Contract Lawyers EM Law London

Contract Lawyers – If You Can’t Afford One Then At Least Do This

Contracts can be simple (for example a low value supply of services contract) or complicated (for example, a contract to explore for oil). You can read about different types of contracts by clicking our contract law page. But no matter what the subject matter or level of complexity is in a contract there are certain fundamentals that should be addressed. If they aren’t then one or more of the parties to the contract could be signing something they later regret, or the contract may not even be legally binding.

So, what should you look out for before signing on the dotted line?

Know who you are contracting with

With over 5 million businesses registered in England and Wales, it is important to check that you are contracting with the correct party. If the party you’re contracting with is a limited company, you can look them up for free at Companies House. You can check their name, registered office, and company number and you should make sure that these details are included in the contract. Why? Because if you don’t include at least the name and registered company number it can be difficult to establish later on exactly which business you contracted with. Not ideal if you are trying to enforce your rights under the contract. A company can change its name and registered office as many times as it likes but it cannot change its registered number.

Be clear about what is being sold

Most contract disputes arise because the contract is unclear about what is being supplied. It is easy to get bogged down in other legal or more technical aspects while forgetting that the fundamental point of a contract is to describe clearly what goods or services are to be supplied. It is also easy to be lazy and to think that a short description of the goods or services will suffice. It may do but bear in mind that if you fall out with the other party that other party’s contract lawyers are going to exploit the lack of detail or ambiguity in the contract. It is so much better to avoid this from happening in the first place and describe the goods or service to be supplied in detail.

Set out the payment terms clearly

For one of the parties, payment will be the whole object of the contract. Although seemingly obvious, many contracts are unclear about how pricing and payment mechanisms work. Ensure that your contract is clear about what is payable and when, and how prices can be changed. For example, if a consultant is being paid a “day rate” how many hours constitutes “one day”? If commission is being paid based on profit should that be gross profit or net profit? The contract should define what exactly “gross profit” or “net profit” means.

Start date and termination

Contracts should have a clear start date, whether that is the date that both parties sign the contract or a different specified date. Even more importantly, the contract should also contain a termination date or a mechanism that provides for how the contract can be ended. If termination is not dealt with then you are left relying on common law rights such as the right to terminate the contract for “repudiatory breach” i.e. serious breach of the contract or the right to terminate the contract on “reasonable” notice. What constitutes “reasonable” notice will depend on various factors relevant to the specific contract – bottom line, the position will be unclear. So avoid the problem in the first place and put in clear start and termination provisions.

The top four points are crucial – read on for some others that you should also think about….

Limiting and excluding liability

After dealing with the questions of who does what, and who pays what, you should think about whether your liability under the contract should be limited. If you are supplying to consumers then limiting liability is hard – we are not going to discuss that here – get in touch with our contract lawyers about this. If you are a supplying to a business then it would be standard for you to include a limit of liability clause so include one! The usual limit of liability that customers accept is the total cost of your goods / services or 12 months’ worth of those costs. You can also exclude liability for things such as loss of profits but you cannot exclude liability for causing death or injury, for fraud or fraudulent misrepresentation or breach of the terms implied by section 12 of the Sale of Goods Act 1979 or section 2 of the Supply of Goods and Services Act 1982. Limitation and exclusion of liability clauses should be carefully worded if they are to work properly so if it’s really important for you to include these clauses in a contract get in touch with one of our contract lawyers and pay for some advice! If it’s not that important for you then you can find example contracts on-line. Hopefully you won’t get inspiration from a poorly drafted one.

Intellectual property rights

Unless the contract says otherwise - if you are signing a contract with anyone other than an employee, that other party will own the intellectual property rights in whatever they supply to you. If, say, you are engaging a freelancer or consultant to carry out some creative work or software development work then having that other party own the intellectual property rights in the work they supply to you will not be ok for you – they will be able to hold you to ransom if you use their work in a product that turns out to be a money spinner or if you supply that product on to a client and you don’t want that client suing you. Same point as above: intellectual property rights clauses should be carefully drafted so either use one of our contract lawyers or hope for the best by seeing what you can find on-line.

Data Protection/ Confidentiality

You should always think about data protection / confidentiality and the extent to which these things should be provided for in the contract. If you will be disclosing sensitive information about your business or clients to the other party then you will need to include confidentiality clauses. If you will be sending or receiving personal data belonging to individuals who are not your staff or the staff of the other party then you should work out who is the data controller / data processor and include appropriate data transfer / data processor clauses in the contract. Sorry, but you will need one of our contract lawyers for that unless you are very confident that you know what you are doing – data protection compliance is hard. If you are not supplying / receiving other people’s personal data i.e. it’s just your and the other party’s staff that are exchanging their own personal data (name and contact details) when they email each other then you don’t need to worry so much about what is in the contract. You do though need to think about whether this type of exchange is covered in the privacy notice you have given to your staff – we aren’t going to go into more detail about GDPR / Data Protection Act compliance in this note.

Choice of Law/ Jurisdiction

Specifying that the laws of England & Wales apply and that the English courts have exclusive or non-exclusive jurisdiction is not so important in a contract where all the parties are based here. However, if you are signing a contract with a party who is based overseas it is crucial to include such provisions. If you don’t and there is a problem then you will have an argument with the other party as to which law should apply which you may lose and you may find yourself having to sue or defend in a foreign court.

Final thoughts

Our contract lawyers will ensure that you have proper contracts in place that not only protect you from risk but which help you do deals (because they are clear and balanced) and they will make you look professional (sorry but contracts prepared by businesses who have cobbled them together themselves tend to look pretty awful apart from anything else).

However, if you really need to cut corners then we hope that you find this a useful guide. If you focus on points 1 – 4 and then bear in mind points 5 – 8 you should be ok until your business takes off and then you can get in touch with us!

If you do want to talk about your contracts or any other legal support we can help you with please contact Neil Williamson.


EM Law Commercial Lease Lawyers London

Commercial Lease - A Quick Guide For Tenants

However, before signing on the dotted line, it is very important to understand exactly what you are getting into. To avoid potential pitfalls, here are some issues that tenants should consider when taking on a commercial lease for the first time.

Identify the parties and the premises

Care must be taken to correctly identify the parties to a commercial lease as well as the premises in question. The lease should be taken in the name of the business rather than in the name of a person as leases usually contain onerous obligations and can expose the lessor to significant liability. You should also check that the precise square footage of the premises is clearly defined in the lease and matches the premises that you were expecting.

Think about the length of your lease

Commercial leases are generally for a fixed term, typically three, five, ten or 15 years depending on the business sector. Although it may sound obvious, it is essential that the length of your lease fits in with your commercial objectives. Committing to a long lease when you have a long-term plan to relocate may not be in your best interests. Ideally, as a tenant, you also want to be protected by the Landlord and Tenant Act (1954). The Landlord and Tenant Act (1954) allows commercial tenants to remain in occupation of the premises even when the contractual term has come to an end, and to apply to the court for the grant of a new lease.

Ask for a break clause

If your business starts to struggle and you need to end your lease early, you won’t be able to do so unless your commercial lease includes a break clause. A break clause essentially enables you (and possibly the landlord) to end the lease early. The right to break may arise on one or more specified dates or be exercisable any time during the term on a rolling basis. Before signing your lease, you should check the conditions of any break clause. It is important that both parties are aware of the other’s right to break the lease and the required notice that may need to be served.

Be aware of hidden costs

When it comes to commercial property, there are certain costs that are unavoidable. Having said that, there are also hidden costs that you should be aware of. A repairing obligation can, for example, prove a real burden. To avoid this burden, you should ensure that the definition of ‘Premises’ does not include areas that you have not anticipated you need to keep in repair. You don’t want to find yourself responsible for major works or repairs to your premises that are disproportionate to the length of your commercial lease.

You should also be wary of any additional service charges. Additional service charges often apply to premises where there are multiple occupants and the landlord provides a range of services for those occupants, such as cleaning, heating and general maintenance. Before signing a commercial lease, you should ask your landlord to provide an exact breakdown of costs so that you can make an informed decision about whether or not the lease is financially viable for your business.

Don’t forget about assignment and subletting

If it's not easy to terminate your commercial lease, being able to assign or sublet it may be a huge help to you. Assignment involves transferring the remainder of your lease to another party whereas subletting creates a new lease where you become landlord to a sub-tenant. However, whether you can assign or sublet your commercial premises will depend on the terms of your lease. If you want to keep your options open, you should try and get your landlord to agree appropriate assignment and subletting terms before you sign the lease.

Commercial lease terms can be difficult to understand, and once signed can be very tricky to get out of. Before signing a commercial lease you should seek advice from one of our commercial lease lawyers. If you have any questions regarding commercial leases please contact Razina Akhtar.


EM Law technology lawyers

Artificial Intelligence - Some Legal Issues

When someone says “Artificial Intelligence” what do you think? Robots taking over the world? Machines replacing you in your job? Or an opportunity for you to put your feet up and let someone else or rather something else do the chores? Although AI may be daunting for some, there is no doubt that it will transform the way we live. This blog takes a look at some of the legal aspects of AI and what you should consider when developing such a system.

What is Artificial Intelligence?

AI is essentially machine-learning technology used to complete tasks that previously required the skills or intellect of human beings. AI systems will typically demonstrate problem solving skills, knowledge and perception and, to a lesser extent, social intelligence and creativity. Take Ai-Da as an example, a robot named after computer pioneer Ada Lovelace and designed to draw people from sight with a pencil in its bionic hand. With cameras in each of its eyes, Ai-Da will be able to recognize human features and mimic your expression to create a lifelike portrait. Self-driving cars, mobile banking apps and Apple’s personal assistant Siri are further examples of AI technology that we may come across in our everyday lives.

Artificial Intelligence – some of the legal issues

AI regulation

The UK, like the rest of the world, recognises the potential of AI. However, the UK, like the rest of the world, does not currently regulate AI in any significant way. In April 2018 the House of Lords published a report titled “AI in the UK: ready, willing and able?” In this report the House of Lords suggested that blanket AI-specific regulation, at this stage, would be inappropriate. Instead, existing sector-specific regulators were best placed to consider the impact of potential AI regulation on their sectors. The Automated and Electric Vehicles Act 2018, which came into force last July, provides an example of this. This act does not apply to AI generally, but applies specifically to automated vehicles, putting the burden of liability onto the insurer.

In December 2018 the European Commission published a draft of ethics guidelines for the development and use of artificial intelligence (AI). The Commission has opened the guidelines for comments and states that discussions are also taking place through the European AI Alliance, the EU’s multi-stakeholder platform on AI.

The guidelines emphasise “trustworthy AI” as their guiding principle. Trustworthy AI has two components:

  • it should respect fundamental rights, applicable regulation and core principles and values, ensuring an “ethical purpose”; and
  • it should be technically robust and reliable since, even with good intentions, a lack of technological mastery can cause unintentional harm.

The Guidelines set out a framework for trustworthy AI that include:

  • the fundamental rights, principles and values that it should comply with;
  • the requirements for trustworthy AI and offering an overview of technical and non-technical methods that can be used for its implementation; and
  • concrete but non-exhaustive assessment list for trustworthy AI. 

AI development contracts

Whilst some AI developers will attempt to build bespoke hardware, the majority of today’s AI systems will be implemented as software. Contracts to develop AI systems will therefore need to take account of the usual issues associated with developing software. Such issues include the ownership and licensing of any pre-existing IP rights as well as any rights that are developed as part of the project. The software development agreement should also provide for indemnities relating to any infringement of third-party IP rights by the developers of the AI system.

AI generated intellectual property

Traditional copyright law in the UK protects the original creations of authors. Author is defined in the Copyright, Designs and Patents Act 1988 as the person who creates the work. An author must therefore be a human. This poses a potential issue for purely autonomous AI systems, where computers make decisions and carry out functions without any form of human involvement at all. Copyright law does however acknowledge the possibility that works could be “computer-generated”. The author of “computer-generated” work is deemed to be the person “by whom the arrangements necessary for the creation of the work are undertaken”. Under UK Copyright law the software programmer would therefore most likely be the author and first owner of a copyright work generated by an AI. This seems simple enough but the situation becomes complicated for AI which involves human collaboration and input at various stages of development. Who in this scenario will be the owner? Will there be multiple joint owners? As things at present are not clear, you should ensure that any new agreements for the development and use of AI clearly state which parties will own any protectable IP resulting from the AI.

AI and Data Protection

Data processing lies at the heart of AI with AI projects often involving the processing of large amounts of personal data. The ICO published a paper in September last year setting out a number of recommendations for organisations to follow. Organisations should, for example, carefully consider whether their AI system actually requires the processing of personal data or whether they could anonymise the personal data before analysis. As anonymised data does not relate to an identified or identifiable person, it is not personal data for the purpose of the GDPR. Organisations should also carry out a data protection impact assessment. A data protection impact assessment will help organisations identify and minimise the data protection risks of a project. A recent example of AI in the data protection context is the case of Royal Free Hospital v DeepMind. In this case, the Royal Free Hospital handed over the personal data of 1.6 million patients to DeepMind, an AI company and subsidiary of Google. The ICO decided that the hospital had failed to comply with a number of data protection principles and also found that DeepMind was in fact a data controller, rather than a data processor as previously thought.

AI and product liability

A smart car hits a person. Who is at fault? The programmer in the office with the source code? The owner on the road in the smart car? The manufacturer in the lab with the testing protocols? The general principles of tort law (negligence) are likely to apply to the widespread use of AI but under existing law AI is personal property, not a person. AI machines cannot therefore be held liable for negligent acts or omissions that cause damage to third parties. So, who will be held liable? As there are many parties involved in an AI system, this may be difficult to establish and there are many factors that should be taken into consideration. These factors include whether the AI system was following instructions, whether damage can be traced back to the design or production of the AI system and whether the AI system provided any general or specific limitations. Contributory negligence will also be considered as a factor here.

It has also been suggested that liability could be established for AI systems under a similar framework to the Animals Act 1971. Under this Act, when an animal runs onto another person’s property and causes damage, the animal’s owner is liable for this damage. As this is strict liability, there is no need to prove negligence or intent. It may be the case that for some forms of physical AI, for example robots, similar legal framework will be put in place.

Conclusion

Artificial Intelligence is evolving rapidly but the law around it is not. This does not mean that no legal frameworks around artificial intelligence exist – they do but they are rooted in regulation or legal doctrine that do not answer all the questions. From the perspective of AI developers while this creates challenges such as understanding the kind of liability that the products they are developing can throw back at them, this also creates opportunities for developers to inform and shape regulation as it tries to keep up with the paths that developers chose to go down. If you have any questions about AI and what you should be considering when developing such a system please contact Neil Williamson.

 

 

 

 


Death Of Contra Proferentem Contract Lawyers London

Not The Death Of Contra Proferentem

However, following the recent case of Persimmon Homes v Ove Arup (Persimmon Homes), many have questioned whether the rule still exists. This blog takes a look at the contra proferentem rule and explains why we have not seen the last of it.

What is the contra proferentem rule?

“Contra proferentem” (literal translation from Latin is “against the offeror”), also known as “interpretation against the draftsman”, is a doctrine of contractual interpretation that provides: where a contract is ambiguous, the words will be construed against the party who put them forward. The logic behind this rule is that a party who imposes terms on another should make those terms clear and should be the one to suffer the consequences if they do not. Originating from the case of Canada Steamship Lines Ltd v The King in 1952, the relevance of the contra proferentem rule has been extensively debated over the past few years.

Initial debate

It was the comments of Lord Neuberger in K/S Victoria Street v House of Fraser in 2011 which sparked the initial debate on the relevance of contra proferentem. Although the case focused mainly on the effect of the Landlord and Tenant (Covenants) Act 1995, the Court of Appeal also commented on the usefulness of the contractual interpretation rules. Referring to contra proferentem, Lord Neuberger said “such rules are rarely of assistance when it comes to interpreting commercial contracts.” Instead, “the words used, commercial sense, and the documentary and factual contexts are and should be enough to determine the meaning of a contractual provision.” A similar stance was taken in Transocean Drilling UK Ltd v Providence Resources in 2016. In this case, the Court of Appeal reversed the initial judgement of the High Court, stating that the rule of contra proferentem had “no part to play when the meaning of the words is clear.” However, it was the case of Persimmon Homes in 2017 which caused the most stir.

Persimmon Homes

The comments of Jackson LJ in the case of Persimmon Homes cast the most doubt on the contra proferentem rule. In Persimmon Homes, a consortium of property developers brought a damages claim against project consultant, Arup, for failing to identify large quantities of asbestos on a development site that they had purchased. The developers and the project consultant had entered into two agreements, under which the consultant agreed to take out professional indemnity insurance and to limit their overall liability. The agreements also contained an exemption clause which stated “liability for any claim in relation to asbestos is excluded”. Relying on the contra proferentem rule, the claimants alleged that this did not exclude liability for negligence in failing to identify asbestos. However, the court did not bite. Instead, the Court of Appeal ruled that all liability relating to asbestos, including liability arising from negligence, was excluded. The court relied on the clarity of the language and concluded that the contra proferentem rule had a very limited role in relation to commercial contracts negotiated between parties of equal bargaining power.

Not the end

Despite numerous commentators citing the “death of contra proferentem” following Persimmon Homes we do not believe that this is the case. Firstly, in Persimmon Homes, Jackson LJ drew a distinction between indemnity clauses and exclusion clauses observing that where an indemnity clause is involved, the contra proferentem rule and the Canada steamship guidelines will continue to be of assistance.

Secondly, although the courts seem much less willing to listen to a contra proferentem argument when it is possible to interpret a clause’s meaning by, dare we say it, adopting a “common sense” approach or interpreting the clause in the way that the average businessperson would, there will still be times when the courts simply cannot work out what a clause is saying because it is truly ambiguous or it conflicts squarely with another cause elsewhere in the contract. It is in these cases that the contra proferentem rule will remain.

Finally, the case of Persimmon Homes involved two sophisticated commercial parties, who were capable of allocating risks as they saw fit. In cases where parties do not have equal bargaining power, the courts may be more willing to find that the contra proferentem rule applies. Where the courts cannot achieve protection for a weaker party through statutory provisions, the courts could use interpretive principles to avoid contractual oppression by the stronger party. This may be relevant in cases of consumer contracts, residential leases and insurance contracts.

Conclusions

So, despite what you may read, the contractual interpretation rule of contra proferentem is still relevant today and should not be forgotten. As a business, the main thing to take away from this is: make sure your contracts are clear and free of ambiguities! If you have any questions about contra proferentem, or contract law more generally, please contact Neil Williamson.