4th July 2013 seminar: Preparing the contract

1. Preparing the contract
Doug Locke, Partner
Lawyers & Parliamentary Agents

2. Contents
• Intellectual property
• Contract terms
• Change management

3. Please vote now using your keypads
Does a co-owner of intellectual property rights have the
right to grant licences?
1. Yes
2. No

4. Law and jurisdiction

5. Please vote now using your keypads
If you granted a licence, do you have the right to grant sub-
licences?
1. Yes
2. No

6. Exclusivity
• “Sole and exclusive”
• Dangerous for licensor without:
• clear obligations on licensee
• minimum royalties
• Licensee’s right to enforce

7. Warranties
• “Operating within the scope of the licence will not
infringe third party IP”
• “The Licensor warrants that the patent is valid”
• Obligation to inform
• Obligation to co-operate

8. Payments
• Indexation
• Royalties based on revenue or profits?
• What does “revenue” mean?
• Information and audit rights
• Interest on late payments

9. Duty to act in good faith
Compass Group v Mid Essex NHS Trust

10. Duty to act in good faith
• Those deductions were “ absurd” and they were
repaid. But other deductions were valid.
• The contract gave the Trust the right to terminate
(and claim compensation) if deductions reached a
certain level.
• But could the caterers terminate (and claim
compensation) because the Trust had acted in bad
faith?

11. Duty to act in good faith
High Court:
• Trust’s breach of duty to act in good faith constituted
a serious breach of a long term contract requiring co-
operation.
• The caterers could terminate.

12. Duty to act in good faith
Court of Appeal
• The Trust could terminate. In terminating, the Trust
had simply enforced the contract.
• No general duty to act in good faith.
• (But, an implied duty not to act capriciously where a
contract allows a party to make an assessment, or
choose from a range of options, taking into account
the interests of both parties.)
• Different in other jurisdictions.

13. Change management
• Big changes and small changes
• Changes requested by customer and changes
requested by contractor
• Changes in law
• Who pays for analysis and costing?

14. Termination
• If someone breaches an agreement, do you have the
right to terminate it?
• Serious breaches
• Repeated breaches
• Delays

15. Dispute resolution
• Escalation
• Mediation
• Expert determination

16. Exclusions of liability
English law prohibits:
• the restriction of liability caused by negligence unless
the term is reasonable
• in contracts on a party’s written standard terms,
clauses which permit that party to restrict liability for a
breach of contract unless the term is reasonable

17. Exclusions of liability
To be reasonable, a clause must be:
• “fair and reasonable having regard to the
circumstances which were, or ought reasonably to
have been, known to or in the contemplation of the
parties when the contract was made.”

18. Reasonableness factors
• Bargaining strength
• Inducement
• Opportunity to avoid
• Knowledge
• Availability of insurance cover

19. Endeavours
• Best endeavours
• Reasonable endeavours
• All reasonable endeavours

20. Endeavours
Jet2 v Blackpool Airport

21. Please vote now using your keypads
“All reasonable endeavours”?
1. More than “reasonable endeavours”, but less than
“best endeavours”
2. The same as “best endeavours”
3. Meaningless

22. Jet2 v Blackpool Airport
“Jet2 and Blackpool Airport will use their best
endeavours to promote Jet2’s low cost services from
Blackpool Airport, and Blackpool Airport will use all
reasonable endeavours to provide a cost base that
will facilitate Jet2’s low cost pricing.”

23. Endeavours
• Jet2 operated flights outside Blackpool Airport’s
normal hours.
• Blackpool Airport made a loss on those flights.
• New management arrived at Blackpool Airport. No
more out-of-hours flights.

24. Endeavours
“Jet2 and Blackpool Airport will use their best
endeavours to promote Jet2’s low cost services from
Blackpool Airport, and Blackpool Airport will use all
reasonable endeavours to provide a cost base that
will facilitate Jet2’s low cost pricing.”

25. Please vote now using your keypads
Did Blackpool Airport have to stay open for the out of hours
flights?
1. Yes
2. No

26. Endeavours
• “Endeavours” clauses rarely give a clear answer.
• If possible, be explicit in advance.

27. Summary
Plain English written agreements

28. Doug Locke, Partner
dlocke@vwv.co.uk 0117 3145 602
Lawyers & Parliamentary Agents