Tag Archive: Blacks Solicitor

BLACKS SOLICITORS: Retention of Title

Leave a Comment

If you provide goods to a customer you should include a provision in your terms and conditions of sale that entitle you to retain ownership of those goods, irrespective of whether you still hold possession or not, until payment is received in full.

This is called a “retention of title” clause and needs to be quite specific to have any meaningful effect. If drafted properly it could be enforced against a debtor company, even if insolvent, to recover your goods.

If a customer becomes insolvent and you have a retention of title clause in your terms and conditions then you must act promptly to distinguish the goods as yours so that they are not sold and the proceeds distributed without your approval.

In some circumstances if the goods are for an end user it may be possible for you to negotiate with them directly to discharge some or all of the sums due to you. Retention of title is a good way to maintain leverage over the debtor to encourage payment of your invoices while allowing you another opportunity to re-sell those goods.

By omitting this clause from your terms and conditions you are leaving your business exposed and providing grounds for argument in litigation. It’s important to make sure that your terms and conditions and the appropriate retention of title clause in particular are sound to increase your chances of retaining ownership of the goods provided until payment is received.

There are limitations to retention of title clauses; for example, when the goods supplied are used in a manufacturing process so as to make them unidentifiable (such as leather supplied to make handbags).  It is important therefore that the wording of the clause is drafted carefully to protect the supplier’s position in the event that payment is not made or the company becomes insolvent.  

Similarly, regular and careful reviews of your terms and conditions of trading are important to ensure that they are relevant and enforceable. If you are forced to litigate, a well prepared and comprehensive set of terms and conditions will vastly improve your chances of succeeding at a trial or achieving a settlement.

If you have a retention of title clause in your terms and conditions and a debtor is depriving you of your right to recover these items then you may wish to make an application to court seeking an injunction to prevent them selling these items and for an order to deliver up these goods to you.

If you require advice regarding the enforceability or the drafting of retention of title clauses or terms and conditions of sale then please contact Luke Patel on 0113 227 9316 or by email at “LPatel@LawBlacks.com”.

Share

BLACKS SOLICITORS: Asian Handshake Is Not Good Enough

Leave a Comment

The intention to create legal relations is an essential part of any contract.  Without such intention the contract cannot be formed.  This issue was highlighted in the recently decided High Court case of MacInnes v Gross.

In that case, Bruce MacInnes, an investment banker with the investment bank, Investec, claimed that €13.5m was due to him pursuant to an oral contract which he alleged had been entered into over dinner in a Knightsbridge restaurant with Hans Thomas Gross, an Austrian national and the main figure behind a group of companies known as “RunningBall” (a global sports data company).  Mr Gross is also known for being the ex-boyfriend of the socialite, Paris Hilton.

Mr MacInnes claimed that it was agreed that he would personally provide services to Mr Gross with the aim of maximising the return of the sale of RunningBall and that in return he would receive remuneration equivalent to 15% of the difference between the actual sale price of the company and the ‘target’ price.  

Mr MacInnes explained that there had been no written agreement between the parties because Mr Gross had told him that he “made his deals on a handshake – in the Asian way”.  Mr Gross however claimed that the only handshake between them was “just to say goodbye” after dinner.

The Court found that although it was possible for a binding contract to come into existence over dinner in a restaurant, the highly informal and relaxed setting required close scrutiny over whether there was any intention to create legal relations.  It decided that in this case there was no such intention because:

  • Mr MacInnes was an experienced banker who would have been aware of the importance of having a written contract and his failure to produce one or even a draft was a critical omission.
  • There was substantial uncertainty over the terms of the alleged agreement and, in particular, over Mr MacInnes’ remuneration and the services he was to provide.
  • There was no agreement or certainty as to the parties to the transaction – Mr MacInnes was, at the time, an employee of Investec and was therefore not in a position to make any immediate contract with Mr Gross personally; he could only have contracted on behalf of Investec.
  • The fact that the discussions took place in English, a language that was not Mr Gross’ first language (although he was relatively fluent in English) added a further note of caution when considering whether or not a binding agreement had been reached.

Although it is possible to enter into an oral contract, it is advisable for the parties to an agreement to seek legal advice and have a written contract drawn up which accurately reflects the terms agreed between them so as to avoid any dispute arising subsequently.

Blacks Solicitors can assist with all aspects of contractual matters from drawing up the contract to enforcing it if there has been a breach.  Please contact Luke Patel on 0113 227 9316 or email him at “LPatel@LawBlacks.com”.

Share

No breach of human rights by private landlords

Leave a Comment

blacks-800x530

Under Article 8 of the European Convention on Human Rights (ECHR) everyone has the right to respect for his private and family life, his home and his correspondence and there is to be no interference by a public authority with an individual’s exercise of that right except in certain circumstances, such as in the interests of national security or for the prevention of a crime.  In what is being hailed as a landmark decision concerning the role of human rights law in possession claims between a tenant and a private residential landlord, the Supreme Court recently ruled in McDonald v McDonald that there was no breach of a tenant’s right to live in a house where there were arrears of mortgage and possession was sought.  

Miss McDonald was in her mid 40s and had suffered from a personality disorder and psychotic symptoms since childhood.  In 2005 her parents purchased the property for her with the assistance of a loan and granted her a series of Assured Shorthold Tenancies on the basis that the rent would be covered by housing benefit payments.  When the parents fell behind on their loan repayments, the loan company appointed a Receiver who served a notice, in the name of the parents, indicating that it would be seeking possession of the property and on expiry of that notice they issued possession proceedings.

At the initial possession hearing, Miss McDonald claimed that a possession order would violate her Article 8 rights and that the Judge should take into account the proportionality of making such an order.  The Judge disagreed and found that he did not need to do that where the person seeking possession was not a public authority.  Miss McDonald appealed but her appeal was turned down by the Court of Appeal.

She therefore appealed to the Supreme Court arguing that because the Court, as a public body, was granting the Possession Order, Article 8 and the test of proportionality would therefore be engaged despite the loan company being a private organisation.

However, the Supreme Court held that, although the Court was a public authority it merely provided a forum for the determination of civil rights and disputes between the parties and that any decision which required the courts to consider proportionality “would involve the Convention effectively being directly enforceable as between private citizens as to alter their contractual rights and obligations, whereas the purpose of the Convention is ... to protect citizens from having their rights infringed by the state”.   The appeal was therefore dismissed.

This decision will be welcome news for private landlords because if the Court had reached a different decision it could potentially have opened the floodgates to a variety of defences based on human rights whenever a landlord tried to obtain possession of a residential property.  This case also highlights that a distinction must be drawn between private and public sector tenancies – the ECHR applying in public sector tenancies.

If you are involved in any property dispute and require advice and assistance then please contact Luke Patel of Blacks Solicitors on 0113 227 9316 or email him at “LPatel@LawBlacks.com”.

Share

To terminate or not to terminate?

Leave a Comment

blacks (800x530)

Commercial contracts commonly provide that if a party wishes to terminate the contract then it first needs to take certain steps before it is able to do so, for example, by giving notice or allowing the other party the opportunity to remedy any breach.  But what if one party wishes to terminate the contract due to the unlawful actions of the other party?  This was the scenario which occurred in the case of Vinergy International (PVT) Limited v Richmond Mercantile Limited which was heard by the High Court earlier this year.

Vinergy was an Indian company who entered into an agreement (“the Agreement”) with Richmond, an UEA company, under which Richmond agreed to supply bitumen to Vinergy for 10 years.  However, part way through the Agreement Richmond terminated the Agreement and commenced arbitration proceedings seeking damages on the grounds of Vinergy’s breach of its obligations to buy bitumen exclusively from Richmond and its failure to pay an invoice.  Vinergy claimed that Richmond had terminated the Agreement unlawfully because it had failed to give it notice in accordance with the terms of the Agreement and, as such, it contended that the termination was unlawful and a wrongful repudiation of the Agreement.

At arbitration, the Tribunal ruled that Richmond had lawfully terminated the Agreement.  Vinergy appealed.

The issue which the Court had to decide was whether Richmond could ignore the contractual provisions in the Agreement and instead rely on its common law right to terminate the contract.  At common law, where a party to a contract commits a breach that is sufficiently serious, the innocent party may choose to accept that breach by giving notice to the other party.  The contract is then terminated and the innocent party can claim damages.  This is known as a repudiatory breach.  The issue was therefore whether Richmond could rely on its common law right to terminate the Agreement by reason of a repudiatory breach by Vinergy so as to circumvent the notice requirement within the termination clause of the Agreement.

The Court upheld the Arbitrator’s decision and dismissed the appeal.  It held that there was no general rule that the contract termination requirements should override the common law right to terminate.  The Judge found that the termination provision in the Agreement did not apply to repudiatory breaches and even if it did, the breach in question was incapable of remedy and therefore was not within the scope of the termination clause.

This case illustrates that where one party to a contract informs the other party that it no longer has any intention of being bound by the contract, the innocent party would not reasonably be expected to give notice before being able to terminate the contract.

Where a party is considering whether to terminate a contract, it will need to consider carefully whether or not it has to follow the contractual termination provisions or whether the facts are such that it can terminate on the grounds of repudiatory breach.

If you are involved in any contractual dispute then Blacks Solicitors can assist.  Please contact Luke Patel on 0113 227 9316 or email him on “LPatel@LawBlacks.com”.

Share

Fraud unravels all

Leave a Comment

blacks (800x530)

When is the settlement of a claim between two parties not final?  When there has been fraud involved.  In what is being hailed as a landmark judgment for the insurance industry, the Supreme Court decided in the case of Hayward v Zurich Insurance Company Plc last month that where an insurer suspects fraud but nevertheless settled a claim, it would be entitled to set aside the settlement if it subsequently discovered that there had indeed been fraud involved.

In 1998 Mr Hayward suffered a back injury at work and pursued a claim against his employer for £420,000.  The claim was settled in 2003 for £134,973.11 after the employer’s insurers, Zurich, obtained video surveillance evidence showing that Mr Hayward had exaggerated his injuries.  However, two years after the settlement, Mr Hayward’s neighbour provided evidence that Mr Hayward had actually made a full recovery from his injury at least one year before the settlement.  Zurich therefore issued proceedings to set aside the settlement and to recover the sums which they had paid on the grounds of Mr Hayward’s fraudulent misrepresentation.

The Judge found that Mr Hayward had dishonestly exaggerated the effects of his injury and ordered that the settlement be set aside and that 90% of the original settlement sum be repaid leaving Mr Hayward with the amount actually found to be due to him, £14,720.

However, the Court of Appeal overturned the County Court decision and held that, given that Zurich was aware of the fraud at the time of the settlement and had pleaded fraud in the original case, it could not now set aside the settlement agreement when proof of fraud was eventually obtained.  The Court of Appeal stated that “parties who settle claims with their eyes wide open should not be entitled to revive them only because better evidence comes along later”.  The Court of Appeal found that Zurich had settled the claim with the risk that the claim may be fraudulent and it therefore had to live with the consequences of that bad bargain.  Zurich appealed to the Supreme Court.

The Supreme Court unanimously allowed Zurich’s appeal, restoring the Judge’s decision.  The Supreme Court was not prepared to allow Mr Hayward to profit from his fraud at the expense of the insurer stating that “it is difficult to envisage any circumstances in which mere suspicion that a claim was fraudulent would preclude unravelling a settlement when fraud is subsequently established”.

Although this case relates to a personal injury claim, it is likely to apply to other types of settlements.  It is not unknown for parties to settle cases even though they have doubts about the veracity of what they have been told by the other party.  If that initial suspicion subsequently proves to be true then the deceived party may now be able to set aside the settlement on the ground of misrepresentation by the other party.

If you are involved in any dispute, contractual or otherwise, then Blacks Solicitors can assist.  Please contact Luke Patel on 0113 227 9316 or email him at “LPatel@LawBlacks.com”.

Share

To surrender or not surrender

Leave a Comment

blacks (800x530)

When is a commercial lease surrendered?  The question may appear straightforward but as the tenant found out in the recent case of Padwick Properties Limited v Punj Lloyd Limited the answer is not always as simple as it seems.

The landlord granted a 21 year lease of an office block to the tenant company.  The lease was guaranteed by the tenant’s parent company.  Subsequently, the tenant ceased trading and went into administration.  The administrators wrote to the landlord’s solicitors to inform them that the tenant had vacated the property stating that “the security and safety of the Property will therefore revert to your client”.  Notwithstanding this the landlord reminded the administrators that the tenant and the guarantor remained liable under the lease and that they should make arrangements to secure the property.  The landlord eventually had to secure the property itself after the tenant failed to do so and upon the insistence of its insurers.

A few months later the administrators returned the keys of the property to the landlord and confirmed their intention to surrender the lease. The landlord only accepted the keys because it was told by the administrators that the keys would otherwise be thrown away. However, the landlord made it clear that it was not accepting a surrender and demanded that the guarantor comply with its obligations.

The tenant subsequently entered into liquidation and the liquidators disclaimed the lease.  The landlord asserted that the lease had not been surrendered, called upon the parent company to honour its guarantee and required it to pay the rent arrears and to enter into a new lease.  The parent company refused to enter into a new lease on the basis that it had already been surrendered.  

The Court ruled in favour of the landlord and held that the lease had not been surrendered because:

  • The acceptance of the keys to the property by the landlord was not, in itself, inconsistent with the continuation of the lease and in any event the landlord had made it expressly clear that it had only accepted the keys for the purposes of maintaining security to the property.
  • The attempt to re-let the premises did not give rise to the surrender although the position would have been different if the property had been successfully re-let.

This case highlights the need for unequivocal conduct by both parties for the surrender of a lease to be effective.  A tenant cannot terminate a lease by simply walking away.  The decision also emphasises the importance of stating your position clearly.  In this case the landlord expressly stated that the return of the keys was only accepted to protect its interest and not because it had agreed that there had been a surrender of the lease.  

If you are involved in any disputes concerning a lease then Blacks Solicitors can assist. Please contact Luke Patel on 0113 227 9316 or email him at “LPatel@LawBlacks.com”.

Share

Hands off!

Leave a Comment

blacks (800x530)

In the past month, two longstanding high street brands, BHS and Austin Reed, have gone into administration.  In addition to the 12,000 or so employees whose jobs are at risk there are also hundreds of suppliers who may receive only a fraction, if any, of the value of the goods which they have supplied to those two firms.  That is unless their contracts contain a retention of title (ROT) clause.  

A ROT clause allows the seller to retain title to (i.e. ownership of) goods which have been delivered to a buyer until the buyer has paid for the goods in full.  These clauses are designed to protect the unpaid seller against a buyer’s insolvency by giving the seller priority over other creditors in relation to the goods concerned.

The Sale of Goods Act 1979 says that title in goods passes to the buyer at the time the contracting parties intend it to pass.  A ROT clause in a contract is evidence that the parties did not intend for title to pass to the buyer prior to full payment even though the goods have been delivered.  

Although a ROT clause enables the seller to recover goods which have been delivered but not paid for, that will only be possible if the goods are identifiable and have not been mixed or incorporated into other goods as part of a manufacturing process.

Some ROT clauses contain an “all monies” clause.  A simple ROT clause only prevents title passing in goods which are the subject of a particular contract; an all monies clause reserves title to the seller in respect of goods that have been supplied to the buyer by the seller under other contracts too until all of the goods have been paid for.  The advantage of an all monies clause is that it avoids the need for the seller to allocate specific goods delivered to specific invoices as title to the goods does not pass until the buyer has paid all sums due to the seller.

For a ROT clause to be effective the seller must ensure that it is incorporated into the contract between the parties i.e. that they are contracting on the seller’s terms and conditions, not the buyer’s, as it is highly likely that the buyer’s terms will specify that title passes upon delivery.  A clause in the seller’s terms and conditions will be irrelevant if the contract is based on the buyer’s terms.  

If the seller needs to enforce a ROT clause then it needs to act promptly once it discovers that a buyer has become insolvent or insolvency appears likely.    

At Blacks we can assist with the preparation of contracts and agreements to include ROT clauses or, if appropriate, to enforce such a clause.  Please contact Luke Patel on 0113 227 9316 or email him at “LPatel@LawBlacks.com”.

Share