity to simplify things by ruling that a collateral warranty is always a “construction contract” for the purposes of the Act, meaning that adjudication is an option. If they do, that will make the enforcement of collateral warranties much easier for their beneficiaries.

Comment: The review by the Court of Appeal will be welcomed by the construction industry and property owners alike to bring much needed clarity to this issue. Adjudication has positively transformed dispute resolution in the construction industry and extending this to collateral warranties will provide a valuable alternative process for the cost-effective resolution of disputes.

For further details, please contact Amy Morley.

Legislation

Extension of temporary off-licence sales

The Alcohol Licensing (Coronavirus) (Regulatory Easements) (Amendment) Regulations 2021 (The Regulations) have now been approved by Parliament and are in force.

The main changes include:

  • Extension of the Business and Planning Act 2020 to allow sales by licensed premises of alcohol for consumption off the premises without permission until September 2022.
  • The limit for temporary event notices in the years 2022 and 2023 has been increased from 15 to 20. The maximum number of days for events to be held has increased from 21 to 26.

The full regulations can be found here.

Comment: The relaxations allow for the easier use of external drinking areas and the increased use of the temporary licensing system.

For further details, please contact Lisa Gilligan.

 

The Government consults on proposals for legislation to improve the UK’s cyber resilience

On 19 January 2022, the Government launched a consultation on proposals for new laws to improve the cyber resilience of organisations which are important to the UK economy, which closed on 10 April 2022. The consultation forms part of the Government’s £2.6 billion National Cyber Strategy 2022 to protect and promote the UK in cyber space and was published alongside the 2022 Review of Cyber Security Incentives and Regulation, which offers further analysis on the need to improve UK cyber resilience.

To find out more, read the Government’s press release here.

Comment: This consultation follows multiple recent high-profile cyber attacks (referred to within the above consultation link), which demonstrates how malicious actors are able to compromise a country’s national security and disrupt activities in the wider economy and society. Travis Perkins should keep a watching brief on the consultation and revisit its cyber security programme in the wake of the increased threat of cyber attacks following the Russia/Ukraine crisis.

For further details, please contact Luke Dixon.

News

Transition Period for the validity of “Old” EU SCCs entered into before 27 September 2021 and new UK International Data Transfer Agreement/EU SCC Addendum

Where an organisation transfers personal data from the EEA to a “non-adequate” third territory, it may legitimise those transfers by entering into EU-approved standard contractual clauses (SCCs). The EU adopted new EU SCCs on 4 June 2021, to replace the current versions.

Organisations have been able to use “old” EU SCCs entered into before 27 September 2021 during a transitional period prior to the introduction of the new EU SCCs. That transitional period ended on 27 December 2022.

This is an important deadline for organisations that transfer personal data from the EEA “non-adequate” third countries, because they should have re-papered their contractual arrangements to replace the “old” EU SCCs with the “new” versions by the 27 December 2022 deadline.

The Department of Culture, Media and Sport has also placed the UK’s own model agreement for international transfers (IDTA) before Parliament. The IDTA will apply to international transfers from the UK. The DMCS has further placed the UK’s Addendum to the EU SCCs before Parliament as part of the same process. The IDTA and Addendum came into force on 21 March 2022. The ICO has promised further guidance on these documents and international transfers in due course.

Comment: Organisations should therefore consider their international transfers from the UK and keep a watching brief for further guidance regarding the application of the IDTA and Addendum to their international transfers.

For further details, please contact Luke Dixon.

 

ICO publishes new international data transfer tools

The ICO has published new tools to document and facilitate the international transfer of personal data, this came into force on 21 March 2022. For further detail please see here.

Comment: Businesses transferring personal data outside the UK can still use the old EU “Standard Contractual Clauses” in any new contract entered into until 21 September 2022, but all existing contracts will need updating to reflect one of the new transfer tools by 21 March 2024.

For further details, please contact Luke Dixon.

 

The Chancery Lane Project publishes net zero toolkit including 20 new clauses

The Chancery Lane Project (TCLP) is a non-profit and pro bono collaborative effort by lawyers and industry experts across the globe, whose aim is to enable solutions to climate change, within every contract. Over 140 organisations are involved in the production of new, practical contractual clauses across various areas of law, to deliver climate solutions (in the hope of achieving net zero carbon emissions). They work to ensure effective and impactful implementation of the clauses, particularly into standard forms, templates and precedents.

On 30 September 2021, TCLP published its ‘Net zero toolkit’, a tool designed to aid legal professionals in amending their contracts in the hope of meeting net zero goals. Amongst the various provisions within this toolkit are 20 new clauses which predominantly cover corporate governance, supply chain contracts, construction and infrastructure projects, finance and insurance contracts. TCLP has also published what is defined as ‘best-in-class’, high ambition versions of 24 of its existing clauses. Each of these align with the UN’s Race to Zero requirements and the Paris Agreement goals (as well as the Oxford principles for net zero aligned carbon offsetting).

Visit the links above to find out more.

Comment: Having contributed to TCLP, we can confirm that although at first sight the template clauses may look daunting, they are in fact very usable. We are aware that in 2021, Travis Perkins announced a target to reduce total scope 3 emissions by 63% before 2035 from a 2020 base year. Travis Perkins will need the help of its supply chain to achieve this reduction target and that’s where TCLP clauses come in – to turn aspirations into contractual commitments.

For further details, please contact Rebecca Howlett.

 

Smart contracts can be legally valid

Smart contracts have been around for a number of years but have had a somewhat uncertain legal status. A smart contract is effectively a piece of computer code that runs automatically, in whole or in part, without the need for human intervention. In the most basic form, a vending machine can be considered to be equivalent to a smart contract, in that it performs one side of a contract (the provision of a product) automatically on the request of a user. In more recent years, smart contracts have been associated with cryptocurrencies, performing transactions on decentralised exchanges, and with online gaming and gambling. In essence, a smart contract allows part of the contractual obligations to be performed automatically.

The nature of smart contracts gives rise to a number of legal questions, including contract formation and interpretation. In 2020, the Law Commission launched a project to analyse how the law handles smart contracts and determine whether any legal reforms would be required. The results of that review have now been published in the form of the Advice to Government: Smart Contracts. The review concludes that the existing legal framework for England and Wales can handle smart contracts without the need for reform. To an extent, this may be an incremental process, particularly around areas such as the elements written in machine code rather than natural language. In addition, in relation to deeds, which require additional formalities in comparison to simple contracts, the Law Commission concluded that the current law may not be sufficient to ensure that those formalities can be complied with by smart contracts.

We would expect further developments in this area during 2022, particularly where deeds are concerned, and in the meantime, businesses using smart contracts should take care to ensure that the way in which they are used works within the existing framework (for example, that there is a clear offer and acceptance from a contract formation point of view). The Law Commission is separately working on a digital assets project, which amongst other things considers the legal status of cryptoassets. Following a call for evidence in early 2021, the Commission intends to publish a consultation paper in 2022.

Comment: Organisations should keep a watching brief for further guidance regarding the use of Smart Contracts and where used, ensure they have clear offer and acceptance.

For further details, please contact Rebecca Howlett.

The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.

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